The 8 benefits of offshore banking
If you're planning to live and work abroad as an expat, or you travel a lot for work or pleasure, opening an offshore bank account can make life a lot easier when it comes to managing your finances.
There are many benefits of offshore banking, particularly for the global expat.
These range from peace of mind (no one will care about your money as much as you), security, privacy and a personal level of service you only get with a private bank.
Here are the 8 main benefits our clients said they enjoyed most, when we conducted a straw poll:
1. Personal private banking service
Around the clock help if something goes wrong, with access to telephone and online banking 24 hours a day, 7 days a week, 365 days of the year - what's not to like!
Unlike most high street accounts, this level of service comes as standard with the best offshore banks.
And a relationship manager is often assigned to your account, which is the level of service that international travellers and expats need in an emergency.
2. Preferential foreign exchange services
With multi-currency accounts, transferring money between your accounts is usually fast and free.
However, if you do need to transfer money between currencies, having an offshore account will usually offer a very competitive foreign exchange rate, compared to a regular banking service, and this is one of the biggest advantages.
3. Tax planning
Some account holders who bank in jurisdictions like the Isle of Man and Jersey, for example, can choose to receive interest on their savings tax free.
The interest is credited gross to their account, which means there is no income tax deduction at source.
If you are an expat, this removes the need to reclaim tax paid, and avoids the hassle of reconciling your tax returns to ensure you are not over-paying tax.
4. Lending, leveraging and credit
Once your new banking arrangements are open, you will often be able to apply for a mortgage or lending facilities.
The best offshore private banks will usually be highly flexible in their lending arrangements, and you will often find competitive mortgage rates available for property, particularly if buying in a mainstream market like the UK.
If you're interested in:
- Flexible and easily accessed consolidated structured lending.
- Floating interest rates linked to the prevailing prime rate, fixed interest rates or forward fixed rates.
- A service catering for individuals, trusts, close corporations and companies.
- The option of multiple sub-accounts for multiple assets or personal administrative and/or debit order requirements.
- Commercial property finance.
- Finance of selected property development projects.
- Equity-geared lending.
- Preference share lending...
5. Offshore investments
The offshore investment market usually offers funds and investments that are not available in your home country, and setting up an investment portfolio or using a bank's investment platform can be done fairly easily with many offshore private banks.
Don’t forget you will need to think about what the purpose of investing is, how long you want to invest for, how much risk you are prepared to take with your funds and what fees and costs are involved in running an investment portfolio.
One of the attractions of having your accounts held outside your home country is the privacy you get.
Bank secrecy in some countries like Switzerland and Singapore is a legal entitlement, and banks cannot disclose details of their account holders or assets, except in extreme circumstances like a criminal investigation.
This has led to widespread tax evasion, but many banks and governments have moved forward in recent years to ensure all money upon which tax is due is declared, and new anti-money laundering rules are in place.
And as well as complying with these robust standards, expats may still be able to enjoy more privacy from an offshore bank than they can from an onshore one.
7. Estate planning
In many countries, local law will dictate what happens to your wealth if it is held in a local bank. Offshore banks solve this problem.
For example, in places like Dubai, Abu Dhabi, Qatar and Riyadh in the Middle East, if you were to pass away, Sharia Law would be applied to local accounts.
This would mean that such accounts would be frozen until probate is granted, which in some cases, could take years.
So, if you work in one of these countries, banking offshore is a good idea for estate planning purposes.
Staying with the same bank, no matter how many times you move country as an expat, may be a good enough reason alone to open an offshore account.
Photo by Angelina Odemchuck
Updated March 2017
AES International - Winners
Best Global Offshore Banking Team of 2014
(Tax notes^It is important to make sure you pay any tax due depending upon the residency rules of the country you live in. Each country has its own tax rules and as an expat it is important you are aware of your obligations and if necessary, make sure you disclose all the income you earn through your offshore bank. If you are in any doubt about this, you should take professional tax advice. It is your responsibility to make sure you tax affairs are up to date and fully disclosed to the relevant tax authorities).