An offshore bank account is an account which is set up outside the country of residence of the account holder. The main reason for an individual or company to employ offshore banking is to capitalize on jurisdictions that offer a low or zero percent tax on their wealth. Offshore banking can cater to investors of all levels and the process to open an offshore account is solely simple and similar to that of your standard local bank account.
Benefits of an Offshore Bank Account
Offshore banking has been long considered to be an option only available to the wealthy, however in recent times it has often been employed by individuals or companies that wish to invest their money to gain immediate and long term financial benefits.
When opening a bank account overseas, effective tax planning and account anonymity are two aspects which are considered with upmost importance. Other advantages of offshore banking include;
- Economic and financial stability of the chosen jurisdiction
- Low or zero percent tax
- Safe and secure banking enabling anonymity
- Flexibility in terms of access to funds globally
- Enhanced legal and political conditions
- Improved asset protection
- Higher interest rates from banks in selected jurisdictions
Essentially an offshore account provides the means for wealth to be protected, preserved and extremely increased, as favorable conditions are often offered by offshore banks. These factors have contributed to the increasing number of investors opting to deposit their money in international bank accounts.
The more favorable jurisdictions considered for offshore account opening provide low or zero percent tax, often referred to as 'tax havens', such as the BVI, Cayman Islands and Seychelles. Most tax havens ensure that your account details are kept in confidence, providing improved and enhanced asset protection.
Process of Opening an Offshore Bank Account
Finding a suitable jurisdiction
When deciding to open an offshore bank account, the first step is to determine which jurisprudence favors the investor the most. It is often recommended to acquire the assistance and guidance of a professional firm on order to assist with the process. There is a wide selection of jurisdictions which need to be considered when opening an offshore bank account as each poses its own benefits to investors.
Begin the account opening procedure
Once an appropriate jurisdiction is chosen, you can initiate the account opening process. A professional firm who has contacts with reputable banks internationally can liaise with the bank on the behalf of the client ensuring that the process is completed in line with all legalities. In the event that you do not seek assistance from a firm, locating a jurisdiction to open an offshore account is the first step to establishing it.
Locating a viable banking institution
After a jurisdiction has been chosen, research on the local banks and finally determining which bank offers the best interest rate and services to your specific requirements should be connected. This will enable you to determine the regulations the bank must comply with, how they open accounts, and whether you need to travel overseas to open the account – if they require personal presence.
Most offshore banks are flexible in their procedure and may not require the client to travel.
Selecting a bank account type
This is followed by finding out what type of account the client requires. The type of bank account will also determine what documentation is needed and the legal requirements the offshore bank must satisfy. For example, in order to open a corporate offshore account, a minimum amount of capital is required and this figure may vary with different jurisdictions.
Supplying the required documentation
The documentation that is needed can then be processed after the above factors have been determined. The procedure after this point is dependent on the bank's application process and the jurisprudence of laws. Typically, an offshore bank will require certain documentation, including a proof of identity, proof of address, while corporate and investment accounts may have additional requirements such as business plans or minimum amount of investment.
Types of Bank Accounts available
The three main categories of offshore bank accounts are personal, corporate and investment. The type of account will determine the bank account opening process. Any type of bank account you decide to open must meet the specific requirements of the jurisdiction and the chosen offshore bank.
Personal Account – A personal bank account is one which an individual opens for private use, and not for business purposes. One of the main reasons for a personal account is to enhance an individual's personal capital, thus enabling an individual to benefit from an offshore jurisdiction with low or no tax and potentially improved political and economic conditions.
Corporate Account – In contrast, a corporate bank account is one which is employed by companies and businesses therefore the services provided in this account are specifically tailor for businesses. A minimum amount of capital is required in order to establish the corporate account.
Investment Account – An investment account presents potential investors with the perfect environment to manage their wealth and deal with their funds. It can also serve the purpose of buying stocks, mutual funds, custodial accounts and individual brokerage accounts. This type of account is classified as a financial tool as it enables investors to buy stocks and bonds while offering high security and profitable returns.