If you intend to open an offshore bank account, you have to choose the jurisdiction – and the bank – with great care. Much depends on the main goals that you pursue when setting up a foreign bank account. Besides, you have to take into account the costs associated with opening a bank account abroad and the efforts that the process is going to require. Normally, people pursue one or several of the goals listed below when they set up offshore bank accounts.
Protection of personal information confidentiality.
It may seem natural that banks should keep personal banking information private: it is bad manners to count somebody else’s money. In reality, however, not all banks are reliable as far as banking privacy is concerned. Different countries and different banks exercise different approaches to the matter. Until recently, Swiss banks, for example, used to be considered perfectly safe and perfectly confidential. After a few leaks of information about Swiss bank clients, however, the banks’ international reputation shook. Today, many experts believe that the banking system of Bahrein is the most reliable one when it comes to protecting banking privacy.
If you are not 100% sure that the money that you keep in your home country’s banks is completely safe, you can look for a safer jurisdiction with an advanced economy and a stable national currency. If this is your prevalent goal, banks in Liechtenstein and Switzerland would probably be the best choice for you.
Admittedly, banks in well-developed countries do not usually pay good interests on deposits. In Switzerland, for instance, the interest rate may even be negative. In other words, you may have to pay the bank for keeping your money. On the other hand, you can consider setting up an investment account with a foreign bank, which will let you grow your fortune. An investment account with a Swiss bank may bring you around 5% a year in profits especially if you hire an external asset manager.
Obtaining bank loans.
If you open an account with a foreign bank and use it actively for some time, you may be able to win the bank administration’s trust. If the bank administration trusts you, you may gain access to cheap loans. Banks in some countries give loans to customers at very low interest rates. At the same time, you have to be prepared to go through strict due diligence procedures if you would like to borrow money from a foreign bank. Understandably, giving out a loan to a foreigner is a riskier move for the bank than giving a loan to a local person.
Accumulation of capital outside your home country.
If you are afraid that your capital could be expropriated by the greedy Government or if you feel that you are paying too much in taxes, you can consider the opportunity of opening an offshore company and a bank account. In this way, you can move your capital away from your home country’s tax authorities and also avoid some bureaucratic obstacles. International Wealth experts will gladly help you open an offshore company and set up a foreign bank account.
Bank accounts classified by different criteria
Bank accounts can be divided into different types by several different criteria. Speaking about the uses of bank accounts, they can be broken into the following main types:
- Current bank accounts: these are used for making and accepting regular payments. Current accounts seldom pay any interests.
- Savings accounts: as the name suggests, these accounts are used for saving money. Normally, an interest is paid on a savings account especially if it is a fixed-term account.
- Investment accounts: these are also used for earning interests but they are riskier in comparison to savings accounts even though the interest rates are higher.
- Security accounts: if you are planning to take out a bank loan, you should be aware that many foreign banks will want you to make a security deposit before they can issue a loan to you.
Bank accounts can also be classified by the status of their holders:
- Personal bank accounts: as the name suggests, these accounts are opened for personal needs, not corporate ones.
- Corporate accounts: because a corporation is a legal entity (a legal person), it can also open a bank account and use it for its purposes. Corporate account signers, however, and natural persons in most cases.
Fight against offshores
The USA as well as the European Union are unhappy with offshore jurisdictions and they put various obstacles in their way. The matter is that taxes are high in onshore jurisdictions and business people are attracted to offshores because they can find serious tax advantages there. Offshore jurisdictions are usually small insular states that need foreign investments badly and so they offer some special perks to international investors. Consequently, the fiscal authorities of onshore jurisdictions collect less in taxes than they could if so many entrepreneurs had not gone offshore. When you collect less revenue than what you counted on, naturally you will feel unhappy.
The OECD is especially active in fighting offshores. The organization regularly updates its black lists of ‘uncooperative countries’ who refuse to play by its rules. An uncooperative country is a country that does not share the information about its resident companies, company directors, and bank account holders with the OECD.
The high level of personal information privacy, however, is a very attractive feature for many entrepreneurs. That is to say, contrary to the international financial regulators, business people are quite happy with the opportunities that offshore jurisdictions offer. We must admit that the de-offshorization efforts are bringing fruit and it has become less profitable and less convenient to do business via an offshore-registered company. Why? Mainly because opening an account for your offshore company with an onshore bank can be highly problematic. If you open an offshore bank account, you may run into difficulties when transferring money from that account to certain destinations. Some onshore banks will not accept transfers from offshore banks.
At the same time, if personal information confidentiality is a top priority for you, registering an offshore company will make good sense. In addition to confidentiality protection, you can also reduce your tax burden if your company is registered in a low-tax jurisdiction. As far as banking offshore is concerned, we have to admit that it is not as attractive today as it used to be only two or three decades ago. However, even though you cannot use your offshore bank account for all purposes, you can still use it for at least some purposes.