How to Open an Offshore Bank Account

If you've ever wondered whether you could benefit from an offshore bank account, or you're considering opening an account but you're not sure which one to go for, this guide has been written with you in mind!

If you’ve ever wondered whether you could benefit from an offshore bank account, or you’re considering opening an account but you’re not sure which one to go for, this guide has been written with you in mind!

We take you right through the process - from examining the benefits of banking offshore to finding and opening the best offshore bank account for your requirements.

 

Where does the term ‘offshore’ come from?

The term ‘offshore’ originates from the Channel Islands (Jersey, Guernsey etc.) which are physically located offshore from mainland Britain and which enjoy a tax haven status.

The term is widely used today to refer to tax havens in general, whether they are island nations or not.

What is an offshore bank account?

Simply defined, an offshore bank account is an account held in a bank that is located outside your country of residence.

Usually such an account is located in a low tax jurisdiction and offers certain financial and/or legal benefits to the holder of the account. 

Who can legally open and hold such an account?

Generally speaking anyone is free to open an offshore bank account.

In fact, offshore banking has been widely used for many years by both individuals and organisations worldwide.

What are some of the general advantages of banking offshore?

There is no definitive answer to this question as every individual’s circumstances are unique, and there are so many different types of account available in so many different locations in the world, and each offers the individual customer different features and benefits!

But if you’re an expatriate living and working overseas for example, offshore banking could have tax benefits for you, as interest on your offshore account could be paid without tax being deducted.

And if you were to transfer your current savings and investments offshore as well you may be in a position to further reduce your tax liability in your home country.

Other general benefits not limited to expatriate account holders may include: -

- asset protection
- estate planning and inheritance tax planning
- privacy and confidentiality
- better interest returns
- lower taxation burden
- the chance to exploit active business interests overseas in low to no taxation jurisdictions
- and global access to assets and income.

Do I have to declare income I generate from interest on my offshore bank account?

Certain countries in the world require their residents to declare their worldwide income.  Tax is then payable on the income - the UK and the US are two such countries.

Most countries have no restrictions on where your business interests, investments or bank accounts are located; it is simply your responsibility to report any income you earn to the appropriate tax authority.

If you are not resident in a country that has reporting requirements you may not have to declare any income you earn. 

You are best advised to speak in confidence to an international accountant or financial adviser with an understanding of all things offshore to determine your obligations. 

If you need assistance locating a suitable adviser many advertise on the internet, alternatively we have a free directory of resources on this site. 

If you cannot find what you’re looking for or you have a specific query, and we will endeavour to assist you.

Am I guaranteed absolute privacy and confidentiality from an offshore bank?

When it comes to the declaration of assets held and ‘savings income’ generated, the EU Savings Tax Directive 2005 may limit the amount of privacy you are afforded if you bank or reside in one of the countries affected by the directive. 

These countries are: -

Andorra, Anguilla, Aruba, Austria, Belgium, British Virgin Islands, Cayman Islands, Channel Islands, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Isle of Man, Italy, Latvia, Lichtenstein, Lithuania, Luxembourg, Malta, Monaco, Montserrat, Netherlands, Netherlands Antilles, Poland, Portugal, San Marino, Slovakia, Slovenia, Spain, Sweden, Switzerland, Turks & Caicos and UK.

Simply put, the EU Savings Tax Directive 2005 is an agreement between the EU Member States to automatically exchange information about any customers who earn savings income in one EU State but who reside in another EU State. 

This is known as the ‘automatic exchange of information option’ and it is the ultimate objective of the Directive.

If you would like more information about this I suggest you read What is the EU Savings Tax Directive 2005?

If you would like to find out whether you can escape the restrictions of the directive we can put you in touch with an experienced financial adviser, please .