Offshore

The term offshore refers to a location outside of one's national boundaries, whether or not that location is
land- or water-based. The term may be used to describe foreign banks, corporations, investments, and
deposits.
A company may legitimately move offshore for the purpose of tax avoidance or to enjoy relaxed
regulations. Offshore financial institutions can also be used for illicit purposes such as money laundering
and tax evasion.
Offshore banking - deposit of funds by a company or an individual in a bank that is located outside national
residence.
Functions of Offshore Banks and Offshore Banking Units
1. Deposit savings
2. Provides investment services
3. Provides loans
4. Trading activities
5. Hedging activities
Advantages of Offshore Banking

 Greater privacy
It is used to be the cause that anonymity can be guaranteed in a foreign account, which means a greater
level of privacy and peace of mind for you and your family. However, following the tragic events of 9/11
and other terrorist acts, this is no longer the case. More and more international banks are quick to release
personal information to the local authorities and government if they suspect any criminal activity. It should
be noted that this is not made compulsory by law, so in some banks a level of greater privacy is still
achievable.

 Low or no taxation
There can be expat tax advantages to using an offshore bank - but whether these apply in your case will
depend on your personal circumstances, such as country of residence. Tax benefits can range from keeping
your money outside of the tax jurisdiction of your home country, to protecting it from taxes in the country
in which you are currently living.

 Easy access to deposits

As an expatriate, being able to keep your bank account in one place, no matter how many times you move
countries, is a major benefit. In fact, this reason alone is enough for many people to open an offshore bank
account.

 Choosing a Currency for Your Offshore Bank Account

With multi-currency accounts usually coming as standard, transferring money between accounts will be
fast and free. And, if you need to transfer money between currencies, some offshore banks provide a
competitive foreign exchange rate, compared to a regular banking service.
Disadvantages of Offshore Banking

 sometimes less financially secure

Offshore bank accounts are sometimes less financially secure. In a banking crisis which swept the world in
2008, some savers lost funds that were not insured by the country in which they were deposited. Those who
had deposited with the same banks onshore received all of their money back. Thus, banking offshore is
historically riskier than banking onshore.

 associated with the underground economy and organized crime

Offshore banking has been associated in the past with the underground economy and organized crime,
through money laundering. Following September 11, 2001, offshore banks and tax havens, along with
clearing houses, have been accused of helping various organized crime gangs, terrorist groups, and other
state or non-state actors. However, offshore banking is a legitimate financial exercise undertaken by many
expatriate and international workers.
Despite what you may hear, offshore banking is completely legal. It's not about tax evasion or
other illegal activities. It's simply about legally diversifying your political risk by putting your liquid
savings in sound, well-capitalized institutions where they are treated best.

 often remote, and therefore costly to visit

Offshore jurisdictions are often remote, and therefore costly to visit, so physical access and access to
information can be difficult.
Types of Offshore Bank Accounts
Offshore Commercial Bank Accounts
These are used for active, going-concern type businesses: for example import-export, e-commerce
or consultancy services. Generally there are lots of transactions in and out, relating to day-to-day business
activities, buying and selling of goods and services, making payments to suppliers, settling staff payrolls
etc. Typically credit cards are also needed to cover company purchasing, travel expenses of executives and
the like. It is quite hard to open these types of accounts for offshore companies, for the simple reason that
it is harder for banks to make money on these. There is more compliance and supervisory work than for
personal accounts, so a significant amount of bank staff time is required. On the other hand, commercial
clients typically pressure the banks for low transaction charges. It is therefore not a very attractive business
for banks.
Offshore Private Bank Accounts
These are predominantly accounts maintained for private individuals with a high net worth. The
accounts are often maintained in the name of a corporate entity, such as an offshore company, a foundation
or a trust. However, the type of transactions are not commercial – put simply, money is more likely to enter
the new bank account all at once and then there will be few transactions in or out. A credit card may be
required for personal spending of the owner. The focus of the account is on a personal and private face-to-
face relationship with an adviser known as a ‘Private Banker’ who will assist the client with investments,
portfolio growth and asset protection. Numbered accounts are available. Private banking clients usually
qualify for our VIP Banking.
Offshore Retail Banking
This third category really covers personal accounts with a lower balance: for example where the
client is just trying to ‘test the offshore waters’ and establish a small account to have a presence offshore,
but will not be depositing very much money and will neither be carrying out a lot of transactions. Clients
may be held in personal names, or through corporate entities such as trusts and foundations.

*additional terms
Offshore Banking Unit (OBU) – a bank branch in another country
Offshore Business – refers to a corporation formed in a foreign country

List of Offshore Banking Units in the Philippines

1. BNP Paribas (August 2019)
2. Taiwan Cooperative Bank
3. JP Morgan International Finance (February/March 2018)
List of Countries to Open Offshore Accounts Best
1. Cayman Islands - In addition to offering very little tax rates, the Cayman Islands have
confidentiality clauses that protect the privacy of investors.
2. Switzerland - Switzerland banking entities actually offer ironclad confidentiality services to their
clients.
3. Singapore - The Singaporean financial sector offers great investment protection for your assets.
4. Germany - Germany is widely considered as one of the safest places to save your money in
considering the financial stability and the safety protocols that German banks have to offer.
5. Belize - Banks in Belize offer some of the best protection and investment perks in the offshore
financial industry.
Presidential Decree 1034
Authorizing the establishment of an offshore banking system in the Philippines.
WHEREAS, conditions conducive to the establishment of an offshore banking system, such as political
stability, a growing economy and adequate communication facilities, among others, exist in the Philippines;
Section 2. Qualification Requirements. Subject to such regulatory guidelines as the Monetary Board may
prescribe, only banks which are organized under any law other than those of the Republic of the Philippines
their branches, subsidiaries or affiliates, shall be qualified to operate offshore banking units in the
Philippines
Section 3. Certificate of Authority to Operate. The Monetary Board of the Central Bank of the Philippines
is hereby authorized to issue certificates of authority to operate offshore banking units. The Central Bank
of the Philippines is hereby authorized to collect a fee of not less than US$ 20,000.00 upon issuing any
certificate of authority to operate and annually thereafter on the anniversary date of such certificate.
Section 5. Supervision. The operations and activities of offshore banking units shall
be conducted under the supervision of the Central Bank of the Philippines.
Section 7. Tax and Other Incentives. (a) The provisions of any law to the contrary notwithstanding, the
transactions of offshore banking unit authorized hereunder with non-residents and other offshore banking
units shall be subject to a five per cent (5%) tax on the net, income from such transactions which shall be
in lieu of all taxes on the said transactions (b) In the case of transaction with residents (other than other
offshore banking units or local commercial banks including local branches of foreign banks that may be
authorized by the Central Bank of the Philippines to transact business with offshore banking units), interest
income from loans granted to such residents shall be subject only to a ten per cent (10%) withholding tax
as final tax.

Republic Act No. 9294

An Act Restoring the Tax Exemption of Offshore Banking Units (OBUS)
(3) Tax on Income Derived under the Expanded Foreign Currency Deposit System. - Income derived by a
depository bank under the expanded foreign currency deposit system from foreign currency transactions
with nonresidents, offshore banking units in the Philippines, local commercial banks including branches of
foreign banks that may be authorized by the Bangko Sentral ng Pilipinas (BSP) to transact business with
foreign currency deposit system shall be exempt from all taxes. That any interest income derived from
foreign currency loans granted to residents other than offshore banking units or local commercial banks,
including local branches of foreign banks that may be authorized by the BSP to transact business with
offshore banking units, shall be subject only to a final tax at the rate of ten percent (10%).