Opening An Offshore Bank Account: Is It For You?Publish date: 16-06-2008
Another one of the most common questions we get asked is how do we manage our money. Where do we bank? Do we have an offshore account? Do we have multiple accounts worldwide?
I know some of you have been waiting for this post, so without further ado, here’s the nitty gritty…
Why have an offshore bank account?
In a nutshell, if you’re resident in a country which has relatively high taxation levels on any money earned and kept within that country, when you become non-resident it’s financially sensible to keep your money in a country where you are not subject to such high taxation levels.
Note however, wherever you’re from you should check out the following things and ask the following questions, as the rules differ by country of residence:
- If you’re non-resident are you still liable for tax on your earnings worldwide?
- Can you apply for tax exemption on assets/income within the country because you’re non-resident?
- If you earn money from outside of your ‘home’ country, is that liable to tax?
- Are your worldwide assets subject to tax whether kept in your home country or not?
The answers to these questions will determine whether it’s worth opening an offshore account or not for your circumstances.
How did we do it?
Having set up our corporation in Panama, we then tried for 15 months to open an offshore bank account for the company there. We did all the necessary things - including going into the bank with a proper introduction and signing all the forms. Unfortunately, we didn’t quite have all the necessary documentation with us and our multiple attempts to send it once we left Panama failed.
We have since set up an account in HK which took a total of 10 minutes after which we walked away with a fully activated account and bank cards and pin numbers. It helps however that I have a HK ID card which makes the whole process so much more efficient.
What do you need to open an offshore account?
If you’re planning to open an offshore account in a place you’re traveling to, then it will be useful to ensure you have the following documentation with you:
- A letter of introduction from your existing bank (the more recent the better)
- 6 months worth of recent bank statements (official ones, not just printed from the internet)
- 3 forms of proof of a residential address (in your home country or wherever)
- Copies of your passport
- Your business registration documents (if you’re opening a business account)
Where should you open an offshore account?
If you’re looking to minimize your tax liabilities, it makes sense to choose a bank account within a tax free zone. Some of the most popular ones include: Cayman Islands, Panama, HK, Guernsey & Jersey and Switzerland. Always consult a local professional before opening an account who should advise you on the process and requirements of the country.
Things to consider and tips based on our experiences:
- Speak the language - part of the problem with trying to open our account in Panama was the language barrier; we didn’t understand all the documents, they didn’t understand our questions and the whole thing was harder because of it.
- Currency fluctuations - be aware that if you’re keeping large amounts of money in an offshore account, you may be more subject to currency fluctuations devaluing the investments you make; consider a multi-currency account.
- Bank fees - as with any bank account, ensure you’re fully aware of any bank fees particularly if you’re going to be making frequent international transfers or any minimum balances required on the account to avoid fees.
- Online access - this is a must if you’ll be traveling frequently and not in the country your bank account is based.
If you’re hanging out to know what we do, we still have UK bank accounts (on which we pay tax on the balance) and, as mentioned, now have a HK account with multiple currencies.
I am not a financial adviser and nothing in this post should be construed as me advising you on financial matters - I’m simply sharing what we’ve learned and what we know about this topic.
Written By Lea Woodward | locationindependent.com
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