Offshore banking allows you to keep your money in a foreign country in an offshore bank account. Perhaps you're concerned about payments abroad, foreign currency bills, or assets abroad. However, simply holding money in an offshore account does not automatically grant any tax advantages. In addition, all accounts held abroad must be declared.
More information on offshore banking for non-residents can be found in the following additional guides: Offshore bank accounts, reasons to open an offshore bank account, offshore banking accounts — country comparison and open offshore bank accounts online.
Key Takeaways
- The various services offered by an offshore bank account and the range of individual services provided by a bank and its respective accounts.
- An offshore bank account is particularly suited to assist with cross-border transactions. This could be because you conduct international business from your home country, you are about to relocate to a foreign country, or you have assets abroad.
- Lawful Offshore Banking within tax & disclosure legislation.
- Does the bank offer non-resident accounts, and can you open the account remotely?
- Identification check (including tax resident status) of the account holder, plus copies of ownership documents and of company documents (where applicable).
- Please note any charges, as well as all payment options and additional services the bank can offer you. Also, check the bank’s strength and whether your deposit is insured. As mentioned above, offshore banking in full confidentiality does not mean anonymity.
What Is Offshore Banking and How Does It Work?
The term "offshore banking" or "foreign banking" refers to a banking activity that is conducted from outside of a customer’s resident country. For example, a resident of a country could maintain accounts in foreign countries to receive rental income and pay local expenses from those accounts. Companies bank abroad because foreign banks are best equipped to serve the customer’s customers, suppliers, and bills in the currency in which the company settles with them.
Accounts can typically be opened and funded in local currency to receive money, pay bills, and make payments. Clients may also have access to online banking and payment cards (such as debit or credit cards), and wire transfer facilities, depending on the facilities offered by the particular product.
- Holding deposits in one or more currencies;
- Sending and receiving international payments;
- Using online banking and payment cards;
- Receiving business revenue or managing investment-related cash flows.
The main differences between offshore banking and banking at home are the bank's location and the applicable legislation.
Offshore bank accounts can have limitations to the transactions that can be conducted with the account, such as limits imposed by the bank and regulations imposed to prevent money laundering and other financial crimes. Every international money transfer via your offshore bank account is processed through the correspondent bank network, where applicable, and includes their respective transfer charges and time frames. Offshore bank accounts are also closely monitored, and the bank requires that all transactions be accounted for, with explanations provided where necessary, and that updated identification documents be provided where required.
Read more on the various offshore bank accounts available — offshore personal bank account, offshore corporate bank account, and offshore savings account.
Offshore Banking vs. Domestic Banking
| Factor | Domestic Banking | Offshore / International Banking |
| Bank location | Usually in the account holder’s home jurisdiction | Outside the account holder’s home jurisdiction |
| Typical use | Domestic income and expenses | Cross-border transactions and international financial activities |
| Currency options | May offer local and foreign currencies | May offer multiple currencies; availability is product-specific |
| Regulation | Banking rules where the account is held; the customer's applicable obligations | Banking rules where the account is held; potentially additional cross-border obligations |
| Compliance | Standard KYC and AML checks | Often enhanced due diligence for non-resident clients |
| Tax considerations | Depend on the customer's tax position and income | May involve additional foreign-account or income reporting |
“Offshore” accounts are often misunderstood as products that banks sell. In reality, an "offshore" account is simply an account opened abroad by a foreign national, whereas a domestic account with currency capability would suffice for an expatriate to manage his international needs from within his country of residence.
When Does Offshore Banking Make Sense?
Whether offshore banking suits you depends on your personal circumstances. Offshore banking can make managing assets, income, or expenditure in foreign countries easier, but only if it is cheaper than how you currently manage your affairs.
Who May Benefit
- International entrepreneurs and businesses: Such individuals would require an offshore account to receive money from abroad (for example, from customers or suppliers), to spend abroad, and to make payments in foreign currency that a bank in their home country does not accept for transactions to specified destinations.
- Expats and globally mobile professionals with income that is earned in a country other than where they are living temporarily and who also have expenses in that country need to be able to manage their income and expenses while abroad. They also need to ensure their account isn't closed when they move to another country.
- Individuals with income and expenses in different currencies (e.g., house rental income paid in foreign currency, keeping the receipt in that currency until the money is needed for a payment). Note that the account holder remains exposed to exchange rates.
- People living abroad who own real estate or receive foreign income from investments abroad: Foreign income can be received and paid abroad using foreign banking.
- Banking services in foreign countries: If you open an account with a bank abroad, you can also use their services there. As a result, you can compare your banking services and change your bank if necessary in order to diversify your offers of banking services.
The practical advantages come with trade-offs:
| Potential use or benefit | Main trade-off |
| Multi-currency balances | Conversion charges and exchange-rate risk |
| International payments | Transfer fees, intermediary deductions and compliance checks |
| Banking diversification | More relationships, documentation and administrative work |
| Managing foreign assets | Local costs and potentially additional reporting obligations |
| Financial confidentiality | Customer identification and lawful disclosure to authorities |
For a fuller discussion, see the benefits of offshore banking.
When an Offshore Account May Not Be Worth It
If you earn, spend, and hold your assets within a single country, an account with a bank in that country will generally be a cost to you and offer no benefits over a bank account offshore. Compare apples with apples.
