There are many different types of offshore accounts. Here we will explore some of the most common types of accounts and different ways you can choose to structure those accounts to get the most out of your offshore solution.
What is Offshore Banking?
Offshore banking is simply a term used to refer to the use of banking services in a foreign jurisdiction outside of the country where one resides.
So any individual who owns a bank account in a foreign country outside of their country of residence is engaging in offshore banking.
In the past, there were typically only a small number of jurisdictions which offered offshore banking services, however, nowadays, one can open an offshore bank account almost anywhere.
Each jurisdiction is unique and offers its own pros and cons. Thus, the important choice of where to open an offshore account will vary according to individual needs and circumstances.
If, however, you would like to open a personal account with a low deposit threshold, and would rather do it all online than perhaps Belize might work for you.
Opening an Offshore Company with A Bank Account
There are a few different ways in which one can go about opening an offshore account, as well as different account types, which we will briefly explore:
Personal Offshore Account vs. Corporate Account
While it is indeed possible to open up a private offshore account in your own personal name, it is generally recommended to incorporate an offshore company in a foreign jurisdiction offshore and subsequently open a corporate account under the name of the company.
There are a few reasons why this is recommended:
1. Corporate accounts are easier to open whereas personal accounts can be more difficult.
In theory, it would seem easier to open an account in your own name compared to going through the additional steps of forming an offshore company, but in reality, having a corporate entity be the holder of the account allows for many advantages
Established banks will generally have much stricter requirements for accepting a foreign individual as opposed to a company. You will likely need a great deal of documentation, references etc. as well as a sizable initial deposit, and even then there are no guarantees of being accepted.
2. A corporate account provides much greater protection and privacy.
Opening an account in the name of an offshore company separates and dis-identifies you personally from the account. This means that your assets will be much safer and less open to unwanted attention.
3. There can be tax and income advantages.
In many jurisdictions, companies that are structured in the right way can be eligible for reduced tax rates and rebates. It may also give you access to certain investment options that wouldn’t be as easily available to an individual, which can help maximize your returns.
In most situations, it is best to go with an offshore company corporate route, although some rare circumstances may require opening a personal account.
It is very useful to seek the right expert guidance to help you with the process of forming a corporate offshore account in your chosen jurisdiction and structuring it in the most advantageous way.
Investment Account vs. Transactional Account
Whether opening an account as an individual or through an offshore company, there are a number of different account types available, each with their own requirements and benefits.
These different types of accounts can broadly be separated as investment accounts and transactional accounts.
Investment accounts generally give one greater access to a wide range of investment and trading options.
They have a complex structure, usually needing the formation of an offshore trust and a reliable investment manager or broker. They also require large opening deposits of at least USD 500,000 or more. They are ideal for high-value investors who want maximum returns and protection for their wealth and do not plan on having many transactions.
Transactional accounts, on the other hand, are better for those who need to set up a smaller fund with a simpler structure.
They operate similarly to orthodox domestic transactional accounts. While they do not offer the same range of investment options and premier services as large investment accounts, they are useful for those who want to have easier access to their funds, make regular transactions, and who are just looking to initiate their offshore plan with a small and simple account.
They too can be opened both as a personal account or as a company, with the latter generally recommended.
Opening an Account Remotely
Many like the idea of being able to open up an offshore bank account online, from the comfort of their own home. While this is definitely possible, it is not necessarily as good as it sounds, to go at it alone.
The fact is that trying to open an offshore account remotely, whatever structure it may take, can be a time-consuming and arduous process. Banks require often times many forms of documentation.
Certain jurisdictions and account types do lend themselves more to opening an account remotely (e.g. Belize), and in certain situations, it may be a practical requirement (if, for example, you are only opening a small account; it may not be financially viable to travel all the way to the country of choice).
In those types of situations, it is best to take the appropriate advice and guidance of an offshore service provider in order to effectively manage the process for you.
The Best Way to Structure Your Offshore Account
With offshore banking, there is no ‘one size fits all’ solution. Deciding exactly how to structure your account will depend on many factors and will differ according to your specific needs and circumstances.
The above information may help you get a general idea of the type of offshore account you are looking for, but for a more tailor-made offshore solution, it is best to seek expert guidance.
In addition, opening your account can be a process that can take as little as a few weeks or, in some cases, a few months (especially if you are inclined to try to open your account remotely).
It is important to understand what the requirements are, and to have everything in order before you begin, so as to prevent unnecessary delays and hassle.
For this reason, and due to the many complexities involved, it is highly advisable that you elicit the right professional support to guide you through the process and ensure that everything flows smoothly and correctly.