Jun
Opening An Offshore Bank Account: Is It For You?
Photo by tao_zhyn
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 travelling 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 minimise 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 travelling frequently and not in the country your bank account is based.
And finally…
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.
Disclaimer
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.
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(I wouldn’t normally comment, but this is an important subject …)
With all respect to Lea, please take this as an example of what not to do when setting up your offshore accounts. When you go offshore, it needs to be part of a full structure that is suited to your own circumstances. Buying an IBC (International Business Corporation) and then having to setup the business bank account is not the way to do things. (Likewise, just using an offshore personal account is also not the way to do things.)
Also note that “banking introductions” are worthless. Every cheap offshore provider will sell you an IBC with banking introductions. This is a waste of time. What you need and want is a full offshore structure, with the IBC and business account guaranteed (or perhaps what you really need is a Trust … again, you need to do this properly). You shouldn’t be having to deal directly with bank account openings at all. (Note that most high quality offshore banks prefer to deal only with their introducers … and not individuals directly. So if you get yourself an IBC and then have to setup the account, you’ll find it harder, and will end up sending your private data to many more institutions … along with much wasted time and money.)
You also shouldn’t be setting up your bank accounts in the same jurisdiction as your IBC (e.g. panama corporation and panama bank account). Again, this isn’t something you do based on where you happen to be living or travelling through. It needs to be done strategically, based on the financial/privacy/security factors. (Ideally, your IBC and bank accounts should be in countries you are unlikely to be visiting, or wanting to spend any significant time in … this just keeps things even clearer when it comes to taxation and privacy/security etc.)
Do the proper due diligence. From my own experience, I can recommend shelteroffshore.com as a solid first port of call when researching this (get in touch, and have them refer you to a provider best suited to your situation).
Don’t bother going offshore until you can invest in the right structures. A poorly setup offshore structure is a real liability and a source of wasted time and money. Hang tight, and operate from your onshore accounts until you’re able to do it properly. (In most cases you’re looking at £2000-£3000 for a very solid, hassle free, secure setup, appropriate for your circumstances).
Thanks for sharing your experiences Lea.
Thanks for the info Ben - very useful for others wanting this kind of structure and you’re right, we didn’t do it in the most strategic manner, however that doesn’t mean we didn’t do our due diligence in the planning…it’s the implementation that went awry!
In Panama, banking introductions are not “worthless” but vital; you can’t get a bank account unless you have one and go in and meet the bank via the introduction. It was our fault however that we didn’t have all the right info with us for the bank (we thought we did but we didn’t), which meant we then ended up dealing with the bank personally as our lawyer was so rubbish at responding to emails etc. and generally not doing what he was supposed to do - which was to deal with the bank on our behalf (he was recommended to us so we obviously no longer trust *that* person with recommendations!).
I suspect we’re slightly different from many people wanting an offshore solution - we’re not looking to hide away our millions to minimise our tax liability, safeguard our privacy and keep ourselves away from prying eyes, we simply want a more efficient banking solution that better enables our LI lifestyle.
As you mention, an offshore solution should be tailored to your individual needs and personal circumstances - which ours now is, even though it may not be the *right* way to do things. Fortunately, we’ve managed to do this for quite a bit less than £2-3k but I’d happily pay that if I were getting the right kind of advice and guidance from a qualified expert.
And Ben…why wouldn’t you normally comment? If you’ve got useful info to share which you obviously have, please do share more of it
Re: introductions … I wasn’t saying they are worthless (as in you don’t need them) … but that the whole idea that introductions are of value also ties in with the kind of problems you encountered. Again, it’s levels of understanding. Introductions are one thing, having the account fully setup (as part of the structure), and not having to go through application process, personal visits, handing over lots of data (and the potential of the account opening not going smoothly, being delayed, or being denied), is another.
But again, it all depends on the individual. And as you say, going offshore can be much cheaper than £2k-£3k … it all depends on how much time and hassle you want to expose yourself to, and how important privacy and security is for you.
Re: stashing millions … I’m not talking from the point of view of large asset bases (or tax evasion), but simply that of the mobile entrepreneur. There is a lot of mystique surrounding the Offshore terrain, and also many false associations (e.g. Trusts are only needed for millionaires etc) which is half the problem.
The thing to bear in mind is:
It’s very easy for the unfamiliar concepts and terminology of a new subject to cloud our ability to see the underlying fundamentals. The offshore world is no different. There are some basic fundamentals that are best understood in offshore … which for the most part get overlooked, or more commonly, were never understood in the first place, because of all the confusing surface details. This makes it very easy for an offshore provider to sell poor solutions to unknowing clients.
Anyway … this is just my thoughts on the matter. And I totally understand re: just wanting a simple solution to tie in with international living.
Re: commenting … I was just passing by (not a regular reader) skimming some posts, but was compelled to stop and comment, in case it saved someone some time and hassle.
Time for me to move along …
Keep up the good work … from what I’ve seen I’d say you’re doing the best job of providing insight into the realities of international living. No doubt a catalyst in the immerging lifestyle trends. Congrats
I had been thinking of the whole HK bank account thing but it seems like now that I’ve left the UK it migh tbe difficult to sort those documents out. I even had hassles trying to open a new bank account in the Uk after having lived there for 2 years! the problem is always proving my address. It’s difficult when youre not on the bills.
But something to keep in mind once I have the time to get the proper documents. Actually, now that I think of it, it might be easier for me to set this up using my Canadian details… hrm…
Thanks for the post. Gives me some things to think about!
You should look into opening an account in Dubai and Singapore. Most major banks like HSBC and ABN Amro will let you do this.
you should be able to wire money into any local bank account from these accounts.
My wife and I,both pensioners,are selling our house ,buying a caravan and going walkabout.How do we go about a UK bank account as we will have no fixed address.Can anyone advise?
Hi Ken
- do you have any friends or relatives whose address you can use? If you’ve already got a UK bank account, you can usually just use a different correspondence address. There is a UK version of Earth Class Mail - I can’t remember what it’s called but try searching for “virtual postal mail UK” or something similar (I just did it and an interesting service emailmymail.co.uk turned up).
Hope that helps! Lea
Thanks for this article Lea, I appreciate you publishing this and the subsequent discussion.
Best wishes
Guy