Overseas bank accounts or ‘Offshore’ accounts are usually connected with criminal activities, suspicious deals and money laundering. The reality is that opening an offshore account basically means opening a bank account in a foreign country which is completely legal and of course profitable.
So why would anyone want to open an overseas bank account? In the past, Offshore Bank Accounts were perceived as just for the wealthy. This is no longer the case. Theoretically anyone can open an account overseas and in these days of electronic banking, most applications can be handled on-line or by mail.
Your application can be handled by specialized companies or financial advisors who will help you to deal with the paperwork and regulations.
The main reason most individuals and companies open an overseas account is to save or make money. Foreign banks offer a very good interest rate, usually much better than most US banks. And that’s the first benefit of this type of banking. This basically means that the longer you keep your money in one account, the more interest you will earn. Small foreign country where your offshore bank is located will also have a benefit from this.
Second benefit is privacy. Many countries’ banks are specialized in confidential banking, like Switzerland. But, some offshore banks have confidential and privacy laws so strict that it is considered a crime for any bank employee to discuss your account with anyone except the account holder. Some overseas banks even allow you to open an account using fictitious name.
Reduced taxation is another benefit you should consider when opening offshore bank account. Significant tax breaks can be attractive, but confusing as well, so you’re advised to consult your tax expert before opening an account. Basically, if you have money in a bank account in another country, it does not fall under US tax laws. Which means that you may declare your income, but not necessarily pay taxes on it. Once you start applying this same rule to other investments, your stocks, real estate, etc. the tax rules can be even more confusing.
Accessibility to your account is one of the most significant benefits of having an offshore account. You may access your account anytime conveniently from the commodity of your home. Basically all you need are e-forms and everything can be done via emails and bank web applications.
To open an overseas bank account, you must firstly do some research and ask yourself few crucial questions.
1) Which country and which bank will be most suitable for your needs?
You may want to consider the location of the bank first. Most offshore banks are situated in warmer climates, such as the Caribbean or Bahamas and sometimes it can be fun to combine business with pleasure.
2) What is better - a large or small bank?
There are advantages in both. A larger bank may offer greater security and more services, but with higher fees and vice versa – smaller bank can be more ‘friendly’ regarding payment, but lack some services.
Other questions you should check before opening an overseas account are:
- What kind of fees will apply?
- Do I have to maintain a minimum balance?
- What interest rate I will earn?
- Is the interest rate on your account is tied into the US economy or the local currency of the country where your bank account is?
Also, you may want to consider other services the bank offers, such as different types of accounts, credit cards and safety deposit boxes, although you may not need all of them it can be handy in the future.
Keep in mind that you will have to communicate regularly with your bank, to be able to check your account, to deposit and withdraw funds, and perhaps even visit them occasionally.
Just don't forget to bring your swimsuit and cocktail.