6 things you should know before opening an offshore bank account
Opening an offshore bank account is just like opening a bank account locally. The only difference is the location of the bank, as well as the banking services offered.
If you’re interested in taking the offshore route, there are several things to put into consideration. Here are six of them:
1. Open an account is fast and affordable, but you must do it with the right mindset and proper understanding
If you think that opening an offshore bank account is difficult and expensive, think again. Especially when you’re using an agent’s service, opening an account is very straightforward, and most of the case (depending on the banks’ requirements) you don’t need to visit the bank for that purpose personally.
For example, if you want to open a bank account in Puerto Rico, you only need to spend EUR 260 for a personal account or EUR 550 for a business account, plus a minimum opening deposit of USD/EUR 500. The process itself will only take about seven work days. Forms are submitted by email, and required documents are sent using a courier service.
What you need to emphasize upon is your reasons for opening the account. You may hear about hiding your money in an offshore jurisdiction or take advice on how to cut your tax expenses by opening a bank account in the Caribbean or elsewhere similar.
The thing is, what you’ve been told about going offshore for those purposes is mostly groundless.
The media doesn’t inform you much on this, and the so-called experts from “offshore banking service XYZ” only want your business but don’t offer you real solutions.
Instead, here’s what you should do: Learn as much as you can about offshore banking from the Internet or books and consult with your trusted lawyers and seek recommendations for trusted offshore banking service providers and agencies. Only then you can start the process of finding the right jurisdiction for your bank account.
2. While it’s not expensive, but you should consider the transactional and recurring costs
Indeed, for less than EUR 1,000, you can get your bank account set up. However, you should be aware of other costs. Those are not hidden costs, though.
Some offshore banks are solvent and considered as some of the best in the world. Why? Here’s one of the reasons: They are full-reserve banks, which mean that they keep the full amount of your money and don’t lend your money to borrowers, but instead generating an operational profits by charging your account maintenance and transactional fees, as well as providing you with top-notch services, such as precious metal investing, online trading, managed service, and other banking/investment-related services.
Be aware of the fees and make sure that those make sense, considering your asset size and the level of services required.
3. It’s perfectly legal — if you set it up in the right way
You may read, watch, or hear the otherwise, but the reality is this: Offshore banking is perfectly legal. Yes, some use it for money laundering, tax evasion, and whatnot, but it’s just wrong to condemn the entire offshore banking system because of a few who use it illegally.
Unfortunately, that’s what the global organizations want to do — they want total annihilation of offshore jurisdictions and the offshore structures that come with them. For example, seven anti-corruption organizations created Open Ownership in 2016, with the sole purpose to rip open the secrecy of the offshore world so everyone involved in it can be scrutinized.
The thing is, such ‘openness’ will lead to one major issue: The transfer of control over your wealth from you to someone else (e.g., your government.) Not a good idea, don’t you think?
That said, what you can do is to set up your offshore accounts in the right way, and one of the best ways to do it is by seeking the help of a trusted and reputable International corporation services provider.
4. No excuses — you must report your account to your local tax authorities
Due to the initiatives mentioned in #3 above, you’re required to report your offshore account to you local tax authorities. There are legal implications if you insist on the otherwise, such as tax penalties or even imprisonment. In the U.S., not reporting your account could cost you up to $500,000 and a potential jail term of up to 10 years.
You need to be smart with your asset management, working with ways facilitated by the legal systems. You don’t want to mess with the tax men.
5. You may need two or more offshore structures to make tax planning and asset protection work
If you’re thinking about opening an offshore bank account to make it easier for you in your stay in that particular country — i.e., as an expat, tourist, or someone seeking medical help — then the account can be a real solution for you. However, if you’re thinking about protecting your wealth and/or reducing your tax liabilities, an offshore bank account might not be enough for that purpose.
Offshore asset protection is about strategy. It can involve a complex combination of offshore banks and companies, often residing in different offshore jurisdictions. The idea is to work on a structure that can offer you the best protection at the lowest risk.
Again, you should consult with your trusted lawyer and/or offshore service provider for the best route.
6. Offshore banking isn’t the ultimate solution for your asset protection needs; you should consider the pros and cons
Taking your money overseas may work to benefit your personal finance. However, it’s not always the better way to plan and protect your wealth. Oftentimes, keeping your assets onshore is the best option for your situation.
That said, you should consider the pros and cons of opening an offshore bank account.
Here’s an example: Did you know that the more money you have, the more you’re on the tax men’s radar? That’s right, if you have more $100,000 in your bank account, you could be a target if your government is looking for money in a political and economic turmoil. In this case, taking some of your savings overseas will keep those out of your government’s immediate reach.
However, you also need to understand that having considerable wealth offshore will also put you on your government’s radar. “Thanks” to the global transparency policy which requires you to report your offshore holdings, your offshore accounts are visible to your local government.
Remember that your taxmen always think that you’re hiding something from them — so, always prepare yourself to proof your account ownership.
As you can see, opening an offshore bank account is just the tip of the iceberg. What’s underneath it is plenty of research and consultation with a lawyer, tax planner, and offshore agent. While it seems to be like a real hassle, it’s a must-do. You don’t want to make the wrong move and regret taking your assets offshore.
If you’re still pondering the pros and cons of opening an offshore bank account, you can consult with us. It’s free, with no obligation to use our service.