Is it easy to open an offshore bank account?

Is it easy to open an offshore bank account? Hell no, it’s a real pain in the ass!

And this goes for everyone who wants to open an offshore bank account. What used to apply only to Americans has spread like a virus throughout the EU and Asia. No matter where you’re from, offshore banks will do their research and want to know that you are in compliance with your home country’s tax laws.

It all started with the Foreign Account Tax Compliance Act (FATCA), which was passed as part of the HIRE Act. It requires that foreign financial Institutions and certain other non-financial foreign entities report on the foreign assets held by their U.S. account holders or be subject to withholding on all transfers to the non-compliant bank, effectively putting them out of business.  The HIRE Act also contained legislation requiring U.S. persons to report, depending on the value, their foreign financial accounts and foreign assets.

FATCA basically turned the workers at foreign banks into unpaid IRS agents. It’s their responsibility to find and report any US person or untaxed transaction. If they fail in this “duty” the bank will be hit with massive fines and pushed out of business.

Once the United States softened up the banks, Europe joined in through the OECD. The OECD’s Common Reporting Standard (CRS), formally referred to as the Standard for Automatic Exchange of Financial Account Information, is an information standard for the automatic exchange of information (AEoI), developed in the context of the Organisation for Economic Co-operation and Development (OECD). The legal basis for exchange of data is the Convention on Mutual Administrative Assistance in Tax Matters and FATCA.

So far, 53 jurisdictions have signed an agreement to automatically exchange information based on Article 6 of the Convention on Mutual Administrative Assistance in Tax Matters. This agreement specifies the details of what information will be exchanged and when.

All EU countries, China, India, Hong Kong, Russia and more than 100 other countries have agreed to become signatories. The only major holdout is the United States.

While this might sound strange, keep in mind that the United States is the world’s largest tax haven… not for it’s citizens, but for everyone else on the planet. America puts its people in jail for tax evasion while hiding money from China and corrupt governments around the world.

Because of FATCA, the OECD’s reporting requirements, and several other initiatives, it is very difficult to open an offshore bank account. It doesn’t matter where you’re from, getting a bank to do business with you is going to be a pain.

There are three levels of offshore bank accounts, each with it’s own challenges.

The easiest account to get is a managed investment account with a balance of $2.5 million or more. These accounts are opened by investment advisors in Switzerland and elsewhere and are meant to hold after tax investment funds.

Large banks are willing to take on US and EU clients if the account is large enough. The bottom line is that the bank makes enough money on these accounts to justify the compliance costs.

Next are small accounts at offshore banks in Belize, Cook Islands and elsewhere. These accounts have minimum balances of $5,000 to $20,000 and are meant to hold your savings, an offshore IRA, or investment money. They typically allow 3 or 4 transactions a month and make money on monthly fees.

Then there are small business accounts. These have a lot of in and out flows and low balances, something that doesn’t fit in today’s offshore banking environment. Lots of flow-through transfers can lead to money laundering or tax evasion issues, and banks generally don’t want to get involved.

If you’re going to open a small business account, expect a lot of work and a major headache. These are by far the most difficult offshore accounts to get.

The most friendly jurisdiction for small businesses is Panama. In order to open an account there, you will likely need a local corporation and legal residency in the country. The corporation is self explanatory, but requiring residency is a new wrinkle.

As a resident you can open both personal and corporate accounts at just about any bank in Panama. I suggest this country is the most efficient for small businesses because they have the easiest residency program.

That’s why you want residency… here’s the easiest way to get it quickly from Panama.

The most efficient way to get residency in Panama is through investment. You can either buy a condo for $350,000 or buy teak for $20,000. The teak program is quick, easy, and doesn’t lock you in like a real estate purchase does.

This assumes you’re from the US, EU, UK, or any of the top 50 countries. For more on Panama reforestation visa, see: Best Panama Residency by Investment Program.

Of course, there are many countries where you can get residency. What makes Panama unique is that 1) they don’t require you to live in the country, or spend any time there, to maintain residency, and 2) won’t tax your foreign source income. Combine this with the easiest residency program out there (at least for those from top 50 countries) and Panama is the best choice for those looking to open small business accounts.

I hope you’ve found this article on whether it’s easy to open an offshore bank account to be helpful. For assistance in forming an offshore structure and opening an international bank account, or to get residency in Panama, please contact us at info@premieroffshore.com or call us at (619) 550-2743. All consultations are free and confidential.