Offshore Bank Accounts
Arranging your finances to suit your circumstances is of fundamental importance. As most of us these days will encounter at least one major change in our life, it is reassuring to know that our financial affairs can take of themselves and remain a constant. In what circumstances then, would one look to open an offshore bank account?
Primarily offshore banking is an attractive option for two types of bank customers: (a) those who have large sums of money that they wish to invest offshore tax-free; and (b) those who live and work for a part, or most, of their lives in a country outside the one they were born in and would be considered to “come from” (what are commonly called “expat” workers).
Certain countries have reputations as being tax havens for investors who have large (or largish) sums of money they wish to invest tax-free. Countries that offer attractive tax-free savings accounts to UK customers in particular include the Isle of Man and Jersey (the “Channel Islands”). Other countries, further away, that have traditionally been attractive to UK residents include the British Virgin Islands and Bermuda. In all of these places the customer will deposit a large sum of money in the hope of not only getting a good guaranteed rate of return, but also not having to pay any tax on the interest accruing.
Expat workers find banking offshore attractive for two reasons.
Firstly, due to the nature of their work, they are trying to minimise the tax they pay in the first place (which includes not only the tax on their savings but also their income tax).
Second, due to the services offered by offshore banks, they find that no matter where in the world they are, offshore banks offer them a global tax-free service. Moreover, offshore banks are usually tailored to not only offering these customers useful banking and investment advice, but also useful strategic tax advice on how to minimise their tax payments. At the same time, provided they bank in the Channel Islands, they can still avail themselves of all the usual UK bank services; such as UK credit cards, insurances, loans and mortgages, that give them the feel of banking in the UK with the benefit of not paying tax.
Types of Services With Offshore Bank Accounts
As with most UK banks, offshore banks offer a wide-range of services. In short, most offshore banks offer the following products to their customers:
- savings accounts
- investment accounts and investment advice
- current accounts – which are usually interest bearing accounts (although the interest rate is usually very low)
- debit cards
- credit cards
- mortgages (this one depends on where you do your offshore banking)
- internet/online banking
- tax advice
No matter which offshore bank account you decide to open, keep in mind that the goals you are aiming to achieve by opening the offshore bank account are:
- significant tax savings
- diverse range of investment products
- very competitive rates of return on the investment
- secured investment
- access to all of the world’s major money markets
If you can achieve all of these goals, you’ll have found the ideal offshore bank account!
Restrictions and Fees
One word of caution: whilst offshore bank accounts are very attractive, they do usually come with fairly hefty minimum balance requirements and also with high annual fees. Essentially these measures are put in place by the offshore bankers to ensure that they only receive “serious” requests to open an account. In other words, there is little to no point opening an offshore bank account if you are only interested in putting 100 Pounds on deposit.
Moreover, in certain cases, if you are considered to be a “tax resident” of the UK, certain offshore tax havens may not permit you to open an account with them. As such, you will need to check these issues through very carefully before deciding on an offshore bank account.
10 Questions To Ask Yourself Before Opening An Offshore Account
Before deciding whether or not an offshore account is suitable to you, you should ask yourself the following questions:
1: Do I have enough money to place on deposit to make this worth my while?
2: Will I have immediate access to my account?
3: How easy is it to transfer money from one country to another (are there any currency control regulations in place)?
4: Will the bank offer me reliable tax advice on how to minimise the amount of tax I pay on my savings?
5: Are there going to be any cultural problems with the bank? For example, do the staff only speak French and Spanish, or can they speak English?
6: What currency will the account be denominated in – Pounds, Dollars, Swiss Francs, any or all of the above?
7: Are there any penalty fees for making withdrawals? Is there an annual membership fee?
8: Will I have a cheque-book, cheque card and debit card?
9: Can I get an overdraft or any other services, or is this simply a deposit-taking service?
10: Is the money secure? Here you need to think of two aspects: (a) is the money insured if the bank should crash; and (b) is the country politically safe enough to ensure that I’ll see a return of my money?
Offshore savings accounts