An offshore account can be a powerful tool for diversification, asset protection, and even wealth creation.
But, if you’re not careful (or choose the wrong one), offshore accounts can also cause headaches, trigger unintended tax reporting requirements, and be expensive to maintain.
In this article, we’ll show you how to open an offshore account, reap the benefits, and avoid the pitfalls. We’ll also share the specific countries where foreigners can open an offshore account, what the advantages are, and what you need to watch out for in the process.
But first, let’s all get on the same page about what an offshore account really is…
An offshore account is any bank account held in a foreign country. They can be opened and maintained by individuals, companies, trusts, or foundations. Offshore accounts provide benefits such as diversification, enhanced privacy, tax efficiency, and varying degrees of asset protection. Importantly, opening an offshore account is 100% legal, can be cost-effective, and done remotely.
Before diving in, don’t forget to download your FREE copy of the Non-Resident Banking Starter Guide. It will help you get started finding and opening an offshore account in top jurisdictions around the world.
We just shared the textbook definition of an offshore account above. Now, let’s dig into what an offshore account really is, where they are, why people use them, what the advantages are, and how you can benefit from opening one for yourself.
But, opening an offshore account does not mean banking in some far-flung Caribbean outpost or South Pacific island paradise. Sure, it can mean that… but it doesn’t have to.
In fact, sometimes opening an offshore account in a major international financial center (or even in plain-vanilla Western jurisdictions) is just as useful, depending on your goals.
Yes, many years ago, an offshore account was synonymous with tax evasion. Many people opened accounts abroad, deposited cash, didn’t report it to tax authorities, and then invested that cash — generating “tax-free” returns.
Back then, governments had no way of finding out about the account because banks were tight-lipped about their customers. That’s because bank secrecy was still a thing, automatic exchange of information didn’t exist, and banks didn’t share client information with governments.
Today, most banks and governments trade information about account holders to make sure everyone is paying their tax bills. And, that includes banks and governments in offshore jurisdictions.
So, bank secrecy and using offshore accounts to evade taxes is a thing of the past. And that’s a good thing for a lot of reasons. One reason (which no one ever talks about) is that banks are now forced to compete and offer clients real value.
Before information sharing, clients were saving so much money by not paying taxes that they didn’t care about quality service, fees, or low returns. So long as bank secrecy remained intact, clients were happy and banks could charge whatever they wanted.
Today, those days are long gone. But there are still legitimate and practical reasons why many people and companies still open offshore accounts.
Ultimately, the benefits that someone can derive from an offshore account are going to depend on their citizenship, residency, objectives, and more. But, there are a handful of common benefits that most clients can tap into when opening accounts.
In this section, we’re going to look at five of these benefits in detail. This will include examples of specific jurisdictions where you can access each benefit and additional resources to dig even deeper.
First, let’s take a look at the five most common benefits that people are interested in when opening an offshore account:
Below, we’ll quickly explain each of the benefits and how you can tap into them by opening an offshore account.
In the world of banking, “privacy” has become a dirty word — and that’s unfortunate because privacy is important, especially when it comes to financial affairs. So, if privacy is what you’re after, an offshore account can help… with some caveats.
First, while there are plenty of countries that still offer banking secrecy, this doesn’t guarantee that your information won’t be shared with various authorities and governments. This is especially true for any customers, accounts, or activity viewed as suspicious, potentially illicit, or where agreements require the bank to share information with tax authorities, foreign governments, or international authorities.
For instance, many countries that offer offshore accounts have specific laws that forbid bankers and bank employees from disclosing information about client accounts to anyone. If they do, they face very high fines, even jail time, and immediate dismissal.
Of course, if you’re worried about bank staff sharing your financial information with unauthorized parties – you should also take into consideration local culture, customs, the likelihood of bankers accepting bribes, to what extent secrecy laws are actually enforced in that country, and how seriously the bank (and jurisdiction) take violations of bank secrecy laws.
How easy is it for your arch-nemesis to call up your bank, confirm the account exists, and access your account information? Banks in countries with low-security standards, poorly paid bankers, where there’s a cultural affinity for bribery and corruption, and historically low concern for bank secrecy — are not great for privacy, even if they have bank “secrecy laws” in place.
That said, if you have an offshore account in a country with bank secrecy laws, realize that your information is still accessible to government agencies and tax authorities.
Here’s a selection of jurisdictions that have strong bank secrecy or privacy legislation. If privacy is what you’re looking for, one of these countries may be of interest.
Many people want an offshore account for asset protection purposes. But, iron-clad asset protection cannot be entirely achieved by simply opening an offshore bank account.
