Frequently Asked Offshore Banking Questions

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Offshore Bank FAQ

So you’re interested in opening an offshore bank account but you need to know a little more about the offshore banking process first?

No problem, with our FAQ we will attempt to answer some of the most commonly asked questions related to opening bank accounts offshore.

Covering everything including: -

How do I open and access an offshore bank account?
What is an offshore bank account?
Where does the term ‘offshore’ come from?
Who can legally open and hold such an account?
What are some of the general advantages of banking offshore?
Do I have to declare income I generate from interest in my offshore bank account?
And much more….

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 for 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, 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 in my offshore bank account?

Most 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 might be best advised to speak in confidence to an international accountant.

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 are not affected by this directive then your assets and any income you derive from them will be afforded a certain level of privacy.

But while most offshore jurisdictions offer very high levels of confidentiality, they cannot guarantee you absolute secrecy as all financial institutions worldwide have a legal obligation to report suspicions of serious criminal conduct - e.g., terrorism.  If you are not a terrorist or serious criminal then you are pretty safe!

All your personal data is subject to modern data protection legislation, and there are civil and criminal penalties for breach of confidentiality and unauthorised disclosure and it would never be in an offshore bank’s interests to breach this legislation.

If you desire further guaranteed levels of anonymity and confidentiality you may be able to benefit from various other offshore vehicles such as International Business Companies (IBCs) and/or offshore trusts.

How do I open and access an offshore bank account?

Generally speaking you neither have to visit the country in which you wish to open an account, nor do you have to travel to the country to carry out any banking activity.

Most offshore accounts offered through legitimate organisations will allow you to carry out all your banking activity via the internet, e-mail, post, fax or telephone.  Furthermore, many offshore bank accounts offer full credit card services and in some cases, debit cards are available as well allowing you easy and direct access to your funds at all times.

If you have specific requirements in terms of account access and method of account management make sure you shop around all the various organisations offering offshore banking to ensure your personal requirements are fulfilled.

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