Offshore Banking Costs
If you are interested in banking offshore, it is vital that you consider the offshore banking costs before opening an offshore banking account. One thing that makes opening an offshore account so costly is the various steps involved in opening the account.
The other problem with offshore banking costs is that you have certain standard charges and on top of those are any fees that the local banks may want to charge.
Account Opening Charges
When opening an offshore account you must be prepared for a variety of costs. Before you can even open an offshore bank account, it is recommended that start an offshore company, mainly because of the privacy you will receive.
With an offshore company, everything will be done under the company’s name, including banking transactions, so your name will never come up during a search. Starting an offshore company can cost up to $2,500, while opening an offshore bank account will cost up to $550 more.
No Two Banks Have The Same Offshore Banking Costs
One thing to be aware of is no two banks are going to charge the same fees, aside from the standard charges that apply to offshore accounts. Offshore accounts are marketed in a way to draw customers in; banks offer all sorts of incentives just to stay ahead in this highly competitive market.
The problem is the way in which the accounts are marketed, potential customer are not fully aware of what charges are associated with the account or what services are going to have charges. Offshore banks have also been known to charge different amounts to different customers.
Offshore banks claim these charges are necessary because of the fees they are being charged by other banks that are higher up the chain. Banks also claim these charges are needed because most of their transactions cross different borders, which means that different currencies are involved in one transaction.
No matter how you look at it these fees start to add up each month and if you are not prepared ahead of time they can come as quite a shock.
With offshore banks, you can expect certain services to be free of charge, but what those are will vary by country and by bank. Other services will include service fees, commonly referred to as tariffs. Some of the services that often incur extra charges are currency exchange, transfers done by telegraph, and credit cards. Before opening an offshore account you will want to compare like services with several different banks, this shows you how much one bank charges compared to another so you can choose the one with the lowest overall fees. Something to keep in mind when comparing banks is that some banks charge for minor services, such as email confirmation while others do not, so even the little things can start to add up.
Offshore banking costs are going to vary by country and by bank, but that doesn’t mean you cannot be prepared ahead of time. Contact us today and talk to our reputable financial advisor regarding offshore banking costs.
Offshore Banking Tax Impliciations
How offshore banking tax implications are going to affect you as a taxpayer will mainly depend on where you have opened your offshore account. Most countries require taxpayers to claim all of their earned income, even if it is just interest from an offshore account.
Therefore, all offshore bank accounts are going to have tax implications because they affect how much you have to pay in taxes at the end of the year.
General Offshore Banking Tax Implications
The general tax implications a tax payer faces with offshore banking varies based on the jurisdiction they choose when opening an offshore account, but in general there are only two different groups.
The first group is considered to be landlocked countries, such as Switzerland and Luxemburg. These landlocked countries offer low taxation on the interest earned from offshore bank accounts. While your island jurisdictions, such as Panama and the Cayman Islands offer no taxation on the interest earned from offshore bank accounts.
Advantage Of Offshore Banking Tax Implications
Another great benefit about offshore accounts and taxes is that any interest earned on the accounts is paid out before taxes. This method actually allows for a bigger return on a taxpayer’s investment, especially if you live in the UK. The interest earned has to be reported on a self assessment tax return you have time between when the interest is paid and when you have to claim it in the UK. This window allows taxpayers to invest the interest and earn even more interest income.
Difference Between Tax Evasion And Tax Planning
As a responsible taxpayer one thing you have to understand is that there is a difference between tax planning and tax evasion. The biggest difference being that tax planning is 100% legal, while tax evasion is not something that should ever be done. If you are going to open up an offshore account to protect your assets you must still report any income earned from those assets.
With proper tax planning you can legally reduce the tax liability of your assets, but you must follow the tax regulations of your home country. This is where a reputable financial advisor can help. Tax evasion is simply hiding all of your assets in an offshore account, knowing that countries with no income tax will never report your interest income to the government.
One thing that you might often hear is that tax evasion is not illegal in all countries. For example, Panama does not consider tax evasion a crime nor will they give any of your information to any tax authorities. Despite this, if your home country requires you to claim income earned abroad hiding money in these countries is considered illegal and it is not recommended.
If you have any further questions about offshore banking tax implications you can contact us and speak to our reputable financial advisor who can answer your questions and address any concerns you have.
This offshore banking next steps guide will give you an idea what you should do if you want to open an offshore bank account. With offshore banking, the first step that you will need to take is find a reputable company and opening an account.
Finding a reputable company to help you open an account is important because of the many factors must be considered when opening the offshore bank account. Speaking with a reputable financial advisor in person is the best way to discuss your specific situation.
Picking Your Jurisdiction
Different providers offer the same benefits when it comes to offshore banking, so how are you supposed to pick the right one?
Picking the right jurisdiction is not as hard as you might think, and having a financial advisor to talk it over with makes it even easier. When looking at the various jurisdictions you want to keep your residence in mind, as well as any reporting restrictions they have.
Your financial advisor will know what perks each jurisdiction offers, so they will be able to point you in the right direction based on your specific situation. Low risk jurisdictions include countries that are highly regulated, as well as stable both politically and economically. High-risk jurisdictions are not recommended as no one would want to open a bank account in a place that is not safe and offers little or no benefits.
Should I Consider Opening An Offshore Bank Account?
Before meeting with a financial advisor, you will want to determine whether an offshore bank account will be useful to you. Here is a list of reasons why individuals often open an offshore banking account:
- Mitigate political/economic risk when living in an unstable country in order to protect their assets if something happens in their home country.
- As a company, you operate in multiple countries. An import/export company is the perfect example.
- You are considered a frequent traveler. Having an account offshore can offer favorable interest rates, but also helps negate exchange rates, costs, and risks.
Pick Out Your Account
Once you have done your research and talked things over with your financial advisor you will be able to make an educated choice about your offshore banking provider. After you have chosen the right bank and jurisdiction you need to focus on the type of account you plan to open. Every provider is trying to attract your business so they are going to offer you various kinds of perks. When selecting your account type, know what you need from the account and don’t be swayed by any extra perks that you won’t use.
Opening Your Offshore Account
Thanks to technology, you no longer have to visit your offshore bank in person to open an account. Together you and your financial advisor can complete the process for opening an account online. What paper work you need to submit will vary depending on where the bank is located and what type of account you choose.
You can contact us and speak to our financial adviser if you need more information on offshore banking next steps.