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| FAQ FOR OFFSHORE INVESTORS
AND EXPATRIATES |
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- I'm an expat with considerable onshore savings
and a salary payable anywhere in the world.
Should I use an offshore bank, and if so, why?
- Onshore banking is subject to the tax and
foreign exchange rules of the country in which
the account is held, and depending on the size
of your savings, and the tax regime of your
onshore jurisdiction, the price you pay is likely
to be fairly high if your savings are 'considerable'.
Therefore, if you are interested in reducing
your tax exposure, and in relatively higher
confidentiality levels, it would make sense
to examine the possibilities available to you
offshore.
It is worth noting,
however, that some countries, for example the
USA, tax world-wide income whatever your expatriation
status, so you will need to ascertain the position
held by the country from which you are expatriating/have
expatriated before making a decision.
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- If I decide to use an offshore bank, how do
I know which jurisdiction is best for me?
- To a great extent, this depends on your personal
and business circumstances (e.g. residence,
personal wealth, lifestyle, future tax planning
structures, investments, relocation plans, etc).
You could pay an advisor to do your research
for you, but the chances of finding someone
onshore with the relevant skills and a broad
enough knowledge base in offshore matters are
slim, and an offshore advisor might be less
than objective about the jurisdiction in which
he/she is based. It seems, then, that the best
option is to do at least the initial research
into possible jurisdictions for yourself (perhaps
with the help of the Lowtax jurisdictions guide!).
There are, however, some general points to be
considered:
- Is the jurisdiction
politically stable?
- What are the
specific laws and regulations regarding banking
confidentiality? (Has it set up treaties with
other countries/regulatory groups, etc?)
- Is there an
adequate communications system?
- Is there exchange
control?
- What banking
facilities are available?
- What are the
statutory compliance requirements?
Specific advice
for nationals of the following countries:
Information given
is specific to the countries of origin concerned
but often applies more generally.
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- How do I open an offshore bank account?
- The requirements and length of time it takes
to set up an offshore account are dependent
on the amount you are proposing to invest, and
the size of the offshore institution with which
you are dealing (opening an account with a major
bank may take 4-8 weeks, as it can take this
long to check documentation and confirm references).
Although the information/documentation
that you are required to give varies greatly
according to the institution and type of account,
some of the more common requests are for:
- Signature Card
- Notarized specimen
signatures
- Notarized copy
of passport or drivers license (i.e. some
form of photo ID)
- Bank reference
- Utility bill/s
showing residential address.
This is by no means
an exhaustive list, and many offshore institutions
do not require all of these documents, or require
them in different combinations, but this is
normally well documented in their brochures.
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- How secure is my money? Isn't it more risky
to invest/bank offshore?
- Not if you are sensible, no. It is always
better to regard offers and institutions which
seem too good to be true' with suspicion,
as they generally are! You should begin your
research with well established institutions
to give you a frame of reference regarding industry
standards, and regard with skepticism interest
rates or benefits which seem exceptional'.
Also, check that the reputation of the bank
that you are planning to deal with is good (word
of mouth, media sources, etc)
Finally, bear in
mind that whilst taking advantage of existing
legislation to legitimately minimize your tax
burden with a reputable service provider presents
very little risk, unreported offshore activity
for the purposes of tax evasion is risky.
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- What sort of return can I expect on my savings?
- The rate of return that you can expect on
your savings depends on several factors. The
interest which you will accrue depends on the
amount invested, the length of time for which
it is invested, and the individual institution
and jurisdiction. However, it is worth noting
that higher rates of interest are a benefit
which does not really come into play in the
general field of offshore banking; these can
be expected in a private banking relationship
involving a very substantial investment.
More of an issue
is the currency that you decide to keep your
assets in, and the relative strength or weakness
of this at any given time. You may decide that
it is easier to maintain your savings/income
in whichever currency your liabilities are paid,
or you may decide to examine the status of the
various currencies, and proceed from there.
This does not have to be a permanent decision,
as more and more, offshore jurisdictions are
offering foreign exchange services to their
clients.
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- How do I deposit and get access to my money?
- Depending on your needs, there are many ways
of obtaining access to your money. This can
be done by post, courier, fax, telephone, over
the internet (If sufficient security measures
such as encryption capabilities and protection
against account losses due to deliberate interference
are in place) or bank wire transfer. If you
have transferred all the capital you want offshore,
and are not still in the process of transferring
funds, by far the most convenient way to access
your savings is by using an offshore credit
card.
Although
offshore credit cards have been used legitimately
for many years, onshore tax authorities - particularly
in the United States - have in recent years
subjected this payment form to some scrutiny,
in the hopes of flushing out those using the
cards to evade their tax liabilities. Initiatives
such as the US Offshore Voluntary Compliance
Initiative have had some success in this area.
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- How does an offshore credit card work?
- In a great many cases, an offshore card can
usually be applied for at the same time that
the account is opened. The majority can be used
both to withdraw money from ATM machines worldwide
and to pay merchants, in much the same way as
an onshore card.
Where onshore and
offshore cards differ, however, is that the
latter are, for the most part secured',
which means that you are required to provide
a security deposit with your application, and
you do not have to undergo a credit check. The
deposit required depends upon the desired credit
line, but as a general rule, usually ranges
from between 125% to 200% of the credit line
requested. Many cards offer additional benefits
such as insurance, and card/cash replacement.
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- What is the difference between a secured and
an unsecured offshore credit card?
- Usually a significant amount of your hard-earned
money down the drain! The majority of the offers
you will find, promising you an anonymous,
unsecured and 100% approved' credit card fall
firmly into the too good to be true camp! Drawn
by the promise of complete anonymity, the low'
application fee, and the absence of security
deposit, the unwary investor eagerly remits
his initial administration fee, and in the majority
of cases, this is the last he hears of it. Very
rarely do reputable institutions offer unsecured
credit cards, and then only to well known clients
with substantial assets.
As the saying goes:
You get what you pay for' (or rather,
you don't get what you don't pay for!) Unless
you fall into the above category, you would
be wise to ignore the pitches of unsecured offshore
credit card promoters, and resign yourself to
the idea of providing a security deposit in
exchange for a genuine and legitimate offshore
card.
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- Is an offshore credit card expensive?
- There are additional administrative and transactional
costs to bear in mind, and charges for services
such as use of ATM machines can be quite high.
The rate of return on your security deposit
will also be significantly lower than could
be expected for other types of offshore investment.
For this reason, offshore credit cards may not
be right for everyone, and it is a decision
which needs to be made based on the size of
your investment, and personal situation.
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- What is an offshore debit card?
- An offshore debit card provides you with the
option of accessing savings held in an offshore
account in much the same way as an onshore card
would. A note of caution, however: obviously,
an offshore debit card requires you to transfer
funds to your chosen jurisdiction for ‘safekeeping'.
Choose the location carefully, to avoid communication/logistical
difficulties later on.
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