Bowman Offshore Bank Transfers on How to Open and Access an Offshore Bank Account

Offshore banking is often associated with a high level of financial sophistication and, sometimes, chicanery. However, the reality is that the average person can open an offshore bank account with just a few hours of work. Each offshore bank and foreign jurisdiction has its own requirements, so you'll have to do some research to find the specifics relevant to your situation. The following is an overview of what you can expect, based on common offshore banking centers such as Switzerland, the Cayman Islands, and the Channel Islands.

The Basic Requirements

The basics of opening an offshore bank account are similar to opening a bank account in your home country. Offshore banks will ask for your personal information, such as your name, date of birth, address, citizenship and occupation.

To verify your personal information, you can expect to submit a copy of your passport, driver's license or other identifying documents issued by a governmental agency. Additionally, banks are concerned with verifying your residence or physical address since this may affect taxation issues. This requirement may be satisfied by presenting a utility bill or similar documents.

Due to the wide range of different identification documents that may be presented to offshore banks, additional assurance of a document's authenticity is often required. A notarized copy of certain documents may suffice in some cases. Other offshore centers prefer an "apostilles" stamp, which is a special type of certification mark that is used internationally. Where this is the case, you will need to visit the government office that is authorized to issue this stamp for your state or nation. (For a general overview, also see taking a Look at Tax Havens.)

Additional Verification Documents

While the basics are similar, there are often considerable additional requirements to open the account. These requirements are in place to discourage money laundering, tax fraud or other illegal activities that are often associated with offshore banking.

First, offshore banks may ask for financial reference documents from your current bank, indicating average balances and a "satisfactory relationship." Most commonly, this is satisfied by bank statements for the last six to 12 months.

Second, many offshore banks ask about the nature of transactions expected to take place through the account. This may seem overly intrusive, but offshore banking centers have been under increasing pressure to stop illegal activity. For this purpose, many offshore banks want additional documentation, noting the source of the funds you are depositing in the bank.

If the money is from your job, a wage slip from your employer will likely suffice. To verify your investment income, an offshore bank may ask for information about your investments and where they are held.

If you have significant funds from a business or real estate transaction, you may need to provide sales contracts or other relevant documents. If you are depositing funds from an insurance contract, you may need to provide a letter from your insurance company. If your money comes from an inheritance, the bank may ask for a letter from the executor of the estate testifying to this effect.

Choosing a Currency for Your Offshore Bank Account

Unlike domestic accounts, offshore bank accounts offer an option of which currency to hold the funds in. This can be a highly valuable feature of an offshore account, especially if one's domestic currency is unstable or expected to depreciate.

It is important to understand the consequences of holding your account in different currencies. For example, holding funds in certain currencies may allow you to earn interest on your deposits, but it can also result in foreign tax liability. Also, you may need to exchange currencies to make deposits and withdrawals, which could be a significant expense depending on the fee structure and exchange rates offered (see 6 Factors That Influence Exchange Rates.)

Depositing to an Offshore Bank Account

Offshore bank accounts are most often funded electronically through international wire transfers. Unfortunately, the systems that enable free electronic transfers common in domestic banking are typically not able to transfer money internationally.

Sending a wire transfer is a simple operation, but almost all banks charge international wire transfer fees to send or receive funds. Pricing for wire transfers varies from bank to bank, so be sure to look for deals. Unfortunately, there are few good alternatives. Domestic checks are generally not accepted in foreign jurisdictions, and depositing funds in person on a regular basis is impractical.

Withdrawing from an Offshore Bank Account

Offshore banks offer a variety of ways to withdraw funds to maximize the convenience of using their services. Many offshore banks issue a normal debit/ATM card that allows you to easily access your funds worldwide. You will want to look into the fees for using this method, since they can be expensive. Withdrawing larger amounts of cash at one time may help to minimize these fees.

Some offshore banks offer checks. However, this is usually not a preferred method– primarily, because confidentiality is often desired in offshore accounts. Problems may also arise since checks drawn on foreign accounts are not always accepted locally.

The best option may be to use two accounts: one offshore, one domestic. In this way, electronic wire transfers can be used to transfer larger amounts of offshore funds to a domestic account where they can be easily accessed. This method offers greater privacy and security, while also providing the convenience of local banking services.

The Bottom Line

Despite the mystique surrounding offshore banking, it is relatively simple to open an account. Often all it takes is filling out the paperwork, supplying some basic identifying documents and providing additional information to show that you are not planning to use the account for illegal activity.

Choosing the best currency and optimizing deposits and withdrawals are slightly more complicated, but the best choices should become clearer as you study the various options. When using offshore bank accounts and receiving international wire transfers, it is important to consult with a tax professional to ensure you are following all the tax regulations at home and abroad.