In very simple terms, true impenetrable asset protection can only occur if the asset is properly structured. This often involves creating an appropriate asset protection vehicle(s) (e.g., company, trust, foundation, etc.) in a jurisdiction that has strong (and proven) asset protection laws.
But, an offshore account can still offer a basic level of asset protection. For example, if you live in a litigious country where lawsuits are common, accounts are easily blocked, and tax authorities and creditors have the power to instantly freeze (and garnish) domestic bank accounts — keeping a portion of assets abroad makes financial sense.
Similarly, if you live in a country that has weak rule of law that’s filled with corruption, kleptocrats, and extortion — having an offshore account in a stable country might be a form of asset protection for you.
The point is, by holding even a small portion of your funds in an offshore account, you ensure that you (and your family) can always access your money — no matter what happens. The key is choosing the right jurisdiction and the right bank that match your objectives and provide the benefits you’re after.
To learn more about asset protection, check out these free resources from GlobalBanks:
Economic diversification is another major reason why people open offshore accounts. And it makes sense. If you live in a country with a failing economy, where inflation is out of control, and the currency is unstable, why wouldn’t you open an offshore account?
Case in point: Argentina, Venezuela, Lebanon, Russia.
By opening an offshore account in a foreign country (or across several countries), you minimize your financial exposure and diversify away from economic risks in your home country.
With over 190 countries in the world, there’s no need to bank in your home country if you don’t want to.
Instead, it all boils down to your banking goals, which jurisdictions make sense for you, and where you can realistically open accounts.
For this reason, many people choose to open an offshore account in jurisdictions with long histories of economic stability, strong rule of law, and sound fiscal management.
Economically stable jurisdictions include places like Singapore and Switzerland, two countries where non-resident accounts can be opened remotely.
You can learn more about banking in these two jurisdictions with the following free articles from GlobalBanks:
Somewhat connected to the desire for economic diversification is political diversification.
Political instability, corrupt politicians, poor judgment, policy changes, draconian laws, exchange controls, and expropriation are all real threats.
So, it’s no surprise that many people minimize these risks and protect their money by opening an offshore account. In doing so, they shield their wealth from political instability and the issues that come with it.
Political diversification is commonly cited as a concern for people living in countries prone to political unrest, corruption, and instability such as CIS member states, Middle East, Africa, and Latin America.
However, political stability is a concern for people in Western countries too. For instance, oppressive tax laws, policy changes, or restrictive measures that eat away at your wealth, hurt your business, and reduce freedom. On the other hand, maybe you’re just concerned about the direction your country is headed. Regardless of your reason, keeping a portion of your wealth in an offshore account can offer protection.
To see political risks in action, you can check out the following articles from the GlobalBanks team:
Now, we return to the topic of taxes. Can offshore accounts reduce your tax bill? The answer is complicated, depends on where you’re from, and is ultimately a “maybe”.
That’s because taxes are ultimately determined by either your citizenship, your residency, how you’re structured, and where you’re obligated to pay taxes.
So, while an offshore account can reduce taxes, it typically requires the individual account holder to first be a resident of a no-tax jurisdiction (e.g. Cayman Islands), low tax jurisdiction (e.g. Malta), or a territorial tax jurisdiction (e.g. Panama).
Alternatively, certain individuals who have non-domiciled resident status in countries such as the UK, Ireland, or Cyprus are also able to legally avoid taxes by simply keeping funds in an offshore account and never remitting them to the country where they live.
Likewise, companies can use offshore accounts to reduce or eliminate taxes in certain situations. For example, if a Singapore company remits foreign-earned income to a bank account in Singapore, they have to pay tax. But, if that same company keeps foreign-earned income in an offshore account and never remits it to Singapore, that tax is eliminated.
So, offshore accounts can eliminate or reduce tax depending on your situation, how you’re structured, and the tax laws that apply.
If you want to learn more about the benefits of offshore accounts, check out The 15 Benefits of Offshore Banking here.
An offshore account is simply any bank account outside of your home country.
That said, there are a handful of jurisdictions that are better known for banking than others. These are commonly referred to as offshore financial centers. Not surprisingly, when most people think of opening an offshore account, they envision banking in these countries.
Below, we’ll share some of these countries, their pros and cons, the types of clients who bank there, and the minimum deposit requirements expected when opening accounts there.
Of course, if at any time you want help deciding where to open an offshore account, selecting banks, deciding which account opening strategies to use, or need direct contacts for bankers, we can help. By joining GlobalBanks Insider, you get all this and much more.
Here is a quick snapshot of opening an offshore account in the Cayman Islands:
Cayman is one of the most important jurisdictions in the international banking world. It’s the world’s fifth-largest financial center, home to 75% of all the world’s hedge funds, and has US $674 billion on deposit.
In general, forming companies, setting up investment funds, and even acquiring residency in the Cayman Islands is an administrative process that most people can navigate… as long as they can afford the fees.
For that reason, you might think that opening an offshore account would be an easy process. But, that’s not exactly true and to open here successfully there are hurdles that you’ll need to overcome.
For instance, Cayman requires you to demonstrate real economic ties to the island… simply being a frequent visitor won’t work.
Also, Cayman is a more expensive jurisdiction — meaning you’ll need to deposit higher amounts to get the attention of bankers. This is especially true when trying to open accounts at the private banking level.
That said, it is possible to acquire the necessary ties. And if you know which banks (and bankers) to approach, you can open accounts.
To learn more about Offshore Banking in the Cayman Islands, read our article about Cayman Islands Offshore Banking here.
Here is a quick snapshot of opening an offshore account in the Isle of Man:
Opening an offshore account in the Isle of Man is an under-the-radar banking alternative. It’s especially attractive for anyone just getting started with offshore banking and those interested in opening an offshore account with a lower initial deposit.
That said, there are some important caveats when applying for an offshore account here — especially when selecting banks and during the application stage.
The key is understanding your client profile, associated risk factors, and knowing which banks will actually accept you as a client. Otherwise, you end up wasting time, money, and energy applying to banks where you have zero chance of being approved.
To learn more about Offshore Banking in the Isle of Man, read our article on Isle of Man Offshore Banking below. Or, if you want to learn how you can start opening accounts today, check out GlobalBanks Insider.
Here is a quick snapshot of opening an offshore account in Liechtenstein:
Liechtenstein is a private banking jurisdiction. In other words, if you’re considering opening an offshore account here, it should be for private banking and wealth management purposes. If that’s you, Liechtenstein could be an excellent choice.
Non-residents, foreign companies, trusts, and foundations are all welcome here, assuming they are looking for private banking. Of course, opening requirements vary from bank to bank, so knowing what you’re up against (and what the nuances are) before applying is key.
Additionally, when applying for an offshore account in Liechtenstein, analyze the fees carefully. Fees in Liechtenstein can be significantly higher than in other countries and have the potential to offset the benefits that you’d otherwise derive from the offshore account.
We share specific steps on how to navigate private banking fees in our premium report, Private Banking Secrets — only available to GlobalBanks Insiders in the membership area.
Here is a quick snapshot of opening an offshore account in Singapore:
Singapore is an excellent jurisdiction to open an offshore account. That said, opening an offshore account here is a challenge. The reason for the high degree of account opening difficulty is simple, the banks have plenty of clients to choose from.
As the “Switzerland of Asia,” Singapore attracts investors, businesses, and wealthy clients from across the region. And, international demand has been surging over the last 10 years.
Singapore banks are rock solid. In fact, there has never been a failure. And nation’s regulators have a reputation for uncompromising standards and some of the most well-capitalized banks on the planet. Naturally, this makes Singapore a popular destination for anyone looking to open an offshore account.
But you must know which banks (and even bankers) to approach and what their account opening quirks and preferences are (e.g. client profile, required documents, financial criteria, ties, etc) before applying. Otherwise, you’ll be quickly denied.
Here is a quick snapshot of opening an offshore account in Switzerland:
Opening an offshore account in Switzerland is still the crème de la crème. And it’s no surprise. Swiss banking has been idolized, demonized, and immortalized by Hollywood, the media, and history books. So, for many, an offshore account here is a right of passage.
In fact, Switzerland holds roughly US $6.5 trillion in assets, around 25% of total cross-border assets globally… not bad.
But, now that days of banking secrecy are over, Swiss bankers are under pressure to deliver value (and returns) to keep offshore account holders happy. To do so, Swiss banks offer sophisticated financial services, specialty investments, and lending solutions. Not surprisingly, Swiss banks cater to clients interested in these services. Those looking to hold cash, who don’t plan to invest or use any bank services should look elsewhere.
When it comes to opening an offshore account, it’s possible to do so with most major Swiss private banks if you can deposit between US $500,000 and $3,000,000.
But, remember: requirements, services, and banker quality vary dramatically, so bank (and banker) selection is critical. You’ll also still need to go through compliance, pass due diligence, and carefully negotiate fees.
To learn more about Offshore Banking in Switzerland, check out the articles below. Or, if you want to start opening accounts today, check out GlobalBanks Insider.
