Did you know that if you don’t report an offshore account to the IRS they can fine you up to $500,000?
No wonder that people get nervous when it comes to opening an offshore bank account. They don’t want to do something wrong that will bring them trouble later.
Having an offshore bank account is perfectly legal though. Keep reading to learn everything you need to know about opening an offshore bank account.
Everything You Need to Know About Opening an Offshore Bank Account
When people hear about opening an offshore bank account they either think that it’s only for rich people or that it’s too difficult to do for the average person. The truth is that anyone and any business can open an offshore bank account after doing some research in order to do it the right way.
The Basics
Keep in mind that every offshore bank has its own requirements. They vary based on location and their laws. The basics tend to be similar in all offshore banks and this will give you an idea of what to expect.
Offshore banks will ask for your personal information including your name, date of birth, address, occupation, and citizenship. They will ask for information to verify the information you provide.
Verification Documents
To verify your name they might ask for your driver’s license, passport or any document issued by a government agency verifying who you are. To verify your address for tax purposes they will ask for a utility bill or something similar with your name and address listed on it.
Some banks might ask for a notarized copy of certain documents to make sure that the documents provided are authentic and their information being provided matches. Some international banks might prefer an apostille stamp over a notarized document. This is a special type of certification mark that is used internationally.
Some but not all offshore banks might ask for financial reference documents from your current bank showing your average balances. They might ask questions that seem intrusive such as the transactions that you’re expecting to place through the account. The reason for these type of questions and documents is to prevent tax fraud, money laundering, or any illegal activity.
Recurring Costs
Something you want to consider when you open an offshore bank account is the transaction costs and recurring costs you might have. Some banks offshore are full-reserve banks which means that they keep the entire amount of money in the bank vs lending it out to borrowers. They don’t gamble with peoples savings accounts.
In order to make money, they charge account maintenance and transaction fees. This is how they’re able to operate as a solvent business and provide its customers peace of mind when it comes to their money.
Legalities
Having an offshore bank is legal as long as it’s set up correctly. One of the best ways to set up an offshore account is to ask for help from a reputable corporation service provider that deals with International accounts. Because of those few that have opened offshore bank accounts for illegal purposes, some people think that offshore is not legal.
Local Tax
By law, everyone that opens an offshore bank account has to report their account to local tax authorities to avoid illegal activity. There are legal tax penalties and possible jail time for not reporting an offshore account. The last thing you want to do is find yourself in trouble with the IRS.
Currency
One of the decisions you have to make is what currency you want your funds to be held in. This is very valuable because you can opt for a currency that’s stable and not expected to depreciate. Before choosing the currency you prefer, make sure you do your homework to know what to expect.
Holding funds in certain currencies might allow you to earn interest but it can also mean you have to pay foreign taxes. Something else you want to consider is the exchange rate between currencies. Depending on the bank’s fee structure and the exchange rates when you deposit and withdraw money you might end up paying high fees.
Deposits
To make a deposit to an offshore account you can usually do it electronically through an international wire transfer. This is a simple process but it usually costs money because it’s not domestic. You can go check with a local bank what their fees are to send an international wire transfer.
In person, deposits are also an option if you happen to be visiting the location of where your offshore bank is. This option is obviously not always practical.
Withdrawals
There are different ways to withdraw funds from your account. Most offshore banks give you an ATM debit card that allows you to withdraw from any ATM. They will all have their own fees for withdrawing and their own withdraw limits too.
Some banks will also offer checks but most people don’t prefer this method because a check has private information that most people want to keep private and secure.
Now Go Pick Your Offshore Bank
Now it’s time to put everything you learned into action. As you can see opening an offshore bank account isn’t impossible it will just require planning, research, and patience. You don’t want to rush into picking one and then find the fees astronomically high or find yourself in tax issues because you failed to report something.
It’s important to find a tax professional that can advise you about the tax regulations to keep you safe. If you’re in need of an attorney please contact us today to ask us any questions or concerns you have about offshore banking.
