Before we discuss how to open an offshore bank account, you should check out our previous article Why To Consider Offshore Banking. If you already know the benefits of opening an offshore account, lets dive right in.
You must do your due diligence (and seek help from professionals when appropriate) before opening an offshore bank account. You must insure your offshore banking strategy does not run afoul of your own country’s tax laws, because there are serious fines, and even jail time, associated with tax evasion – even if it was accidental.
This warning is especially important if you are American. U.S. citizens are required to declare offshore accounts to the Internal Revenue Service (IRS). You must file the Foreign Bank and Financial Accounts (FBAR) form and report any funds over $10,000 being held in foreign accounts. You may qualify for the foreign earned income exclusion, which excludes foreign earnings up to a certain amount (that is adjusted annually for inflation), but the rest is taxable.
With that caveat, let us break down the process of opening an offshore account.
FIND A SUITABLE COUNTRY
The first step is to research countries with attractive banking systems. You will want to consider factors such as currency stability, political situation, reputation for safety and privacy, tax and legal system, language, and foreigner-friendliness.
Some popular countries to open an offshore bank account include: Switzerland, Hong Kong, Belize, The Cayman Islands, Singapore, and Germany.
We opened an offshore account in Gibraltar, because it is a reputable financial center, an English-speaking country, and the value of the Gibraltar pound is equal to that of the Great British Pound. In addition, Gibraltar banks do not require you to pay tax on interest you earn.
FIND A SUITABLE BANK
Within your chosen country, you will want to compare various banking institutions. Banks will have different minimum deposit requirements, international transfer fees, interest rates, online banking tools, multi-currency account options, etc.
After exploring our banking options in Gibraltar, we chose Xapo Bank, because it is possible to open an account remotely, it has both USD and bitcoin accounts, it offers 4.1% interest on US Dollar deposits (paid daily), and the minimum deposit amount was only $150 deposit (which covers the bank’s annual fee).
If you are interested in opening an account at Xapo Bank, you can use our referral link https://application.xapo.com/membership-application?ref=NFS-DKJ-ZM.
COLLECT THE DOCUMENTS REQUIRED TO OPEN THE ACCOUNT
Whether you find a bank with an online application, or travel to a bank in person, you will need specific documentation to prove you are a reliable person that will abide by the bank’s regulations (and pay its ongoing fees).
While specific documents vary bank to bank, common requirements include:
- A valid passport;
- Contact information such as address, phone number, and email. Some banks will want a utility bill or some other proof of address;
- Bank statements and/or bank reference letter;
- Proof of fund sources;
- Completed application form and/or KYC form.
OPEN AND START USING THE OFFSHORE ACCOUNT
Once you have submitted your application form and supporting documents, you will have to wait for the bank to accept you as a client. You could be accepted within minutes, or it could take a few days or weeks.
Once you have been approved, you can deposit the minimum amount (or more), sign up for online banking services, and start using the account.
Please note, you will need to keep up to date with any bank fees and comply with all reporting requirements to keep your account in good standing.