Here is a quick snapshot of opening an offshore account in Monaco:
Monaco is a specialty banking hub that caters primarily to those with interests in the principality or along the French Riviera. For this reason, many individuals opening an offshore account in Monaco either have residency, plan to get residency, or plan to acquire assets in the region.
Like many of the other jurisdictions on this list, Monaco focuses on private banking. Not surprisingly, banks here cater to high-net-worth individuals (HNWI) and ultra-high-net-worth individuals (UHNWI). For this reason, the services on offer typically revolve around luxury assets, real estate, marine and aircraft, investments, and other specialty lending products.
Of course, if you can meet the deposit requirements, it’s also possible to open an offshore account in Monaco as a non-resident — even if you don’t plan to acquire residency or property. However, to do so typically requires more than US $500,000. If you approach the right banks, have the right contacts, and can meet the requirements, it’s also possible to open an offshore account remotely and open additional accounts for offshore companies and more exotic structures.
To learn more about Offshore Banking in Monaco, read our Monaco Offshore Banking Article by clicking here. Or, if you want to learn how you can start opening accounts today, check out GlobalBanks Insider.
Here is a quick snapshot of opening an offshore account in Panama:
Opening an offshore account in Panama is one way to enter the world of offshore banking with a smaller deposit. Like some banks in the Isle of Man, Panama accepts lower deposit amounts, will consider remote opening and has English-speaking bankers.
But, unlike most jurisdictions, Panama also benefits from the fact that the entire economy is based on the USD — which can insulate deposits from currency fluctuations as well as domestic or regional economic concerns.
More importantly, Panama does have deposit insurance, not all Panamanian banks are great, service can be spotty, and not all bankers speak English. So, bank (and banker) selection is crucial. For this reason, we suggest focusing on Panamanian banks with strong balance sheets, English-speaking staff, and experienced bankers.
Opening an offshore account is not without risks. So, below we explore some of the key risks to be aware of when opening an account abroad.
Depending on where you decide to open an offshore account, there might be country-specific risks that could impact your deposits.
For example, these risks might come in the form of political unrest, economic downturns, legislative changes, exchange controls, currency fluctuations, or even military conflicts. So, knowing what the risks are, how they can potentially impact your account, and how to protect yourself is important.
To mitigate such risks, look to open an offshore account in a relatively stable jurisdiction, with a history of political and economic stability, and strong rule of law.
Of course, each jurisdiction has its own set of unique considerations. We break these down and identify the trouble-spots in our premium Banking Intelligence reports, which uncover banking opportunities and account opening specifics in top banking hubs around the world. To learn more about our Banking Intelligence Reports click here.
When it comes to offshore accounts, some of the biggest risks that account holders are exposed to come from the banks themselves.
Bank risks primarily include financial risks, operating risks, and compliance shortcomings, though all of these can be broken down into many sub-categories. Knowing how financially stable the bank is, where a bank is vulnerable (or lacking), and how as a potential client you could be negatively impacted is critical.
When considering an offshore account, you want a financially stable bank that’s liquid and well-capitalized. So, it’s important to do a financial health check, understand the financial risks, and how that could impact you. By looking at a bank’s liquidity ratio and solvency ratio, you get a snapshot of the bank’s financials and how “safe” it is in raw financial terms.
To get a sense of operational risk, look at how the bank makes money. Opening an offshore account with a bank that’s heavily dependent on high-risk investments, derivatives, or lending to high-risk borrowers isn’t a great idea — especially if the country where the bank is located doesn’t offer depositor protection.
Lastly, when opening and maintaining an offshore account, compliance and onboarding practices matter. Ideally, you want a bank that follows best practices and has international standards. And, there’s a reason for this…
If the bank has abnormally lax compliance and onboarding feels too easy, this can be a sign of larger internal problems and outdated compliance controls — which may signal account problems for account holders in the future. For instance, later on, this can result in unwarranted account restrictions, burdensome due diligence requests, unpredictable account freezes, sudden account terminations, and more.
Additionally, banks with poor compliance standards attract high-risk customers. This, in turn, attracts scrutiny from regulators, authorities, and correspondent banks. And, this can result in bank failures, a sudden loss of critical correspondent relationships, and massive “de-risking” campaigns where entire customer segments suddenly have their accounts closed.
There are several other considerations when opening an offshore account, but the above will serve as a primer to get you started.
If you want to take the next step and actually open an offshore account, need help sorting out your banking options, or aren’t sure which banks are best for your specific client profile, we can help.
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