Posted on November 26, 2010 by Erika Nolan of IL
Perhaps you’re looking for ways to trim your tax bill… or you’re keen to diversify your portfolio by accessing money-making foreign investment opportunities, then you need an offshore bank account.
An offshore account can give you the chance to trade freely in foreign stocks, bonds, mutual funds and national currencies unavailable to you otherwise. It’s also a good way to protect your wealth since a portion of your portfolio won’t be subject to the whims of the American economy.
For many people, selecting an offshore bank sounds exotic or even difficult. But it’s actually not that different from picking a local one. It’s important to closely examine the bank’s reputation and financial condition. What kind of fees does it require? What services does the bank provide? What do those services cost?
Here’s my checklist for choosing your first (or next) overseas bank.
Step 1: Choose the jurisdiction that’s best-suited for you. A vast number of offshore regions could suit your particular banking needs.
Belize- You can do it online, extremely safe.
Switzerland—Historic banking center but expect high minimums to open accounts.
Austria—Financial privacy and access to investments in Eastern Europe.
Liechtenstein—Much like Switzerland, large minimums are required to bank here.
Singapore—Strong privacy laws outside of Europe and a gateway to Asia.
Hong Kong—Access to investment opportunities in China.
Denmark—Innovative financial products and solid performance.
Step 2: Ensure the bank welcomes foreigners—especially foreigners with U.S. passports. And you want to be sure they have experience with Americans’ cumbersome tax-reporting requirements. Plus, make sure they speak fluent English. The last thing you want is to open your account only to find out too late that no one understood your instructions.
Step 3: Perform due diligence. Invest the time up front to check the bank’s financial standing and perform due diligence. To get you started, here are 10 questions to ask any offshore bank:
1. What types of accounts are available to international investors?
2. Are there any restrictions on foreigners’ investments—specifically with American account holders?
3. What taxes, if any, will be withheld from my investment income?
4. What investments are considered part of the bank’s balance sheet and available to the bank’s creditors (including depositors) in the event of the bank’s insolvency?
5. What are the fees for securities transactions and custody?
6. What other fees may apply to the account?
7. Is my account insured by law or otherwise against loss in the event of the bank’s insolvency?
8. How do I transact business with the bank—are telephone, fax, or e-mail orders accepted?
9. Is Internet banking available and secure? If so, is this service available in English?
10. Will the bank send U.S. clients a year-end statement showing any taxable interest paid?
Step 4: Schedule face time—it’s important. All this due diligence shouldn’t replace a personal visit. I recommend at least one face-to-face meeting at the bank when you open the account and a trip back at least every two to three years.
Step 5: Stay tax compliant. Be prepared for extra paperwork to disclose to the IRS when tax time comes around! Most offshore banks will require you to fill out a W-9. This form simply allows the bank to share your information with the IRS in the case of a criminal investigation—it’s not a reporting form.
If you hold at least $10,000 or the equivalent in offshore accounts, total, you must report these accounts. To do so you need to file Form TD F 90-22.1 or “FBAR” by June 30 each year.
Many offshore jurisdictions have tax treaties with the U.S. so that if you are taxed on capital gains in another country, you receive IRS tax credit. This way you don’t pay taxes on the same money twice. Speak with an attorney who specializes in international taxes if you have any questions about how to handle your offshore account.
About the Author
Erika Nolan is The Sovereign Society’s Executive Director and Publisher. Co-author of The Insured Portfolio, she is a highly respected expert in global investments, tax havens, and international asset protection. For more information, visit: www.Intliving.com/offshore.
It’s not hard or scary, we opened our account in Belize with Caye Bank, it took 15 minutes and you can handle it all on-line if you choose.
We can make the introductions to our contacts there for you if you drop us an email.