May 2, 2018
by Witney Abenson
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Bowman Offshore Bank Transfers on everything you need to know about offshore savings accounts

Offshore savings accounts allow you to save in different currencies. And, contrary to popular belief, you don’t have to be hugely wealthy to take advantage of them.

Offshore savings accounts may have a high profile thanks to scandals involving famous names using them to avoid paying tax – but the reality is that account holders do still need to pay tax. In truth, there’s little point opening an offshore account in the hope of dodging tax because you are generally liable for tax on the interest you earn in the same way you would be in the UK.

However, there are a number of other benefits to holding an offshore savings account. Read on to find out if this could be the right savings account for you.

What is an offshore savings account?

Offshore accounts are savings accounts located outside the holder’s country of residence, in this case the UK.

They can be used to stash euros and dollars (as well as other currencies), which can be handy if your salary is not paid in sterling. Most accounts can be opened by anyone over the age of 18, although some are only available to those living outside the UK.

While it is often necessary to invest at least £5,000 or £10,000 to open an offshore savings account, others require a minimum deposit of just £1.

Offered by many high street banks and building societies as well as private banks, most of the offshore accounts available to UK savers are based in the Channel Islands or the Isle of Man (which have separate tax jurisdictions) and, as such, can be operated by post, phone or online.

Is an offshore account for me?

Offshore accounts are not for everyone, but they are useful if you work or live abroad, regularly travel overseas or hope to retire to another country.

The ability to save in the currency in which you are paid or expect to fund your retirement, for example, removes the risk of losing out on exchange rate fluctuations.

Some people actually use offshore accounts to ‘play’ exchange rates in a bid to boost their returns by converting the cash back into pounds when sterling is weak (as well as deferring the tax bill on their returns – see below for more details).

However, you could lose out if you have to change your savings back to sterling when the exchange rate is poor.

Even though some offshore accounts can be opened with £1, the high operating charges – withdrawal fees can be up to £25 – make them less attractive to smaller savers or those needing regular access to their money.

What types of offshore account are there?

Offshore accounts are available with both variable and fixed interest rates. Variable rate accounts often come with introductory bonuses and offer relatively easy access to your money, while those paying fixed rates generally require you to lock away your savings for between one and five years – just the same as standard savings accounts.

How do I open an offshore account?

Opening an offshore account is much easier than it might seem, providing you meet the minimum requirements set by the bank.

Once you’ve applied online or in-branch, you’ll need to supply ID to prove your identity just like you’d need to with any other account. Depending on the account, you may need to take extra steps to verify your identity.

There are a number of strict checks in place to prevent offshore accounts falling foul of criminals who want to launder money, evade tax or engage in other illegal acts. You could be asked about the nature of the transactions in your account – or your UK bank could be asked for financial reference documents.

If your application is successful, you’ll be able to make your initial deposit and begin using the account.

What are the tax implications?

It used to be the case that standard savings accounts would pay interest only after tax had been deducted at the basic rate of 20%, while offshore savings accounts paid interest without deducting tax. Since April 2016, both standard and offshore savings accounts pay interest without any tax deducted.

This is due to the introduction of the new Personal Savings Allowance. Basic-rate taxpayers have no tax to pay on the first £1,000 of interest, and higher-rate taxpayers will have no tax to pay on the first £500. But it’s important to know that interest earned above these thresholds will still be taxable, so you can't use offshore accounts to avoid paying tax.

You are obliged to declare any savings interest earned to HM Revenue and Customs (HMRC) on a self-assessment tax form and to pay tax on it in due course. If you don’t, you could face a big fine – plus interest on whatever you owe.

However, sophisticated savers can take advantage of the delay between earning interest and paying tax because they can keep the extra cash in their accounts for longer, thus boosting their returns by earning more interest.

Is my money safe in an offshore account?

Savers with money in a Financial Conduct Authority (FCA) authorized bank or building society in the UK are protected by the Financial Services Compensation Scheme (FSCS), which covers the first £85,000 (as of January 2017) held with each banking institution.

However, money held in an offshore savings account is not protected in the same way – even if a UK high street bank operates the offshore account you choose.

Before opening an account, you should therefore check with your provider to see whether your money will be protected by a different compensation scheme.

Banks licensed by the Guernsey Financial Services Commission, for example, are covered by the Guernsey Banking Deposit Compensation Scheme, which protects the first £50,000 per person, per bank. The Isle of Man's Depositors' Compensation Scheme, meanwhile, also protects up to £50,000 per individual saver.

April 19, 2018
by Witney Abenson
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