the offshore financial market, also known as the new international financial market, refers to a financial market that is separated from the domestic financial system of the country where the market is located, and is not controlled by the government decrees of the country where the currency is used, nor by the government decrees of the country where the market is located.
The offshore financial market has the following characteristics:
(1) Business activities are rarely regulated by laws and regulations, with simple procedures, low tax or exemption, and high efficiency;
(2) The borrowing currency in the offshore financial market is overseas currency, and borrowers can freely choose the currency type. The lending relationship in this market is the relationship between foreign lenders and foreign borrowers, which involves almost all countries in the world.
(3) Generally speaking, the interest rate of offshore financial market is slightly higher than that of domestic financial market, with a small spread, which is more attractive and competitive.
offshore financial centers
offshore financial centers refer to financial institutions in various countries that only engage in local currency deposit and loan business. However, after the Second World War, financial institutions in various countries gradually started to engage in foreign currency deposit and loan business other than local currency, so financial institutions in some countries became foreign currency deposit and loan centers all over the world. This financial activity specializing in foreign currency deposit and loan business is collectively called offshorefinance. That is to say, any country, region or city, which mainly deals in foreign currency (or deposits and loans) and deals with non-domestic residents, can be called an offshore financial center.
Take eurodollar market as an example, it is a very typical offshore financial center, and it is a free international financial market with free transactions and no regulation. Offshore financial business is a wholesale banking business, with a large amount of deposits and loans. The transaction targets are usually banks and multinational companies, and its business is usually to introduce foreign funds and then lend them to foreign countries. Individual investors can also invest through institutions.
Theoretically, the main offshore financial centers can be divided into three categories:
1. London-type offshore financial centers represented by London. Its characteristics: the currency operated is overseas currency, and market participants can operate offshore financial business and free market business. There are no restrictions on management, and it is not necessary to apply for approval from the financial authorities to operate offshore business.
2. For new york-type offshore financial centers represented by new york, domestic banks and foreign banks engaged in offshore business must apply to the financial authorities. Offshore financial business can be exempted from deposit reserve and deposit insurance, and enjoy exemption from interest withholding tax and local tax. The currency operated by offshore business can be foreign currency or domestic currency, but offshore business and traditional business must set up separate accounts.
3. Tax-avoidance offshore financial centers are generally located in scenic islands and ports, with stable political situation, preferential tax and no financial control. This is what we usually call an offshore financial center.
In recent years, some countries and regions in the world, such as the British Virgin Islands (BVI), have tried to figure out and cultivated some particularly relaxed economic regions by legal means, allowing international people to set up an international business company in their territory. These regions are generally called offshore jurisdictions or offshore jurisdictions. The so-called offshore company refers to a limited liability company or an international commercial company established in an offshore jurisdiction.
At present, the famous offshore financial centers are the British Virgin Islands, Cayman Islands, Bahamas, Bermuda, Western Samoa, Anguilla and so on.
compared with general limited companies, offshore companies mainly differ in taxation.
unlike the usual practice of collecting taxes according to turnover or profits, the offshore jurisdiction government only collects annual management fees from offshore companies, and no other taxes are collected. In addition to tax incentives, almost all offshore jurisdictions expressly stipulate that the company's shareholder information, shareholding ratio, income status, etc. enjoy the right of confidentiality. If shareholders are unwilling, they can not disclose it to the public. Another advantage is that almost all major international banks recognize such companies, such as Chase Bank in the United States, HSBC Bank in Hong Kong, Development Bank of Singapore, and Credit Suisse Oriental in France. "Offshore" companies can open accounts in banks, which is extremely convenient in financial operation.
Generally, such "offshore" regions and countries have good trade relations with developed countries in the world. Therefore, offshore companies are often used as financial instruments by many large multinational companies and individuals with high assets.