Offshore Banking

Offshore bank:
 
An offshore bank is a bank located outside the country of residence of the depositor, typically in a low tax area that provides financial and legal advantages like greater privacy, low or no taxation, easy access to deposits in terms of regulation, protection against local political or financial instability.
Offshore banking has often been associated with the underground economy and organized crime, through tax evasion and money laundering. However, legally, offshore banking does not prevent assets from being subject to personal income tax on interest.

Advantages of offshore banking:

i)  Offshore banks can sometimes provide access to politically and economically stable jurisdictions. This will be an advantage for residents in areas where there is risk of political turmoil, who fear their assets may be frozen, seized or disappear.

ii)  Some offshore banks may operate with a lower cost base and can provide higher interest rates than the legal rate in the home country due to lower overheads and a lack of government intervention.

iii)  It can help developing countries source investment and create growth in their economies, and can help redistribute world finance from the developed to the developing world.

iv) Interest is generally paid by offshore banks without tax being deducted. This is an advantage to individuals who do not pay tax on worldwide income, or who do not pay tax until the tax return is agreed, or who feel that they can illegally evade tax by hiding the interest income.

v)  Some offshore banks offer banking services that may not be available from domestic banks such as anonymous bank accounts, higher or lower rate loans based on risk and investment opportunities not available elsewhere.

vi) Offshore banking is often linked to other structures, such as offshore companies, trusts or foundations, which may have specific tax advantages for some individuals.

Disadvantages of offshore banking:

i)  Offshore bank accounts are less financially secure.

ii) Offshore banking has been associated in the past with the underground economy and organized crime, through money laundering.

iii) Offshore jurisdictions are often remote, and therefore costly to visit, so physical access and access to information can be difficult.

iv)  Offshore private banking is usually more accessible to those on higher incomes, because of the costs of establishing and maintaining offshore accounts.

v) Offshore bank accounts are sometimes touted as the solution to every legal, financial and asset protection strategy but this is often much more exaggerated than the reality.

 
source 
http://en.wikipedia.org/wiki/Offshore_bank