How to open an offshore bank account

Offshore bank accounts are simply a banking service which is situated outside of your country of residence. Over recent years, offshore accounts have been covered increasingly by media and finance outlets. As a result, offshore banking has both positive and negative connotations aligned to it. One of the key drivers creating greater interest for offshore accounts is the flexibility it provides investors.

A reputable offshore bank will provide a wide range of funds and investments which are sometimes not available in your country of residence. There are an array of countries which provide offshore banking services. Nonetheless, your nationality, risk tolerance and financial status could influence where you decide to open an offshore account.

Numerous high street banks including HSBC, Lloyds and Santander offer offshore current accounts. There is the possibility of applying for a debit or credit card whilst carrying out daily banking functions. However, the currency will usually be in the home country where the account is held unless you have a multi-currency account.

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What are the offshore accounts to choose from?

Multi-currency account

Offshore banks will offer multi-currency current accounts. Usually currencies which are offered will be at least the three major currencies being British Sterling, US Dollars and Euros. Some banks will also offer a wider range of currencies including the Japanese Yen and Swiss Franc.

Being able to receive money in more than one currency is advantageous. Since offshore accounts allow multiple currencies, you could also have the option to hold your funds in a selected currency until the rates are more favourable.

Fixed term deposit account

Alongside a multi-currency account, there will usually be the option to open a fixed term deposit account. This account comes with the stipulation that money must be held in the account for a specific amount of time before withdrawing cash. Usually this will be between 1-5 years.

In exchange, banks will usually offer an interest rate greater than the interest provided on basic savings or a demand deposit account.

Offshore debit/credit account

Offshore debit/credit cards give account holders instant access to their funds normally without an additional charge.

Nonetheless, successfully applying for an offshore debit or credit card doesn’t come easy and isn’t accessible to everyone. In order to be eligible for an offshore bank account, usually you must be a frequent flyer to that specific foreign country. Alternatively, if you invest in a foreign country or plan to retire outside your home country you could also be eligible.

Additionally, not all banks offer this service. For high street banks such as HSBC, Lloyds and Barclays, you can compare the pros and cons of opening an offshore account with a particular bank.

Benefits of having an offshore bank account

Tax benefits

One of the biggest benefits of using an offshore account is the lower tax rates compared to more alternative banking accounts. There are several countries internationally where you can earn money without being deducted income tax, including UAE.

Another advantage of an offshore account is if you’re eligible for paying income tax, payments can be deferred. This can enable an account holder to boost the amount of interest earned potentially. Nonetheless, while there are potential tax savings, account holders are still required to pay tax on the interest they earn from offshore savings, unless certain terms apply.

Currency diversification

If you’re planning to diversify your portfolio and purchase assets overseas, offshore banking could be an ideal solution. Whether you’re an individual or business, it’s a benefit to be able to make and receive payments in different currencies.

For example an expat who lives outside of their native country this option would be convenient. Additionally, for a freelancer or small business owner who has clients internationally, being able to receive or send payments in different currencies would be beneficial.

Nonetheless, it’s worth taking into account transaction charges, including withdrawing cash out of the account. Withdrawal fees can be as much as £25, which can make offshore accounts a less attractive option for those who need regular access to their money.

Higher interest rates for investors

A significant benefit when opening an offshore account is receiving higher interest rates. Compared to a standard debit or credit card account with a UK high street bank, offshore accounts interest rates are more favourable for savers.

Additionally, you would also have your own dedicated relationship manager if you choose to open a premier or private offshore account. At CurrencyTransfer we also offer a personal relationship manager for businesses and individuals who would like to transfer finances abroad.

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Popular countries to open an offshore account for UK citizens

Switzerland

Swiss Banks are one of the most reputable offshore banking destinations internationally. It is considered one of the safest countries to invest in due to its robust and financially stable economy.

The Swiss financial regulations require all banks to maintain a minimum capital level. As a result all clients are paid the full amount for their holdings in case of any bank liquidation.

UAE

UAE is one of the prominent places for offshore bank accounts due to its economic stability and world-class banking facilities. There is no individual income tax in the UAE. This makes investing or purchasing assets in the UAE appealing. As a result, it’s definitely a destination worth considering to open an offshore account.

As mentioned, another benefit of opening an offshore bank account is the investment opportunities that aren’t available in their country of origin. With the UAE
showing signs of economic expansion over the past several months, there are a wide choice of funds and investments to choose from.

Gibraltar

Gibraltar is situated between Spain and Morocco. Banks in Gibraltar specialise in private banking for high net worth individuals and companies. Previously perceived as a tax haven, it has rebranded itself over the past several years and now it’s considered low tax.

There is still no sales or capital gains tax for individuals or businesses. Corporate tax is 10% which is a much lower rate compared to mainland Europe. As a result, Gibraltar has solidified its reputation over the past few years.

Jersey

Jersey is the largest of the Channel Islands, between England and France. It’s a leading offshore financial centre and has long been a key location for offshore banking and private wealth management.

The attraction of Jersey ensures the international deposits received do not go into the economy rather into the treasury function of banks in major cities such as London, Frankfurt, Paris and New York.

What personal verification is needed to open an offshore account?

Opening an offshore bank account tends to be a pretty straightforward process. The documents which are required are similar to opening any specific bank account. These include:

  • Your name
  • Proof of address
  • Date of birth
  • Citizenship
  • Occupation

You will also have to provide a government issued ID such as a passport or driver’s licence. Additionally, usually you will need to prove your income and investments with additional financial statements between a 6 to 12 month timeline. They will need to see the statements to confirm you have a good track record with your current bank.

This process is ultimately to help prevent illegal activity taking place via offshore accounts. If you can provide all of that information, you shouldn’t have any issues opening an offshore account.

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Is your money secure within an offshore account?

Offshore accounts are not covered by the Financial Services Compensation Scheme (FSCS). This means your money won’t get the same level of protection as if it was saved with a bank or building society in the UK.

Some offshore locations have their own financial compensation schemes, meaning that some of your savings would be guaranteed if your provider became insolvent. But other places do not protect savings at all, so it’s important to check the terms and conditions before opening an offshore account.

Summary

Although offshore banking has various connotations, it can be a suitable option for individuals or businesses who have investments in various countries. Offshore banking also provides greater flexibility compared to standard bank accounts.

CurrencyTransfer helps companies and individuals manage their international payments. With over 25 supported currencies, we ensure the transfer process is as simple as possible. Our payment specialists have a great deal of experience working with international clients and provide a tailored service to our clients.

Omari Coates

Copywriter