Offshore accounts

Opening offshore bank account is often associated with money laundering and illegal activities. The truth is that any individual or legal entity can be an owner of an offshore bank account and take advantage of international tax planning.

Due to the latest regulations and agreements singed by the governments of many countries the banking sector of tax havens has gone through very important changes. The main goal of anti offshore policy is to eliminate anonymity and banking secrecy, two core characteristics of this sector that play the most important role when choosing whether going offshore or not. The latest anti fraud regulations have established international collaboration between more than 100 countries that agreed to report mutually the information related to bank accounts of non-residents to fiscal authorities of their countries of residence.

However, this treaty has a small peculiarity that consists in that not all the countries that have signed it will exchange the information automatically. In order to obtain the information of its residents who have offshore bank accounts the government of a country has to sign a bilateral agreement with another country that has a mutual interest in the exchange of banking information. For example, Germany is interested in knowing who of its residents has an offshore bank account in Panama but Panama is not interested in receiving the same information about its citizens or sharing the list of German residents who own offshore accounts in its banks. Therefore, since there is no common interest between these two countries, most probably, they will not sign a bilateral agreement and will not exchange banking information automatically.

What you have to know before you open offshore bank account

Everyone who decides to go offshore has its personal reasons and intentions. Some look for financial or political stability, some for asset protection and flexibility and others for tax saving. Whatever is the reason, it is very important to do a proper research before deciding to open offshore bank account because the number of financial centers, offshore banks and financial entities is constantly growing and you have to choose the best option for you among them.

Further we have listed the main points that any future offshore account owner has to take into consideration.

Opening offshore bank account is completely legal.

Any physical person or legal entity has a right to decide in which country and in which currency he wants to keep its money. If a client doesn't decide to transfer the savings to its country of residence there is no income that he has to declare. Therefore, there is no tax fraud.

Check requirements before you decide to open offshore bank account.

Each bank has its own list of requirements and documents that a future client has to present. Since in majority of the cases the process of application is done remotely, the bank officer can not see you personally and ask you questions regarding your past, commercial activity or financial situation. Therefore, it is very important to prepare all the documents and fill out correctly all the forms before sending it to the bank. In case you are not able to fulfill the requirements, the responsibility for the account being rejected falls on your shoulders and you loose money paid to an introducing agency for bank account opening.

It is fast and affordable to open offshore bank account and in majority of the cases it can be done remotely.

Depending on the jurisdiction, in some banks it might take 3-5 days to approve your account. However, in some of them the process of due diligence takes longer and the employees of the bank take its time to get to know the future client and the risks it might bring to the entity. The average cost of keeping your income in offshore is from 500 to 1000 GBP, which is not expensive for being able to keep your anonymity. However, you have to make sure that the minimum deposit that you will be asked to transfer once the account is activated is affordable and you have this amount on-hand. Also, don’t forget to ask for annual maintenance and transfer fees and make sure that they correspond to the services that you have required.

When in doubt, declare.

The duty of each citizen is to declare his world incomes. If you are a physical person the most logical solution is to declare your offshore bank account to your local tax authorities and then, using double taxation agreement, pay the difference between the tax rates of both countries. In case you operate through an offshore company you have a possibility to delay or avoid tax payment. How can you avoid paying taxes? Any company, offshore or onshore, can decide to invest the generated benefits to the maintenance and the growth of the company or convert it into dividends for the final beneficiary of the company. In this case a company declares zero benefits and is exempt from paying taxes due to unfavorable economic performance. However, if the final beneficiary decides to repatriate the dividends, paid by an offshore company, to his country of residence he will be obliged to declare it and pay with a delay the taxes on this additional income.

Use several offshore bank accounts for a better tax planning.

Not all the countries have signed automatic exchange of banking information treaty and internal bilateral agreements. Therefore, you will be able to use this gap to your advantage and save on tax payments. Keep in mind that, sometimes, complete asset protection and reduction of your tax liability can involve larger structures and you might need to register an offshore company to operate as a legal entity and not as a physical person.

To open offshore bank account choose a right professional.

While surfing on Internet one can find a lot of consultancies or legal teams that promise optimal solutions and guidance through the process. However, not all of them have experience or work directly with offshore banks. OBS E-Commerce Consulting is official introducer who has agreements with many financial entities and banks all over the world. We work directly with local law firms and assure the best solutions for our clients.