What are some of the benefits of putting money into foreign banks, if any? Is this even legal? I hear about some rich people who will put money in Swiss bank accounts and others, and have always wondered if this was just a way to hide money. Can you actually make more off of your money if it is in an account with a different exchange rate?
Sending your cash in foreign banks is a filthy tax evasion strategy that has been used for quite some time now. Those who do don't do it because they want to take advantage of higher interest rates — they simply want to evade taxing. http://www.topaccountingdegrees.org/taxes/ The U.S. economic system offers no shortage of loopholes allowing the ultra-rich to shortchange Uncle Sam . . .
The US government has been making it harder and harder to hide money from the tax man overseas. If you're putting anything into any overseas accounts, I'd make damn sure you know who you're dealing with and that the institution is credible and reputable. It would probably be best to put money into a well-known institution, and preferably that you're able to actually go over and meet with a banker at the physical address of the bank and be able to look them in the eye and hand them a paper check. I know some people who got suckered into some Ponzi scam a couple of decades ago with some American crook who was telling people he was putting their money into "Swiss bank accounts" that supposedly paid 12% GUARANTEED, and that were tax-free and even FDIC insured, which should have been the most obvious red flag. The crook spent all the money on homes, cars, travel, yachts, etc before he eventually went to jail. The people who invested with him unfortunately lost their money. Be careful.
I guess the legality of putting your money in foreign banks would depend on the laws of your country. Over here, the allowed amount is $10,000 and more than that is considered smuggling (or money laundering). Even for travelers, we are only allowed that much to bring to other countries. But you can bet that so many rich Filipinos have accounts in Swiss banks and with huge balances. But accusing is one thing and proving is another. I have yet to see a person jailed for that offense of putting in excessive amount of money in foreign banks.
I'll just step into the benefits part: it can be beneficial. Sometimes for tax purposes, sometimes to get much higher interest rates. Also some of the domestic banks might not allow you to keep other currencies which you might need/want to do if it suits you. Just be careful and make sure the local governmen has insured the cash... even if it seems like a reputable bank.
Ok, so it is nothing more than a tax evasion scheme when people do it. That makes sense if they are trying to get away with not paying Uncle Sam in the United States. I assume then that it can be considered a criminal offense if they are caught?
haha. I knew a person from where I worked who tried to put $50k in a bank in the Bahamas to hide it from his wife before a divorce. But yeah, if you are in the USA, the only benefit is to hide the money from someone. The US gov of course figured it out and put pressure on most countries so you can´t avoid tax liability anymore, not even in a swiss bank. The opposite is true though, and Greece is a good example. There is a lot of reason for foreigners to try and put money in US banks. Where i live, the major banks are owned by the family of the current dictator, and he has a history in the 1980s of looting the bank accounts of political enemies ( which back then was any american). Greek banks right now have a limit of $60 per day that can be withdrawn, and even that questionable.
I have money in a New Zealand bank because I am an NZ citizen and U.S. resident. Savings accounts in NZ offer a 4.25% interest rate. Both my bank and I report this income to the IRS in the U.S. and it is treated the same as if it was in a domestic bank. So this is one scenario where using an offshore bank is both beneficial and completely legal.
Generally people make use of offshore investments to gain higher yields or returns on their investment. There are also many diversification benefits that can come with taking your money offshore, to a region that is known to be less correlated with your own. You may also want to hedge a certain position and you may want to place your money in certain asset classes. The number of reasons for investing offshore are as broad as the opportunities themselves. The world is getting smaller and the ease of doing global business is ever increasing. In some countries for example Monaco, you can gain your citizenship by becoming an investment citizen. You can do this by investing a minimum of million euros in the country, half of which needs to be towards a property. The biggest challenge for many investors when it comes to taking their investment offshore is the amount of rules and regulations that it comes with. Generally most governments have rules and restrictions around how much can be invested offshore, with different thresholds for how much can be invested without tax clearance and with tax clearance.
I think as long as you declare everything it shouldn't be a problem. I'm not American and don't live in the US these days, but from experience those Americans living away from there have to make a declaration when setting up an account in other jurisdictions. Basically, the IRS are going to want their piece of the pie regardless of where you are. This isn't the same approach to tax for citizens of most countries. The whole Swiss bank account thing is harder on non-disclosure than it used to be but there are always going to be places out there happy to take your money regardless of where you are from.
