Consider the advantages of offshore banking as an expat or company located in Belgium. This guide explains the benefits of offshore banking.
Offshore banking is a niche service, often utilised by those requiring international financial services. This overview of offshore banking offers guidance to expats and companies in Belgium for understanding and choosing international financial services.
Introduction to offshore banking
Essentially, an offshore bank is a bank located outside the account holder’s country of residence, typically in a low tax jurisdiction. These banks tend to offer financial and legal advantages over domestic banking arrangements. Estimates have placed the value of capital that is banked with these institutions at 26 percent of the world’s wealth.
Reasons for offshore banking
People choose to bank offshore for several reasons. Those living or working abroad may find that holding an international bank account makes it easier for them to manage their finances when they are outside the country.
Accounts are often available in multiple currencies, which can be more convenient for someone making or receiving payments in different currencies. In addition, more complex foreign exchange features may be available e.g. being able to fix currency prices for up to a year in advance. This removes the uncertainty that can be a feature of dealing internationally.
Clients with operations in several countries may find it more convenient and more economical to direct all of their business through one bank, rather than dealing with separate institutions in a range of countries.
Individuals based in countries that are less politically or financially stable than Belgium may be worried about the security of funds held in a domestic account. An offshore banking facility offers peace of mind.
Advantages and disadvantages of offshore banking
International banking facilities tend to offer great flexibility so that those who need access to their money or to international financing can do so more quickly and easily than would be possible with domestic arrangements.
Offshore banks may also offer services that are unavailable from domestic banks, such as anonymous bank accounts.
Deposits held abroad tend to be larger as a rule – one of the reasons banks often offer higher rates to deposit holders. Also, interest is generally paid gross, without tax being deducted. This can of benefit to individuals who do not pay tax until filing a tax return.
Offshore banking services usually require greater financial assets than other types of account – it is not unusual for balances of EUR 5,700 or more to be maintained in order to run an account. In addition, facilities are usually more expensive than their domestic equivalents.
All European Union (EU) member states are required to have deposit guarantee schemes that protect deposit holders up to the value of EUR 100,000 in the event of something going wrong. In Belgium, the deposit protection scheme is overseen by the National Bank of Belgium. However, accounts held offshore often do not benefit from this protection.
General perception of offshore banking
Offshore banking has developed a somewhat unsavoury reputation among the general public due to its secrecy. There is a perception – deserved in some cases – that offshore customers hide their income and wealth from tax authorities and that banks facilitate the process. This has included tax evasion as well as money laundering.
In 2009 Belgium was one of a number of countries included in an OECD list of ‘grey’ countries, indicating that progress needed to be made on transparency and exchange of tax information. The list also included Switzerland, Austria and Luxembourg. Since then, these countries have moved from ‘grey’ to ‘white’.
Along with the other EU member states, Belgium has signed up to the EU Savings Tax Directive 2005, which automatically exchanges information about EU citizens with accounts who are living in another EU country.
Belgium is also a member of the international Financial Action Task Force on Money Laundering (FATF), also known as the Group d’Action Finacière sur le Blanchiment de Capitaux (GAFI).
Famous offshore banks
Some well-known Belgian banks that provide offshore banking services include: