Definition of an Offshore Bank Account

An offshore bank account may simply be described as: “a bank account maintained by an individual or business in a jurisdiction which they are not normally a resident of”. Basically what this long phrase means is that if you are a British citizen and you open a bank account in somewhere like Spain for example, the bank account in Spain is considered an offshore bank account. This example also works in the vice-versa case.

Countries often offer non-residents certain benefits which can be derived by opening accounts there. Spain for example may choose to promulgate banking laws that favor non-residents and not locals for a variety of reasons. The reason for such legislation would be most likely in order to attract foreign investment into the country. If you reside in Britain for example and have funds in a bank account in Spain its most likely you won’t be withdrawing your money every other day of the week. This assumption also affects the logic that money kept within the banking system bears profit for not only the owner of the bank account but the bank and the local economy as well.

Despite these benefits people are more likely to find better offshore bank accounts in smaller legal jurisdictions such as the Isle of Man, Panama, Jersey or the Canary Islands. Hence most people often assume that an offshore bank account means one that is located on some island located halfway around the world. The reason most people prefer offshore bank accounts in such jurisdictions is because they charge less tax, have more secrecy laws and offer better interest rates. Banks located in much more developed countries where stricter laws exist and banks have to constantly reduce the amount of interest offered to customers in order to meet the profit margins expected by their shareholders.