Offshore Banking and Bank Account

Is offshore banking right for you or your business?  How can you determine which offshore banking provider has the right solution to meet your requirements?  Do you pay tax on interest earned on an offshore bank account?  And how do you actually go about opening an offshore bank account anyway?

These questions and many more are answered for you here in our concise guide to offshore banking and bank accounts…

1) It is legal to open an offshore bank account?

Offshore banking is - and will probably always be - legal.  Why?  Because people, companies, conglomerates and even governments often need to move money around the world - international transactions are par for the course nowadays and offshore bank accounts, i.e., an account held in a jurisdiction other than the one in which you live - are essential to the transfer of money around the world.

So, the short answer to this question is YES - but the more appropriate question to ask is whether an offshore bank account could actually benefit you or your business.

2) Who could benefit from an offshore bank account?

Anyone planning on living or retiring abroad for a period of time or someone who has already expatriated may well find an offshore bank account helps them with the international management of their money and financial transactions. 

Those who live overseas but have assets or responsibilities in another country sometimes find it easier to centralize the administration of their financial affairs from an offshore bank account that allows them access to their money wherever in the world they are, that gives them online or over the phone access to account data and also allows them to bank and transact in multiple currencies.

Companies who have business dealings in more than one jurisdiction may also be able to benefit from the flexibility and ease of account management that offshore banking providers supply.

3) What are the advantages of banking offshore over banking onshore?

Flexibility is possibly the number one advantage for the majority of people when they examine the features of an offshore bank account.
Those with complicated financial affairs generally require a certain amount of flexibility in terms of their access to funds and data, their account structure, multi currency options, loan, mortgage, credit and debit card acquisition etc., and ‘flexibility’ is the core feature of a good offshore bank account. 

Other advantages include having an extra degree of privacy afforded transactions, gross interest payments and access to potentially better interest rates.

4) Tax and offshore bank accounts.

Depending on where you’re resident and tax liable it is possible that you will have to declare your worldwide income and gains to your tax authority and pay income or capital gains tax accordingly. 

America and Great Britain are two countries in the world who insist that their resident citizens declare all assets globally for the purposes of taxation.

To determine your liability for declaration of assets held offshore and any subsequent taxation you should speak to an independent offshore financial adviser or tax consultant.

5) Privacy, confidentiality, asset protection and offshore banking.

Placing assets offshore can help an individual or company protect against potential litigation, but it cannot assist anyone involved in criminal activity! 

Furthermore, since the introduction of the EU Savings Tax Directive in 2005 which affects 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 the UK, people who reside in one of the jurisdictions but who bank in another may be subject to the automatic exchange of personal and account information between affected countries or the enforced taxation at source on interest earned.

6) Which offshore banking providers are the best?

Many of the major banking giants have offshore divisions - for example HSBC Offshore, Abbey International and Alliance and Leicester International to name but a few.  There are also private offshore banks and banks that just operate within one jurisdiction as well for example.  So, the choice of a banking provider comes down to personal preference. 

Basically consider looking at the pedigree of the bank, the jurisdiction in which they are governed, any guarantees you have if the bank goes out of business and the account types offered and with this data you should be able to select the most appropriate provider to meet your needs.

7) How to open an offshore bank account.

Once you’ve selected an institution and account type you can open an account relatively simply without having to visit a branch of the bank or even the jurisdiction in which you require an account.  Because of the crack down on money laundering there is a certain amount of due diligence that an offshore banking provider will need to carry out on you and this will mean you have to prove your identity, complete various forms and then sit back and wait for the creation of your account!  For more information or to open an offshore bank account, complete our offshore advice form.