What is offshore account and tax haven

Offshore bank

1. term: An offshore financial center literally means a financial center far from the coast. Offshore is to be understood in this context not geographically, but rather legally: the financial centers are outside the usual legal norms. Offshore banking is understood to mean banking transactions in a currency other than that of the country of domicile. Many offshore financial centers are located on small islands, often former British colonies, which is where the name: beyond the coastal region, i.e. lying in international waters, comes from. But also locations far away from the coast such as Luxembourg or Andorra are included in the term.

2. Mark: Offshore banks are domiciled in locations that are characterized by low income or wealth taxation, a high degree of confidentiality or lack of transparency, legal security, political stability, secure banking secrecy and / or only rudimentary banking supervision and regulation. Resident banks and other financial institutions conduct a large part of their business with foreign countries; the number of transactions and the investment sums are very large compared to transactions via onshore banks.

3. importance: Offshore banking is often equated with the shadow economy, organized crime, tax evasion and money laundering. Offshore financial centers are criticized primarily as tax havens that, in combination with a secure banking secrecy, favor tax evasion or flight. Proponents, on the other hand, emphasize the important role of the offshore financial centers in the international monetary system, as they allow the development of important instruments, e.g. in risk management, due to liberal legislation.

4. Initiatives of non-governmental organizations (NGOs): In addition to attempts by the state, there are also initiatives by various NGOs with the aim of regulating offshore locations more effectively. These include, for example, Oxfam or Attac, whose main goal is to restrict tax evasion.