To many of us, we relate offshore to criminal activities. But in actual fact, what is really offshore. Now, let's go back to the basic. By definition, offshore is anywhere in the world except your home country. If you are a US company and you decided to expand your business by moving to overseas. You incorporated an overseas company as the subsidiary of the US company, that subsidiary is considered an offshore subsidiary of the US company. There are times whereby you don't want to incorporate an offshore company as the subsidiary of the US company and you want setup an oversea company with yourself as the shareholder of the oversea company. In that case, you own the offshore company and your US company is the onshore company.
Over the years, some countries have figured out that by having a lower tax rate than the global average tax rate or no tax at all, it attracts foreign investments into their countries. To enhance their attractiveness to foreign investors, they enforce strict laws to ensure privacy offer asset protection to foreigners. Their laws on investments are flexible and they place a premium on financial privacy. In these jurisdiction, it is a crime to reveal a client's financial information. This is a big contrast when we compared it to some countries like the United States where is would be against the law not to reveal such information. These offshore jurisdictions have their own laws which means that restrict the ways in which foreign lawyers can practise in their court.
We heard from a banker that United States has become a new offshore jurisdictions for foreigners. We were surprised to hear that and we asked for an elaboration. This banker mentioned that if you are a US citizen, you need to declare everything you have when you open a bank account in US. However, if you are a foreigner and you open an account in US. All you need to do is to fill up the FATCA form and you will be able to open a bank account and transfer your money in and out almost without any restriction. So to look at the bigger picture, aren't all these banks in Singapore and Hong Kong falling into the traps setup by United States by enforcing a strict KYC process which pushes the clients to places like United States? The financial world is managed by the suppose smartest people in the economy but we are moving backward rather than forward.
Let me tell you that in the world, there are many more banks in the world that remote opening of bank account which is better than United States. If you are smart enough, you should not hold USD in your bank account as well.
To give you a rough idea regarding the size of these offshore banks, more than half of the world's personal wealth is stashed in all these zero tax jurisdictions.
These offshore jurisdictions have made it convenient for foreigners to expand their business as well. For example, have you ever thought of incorporate a Caymen Islands company and apply for a fund management license in Caymen Islands? You will be able to raise fund from your investors and manage their assets. You will be entitled to a share of the profits that are generated from the AUM (Assets Under Management).