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Tax Engineering

Offshore cards

Offshore cards can be defined as a financial instrument issued by a bank or payment entity outside of the country of residence of the cardholder with the purpose of making purchases at POS or ATM withdrawals. The main characteristic of offshore cards is anonymity and the possibility of making any payment in every country in the world without any type of restriction. The latest regulations related to the automatic exchange of information have caused tax agencies to oblige banks to report the information about all foreign accounts opened in a bank automatically. However, the information exchange regulations exempt financial institutions that issue cards and payment gateways from reporting this type of information by converting offshore cards into non-reportable financial instruments. That is, when a client has an offshore card, either anonymous or nominative, the bank will not report card information to corresponding tax agency.

Types of offshore cards

Offshore cards can be classified according to their operations in 2 types: physical cards and virtual cards.

Physical cards

The bank or payment entity will physically send the card to your home address including the information necessary for its activation that can be carried out quickly from the online banking provided by the financial institution. Using physical offshore cards the customer can perform any operation: make purchases in online and physical stores without restrictions, withdraw money at ATMs in any currency and transfer money between cards.

Virtual cards

As for physical cards, the bank or payment entity will send an email with the card number and activation data to activate it in the entity's online banking. Comparing to physical cards, virtual cards have one disadvantage due to the fact that the client doesn’t really receive any card for his possession. With virtual card the customer cannot make purchases in physical stores or withdraw money at ATMs. Depending on the needs of the each client, he can opt for a physical or virtual offshore card.

As with cards issued by entities in the country of residence of the owner, financial institutions can provide credit or debit cards. Depending on the credit history of the bank account holder, the offshore financial entities may or may not approve the issue of a credit card. The main reason why an offshore financial institution might opt for not conceding a credit card to a client is due to the possibility of defaults and fraudulent use of the card. The difference between an offshore credit and debit cards lies in the responsibility of the cardholder against the entity. With a debit card the holder will have excess only to the money he has debit, that is, the money he has in his account. But with a credit card the cardholder may have a credit, an amount of money that has been previously authorized by the financial institution. Logically, since the financial institution is in a jurisdiction different to that of the cardholder, the risks of conceding a credit card to this particular client are quite high. 

Classification of offshore cards according to its privacy

From the privacy and anonymity point of view there are 2 types of offshore cards:

Non-transferable cards

Offshore non-transferable cards are those cards that have the name of the cardholder printed on it, which means that the cardholder is the only person who can have this card in its possession. The main characteristics of this type of cards are the associated costs and the possibility to withdraw 4,000 euros per day from ATMs and to make purchases for the same amount via virtual offshore POSs terminals. The advantage of having a non-transferable card is that it can be used for making payments in platforms such as PayPal, Amazon, Google Pay, Apple Pay, online casinos etc. Because the cardholder who makes the purchase can be completely identified the possibility of the fraudulent activities taking place are close to null.

Anonymous cards

Offshore anonymous cards are those cards that do not have the cardholder's name printed on it and do not require a bank account associated with the entity. The main disadvantage of anonymous cards is that they cannot be used for making payments in other financial platforms such as PayPal, Amazon, Google Pay, and Apple Pay. Also, the ATM daily withdrawals limits are lower since the cardholder is the financial entity under a liability contract between the entity and the applicant. In reference to the mode of topping up the balance of the cards, the procedure is the same as for non-transferable card. There are 3 recharge modes supported by the cards: wire transfer, debit or credit card transfer and bitcoin.

Wire transfer is the most common way to recharge anonymous and non-transferable offshore cards. The cardholder or its client (third party) can make a wire transfer in the name of the financial institution using the unique number associated with the card. Therefore, the name of the cardholder stays anonymous and the payment gets associated to the card by the unique number and not the cardholder´s identity.

Also the client or his clients (third parties) can recharge its non-transferable or anonymous card with another debit or credit card through a payment link. In order to avoid inappropriate uses of this kind of recharge, the security protocol used by the financial institution is 3D Secure.

The recharge system of the offshore card through bitcoin is currently available only for non-transferable cards. The client may charge and receive bitcoins on his associated account in the financial institution but he will not be able to pay with the non-transferable in bitcoins.

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