Some accounts have drawbacks that far outweigh their benefits. For example, the minimum amount that needs to be in the account could be greater than the amount of cash you need. The amount of reporting work that would be required to provide information on the account could be greater than the benefits of holding the account. In some circumstances it may even be difficult to document the source of the funds for an account. Do not open an account with the expectation of anonymity, of automatic tax savings, or of asset protection that will invariably fail to live up to the promises.
Is Offshore Banking Legal?
The offshore bank accounts and how the account holder uses the accounts are generally subject to the laws of the account holder’s residence, citizenship, and/or location of the accounts and the account holder’s structure and the type of income earned via the account(s).
Having money overseas does not mean that you can avoid paying tax on it. All income earned overseas is required to be declared in tax returns, and details of all foreign bank accounts must be disclosed where relevant. Additional tax returns, such as a supplementary tax return, may also be required in certain instances.
It is very important that you report all of your income, both foreign and domestic, and provide accurate information with respect to all of your foreign accounts. If a person willfully attempts to conceal income in offshore accounts or willfully attempts to falsify information or evade required disclosure of information with respect to foreign accounts, that person can face very large fines, as well as possible criminal charges in certain circumstances.
Who Can Open an Offshore Bank Account?
For non-resident account holders, the bank has no option but to approve the account opening. The bank cannot automatically approve a non-resident account holder. It must verify if the bank is permitted to open accounts of this type of customer and whether the proposed account relationship would be suitable for the bank.
- Residence, nationality, and all relevant tax residences;
- Occupation or business activity, including required licenses;
- Source of funds and source of wealth;
- Expected balances, transaction volumes, currencies, and counterparties;
- Commercial or personal links to the banking jurisdiction;
- Sanctions exposure, political exposure, and higher-risk activities;
- Minimum balance or other relationship requirements.
For non-resident companies, in addition to the information required for non-resident individuals, offshore banks typically request full details of all the company’s owners and ultimate beneficial owners. The bank may also require a general description of the business activities conducted by the company.
This distinction also exists within one residence or even within one business area. There might be reasons for denying account opening to two non-residents even if they are engaged in identical transactions. There might also be a reason for the lack of sufficient financial resources for account opening even if a bank requires a minimum deposit for account opening. Therefore, a bank's requirement for a minimum deposit does not necessarily mean it will open the account.
Can You Open an Offshore Bank Account Online?
In rare cases, online application forms do not necessarily indicate that the account can be opened entirely online; i.e., the verification process following the online application may still have to be conducted in writing.
An online application form does not necessarily mean that an offshore bank account can be opened online. Therefore, we recommend first confirming what identification a bank requires to open an account before paying your agent's application, certification, or advisory fees.
What Documents Do You Need?
The above list refers to opening up a personal bank account and details the various documents that are required by the bank and by the applicant.
- A valid passport or government-issued photo ID;
- Proof of residential address;
- Tax-residence details and tax identification numbers, where applicable;
- Occupation, income, and intended account use;
- Evidence of the source of funds (for current accounts, often also of wealth and how it was gained).
Banks require bank references for opening accounts or even professional references in individual cases. Account openings in general, however, do not require bank references.
For a company, you will need to supply corporate registration documents (e.g., articles of association and the company’s constitutional documents). All directors and shareholders plus all beneficial owners, must be identified and introduced to the bank. In addition to this, all authorized signatories must be introduced, and evidence of business activity (e.g., contracts, invoices, etc.) must be provided, or a company profile. Sometimes a certificate of good standing is also required.
Although this is standard for account openings, some banks ask for additional documentation in special cases, such as special ownership structures or larger payments. Confirm with the bank what additional requirements apply (certification, translation, etc.) and how long ago the original document was issued.
Source of Funds vs. Source of Wealth
The term “source of funds” refers to the specific funds entering into your account(s), such as salary/deposits, customer payments/receipts, proceeds from sale of property, etc., whereas the term “source of wealth” refers to the method by which your assets have been generated, i.e. via paid employment, as self-employed, etc., or by way of inheritance.
These can include payslips, invoices, management accounts, contracts and agreements for the sale of other assets, and even documentation confirming an inheritance. A statement showing a transfer of funds from another account shows a payment was made but gives no indication of where the funds came from.
How to Open an Offshore Bank Account: Short Overview
- It is helpful to start with defining the applicant’s requirements and preliminary checking of his/her online profile — details on current residence, nationality, tax status abroad, business activities, etc., as well as on the available funds, required services of financial institutions, and scope and frequencies of payments in different currencies.
- Evaluate the services that the banks in your chosen jurisdiction offer to non-residents. Compare charges, minimum account balance requirements, the account-opening process, access to payment systems, and access to other financial services offered by the bank.
- Prepare an online application to the selected bank(s) and submit it. The application form requires personal information, company information, supporting documents, and answers to due diligence questions.
- Funding of your offshore bank account after opening it. Payment limits as well as any bank charges will be advised by your bank. Your online access will be confirmed by your bank.
Please note that the time needed for preparation and review of your application varies from bank to bank. Our step-by-step guide on how to open an offshore bank account will help you prepare your application in detail.
How to Choose a Jurisdiction and Bank
Start by selecting banks that match your requirements and then evaluate the jurisdiction where the bank is established against the bank itself. While a country may have a poor reputation, not all banks operating within that country are equally poor.
| Criterion | What to check |
| Regulation and bank quality | Verify the bank's licence, supervising regulator and available financial information. |
| Non-resident access | Confirm accepted residences, nationalities, entities and business activities. |
| Payment infrastructure | Check currencies, payment routes, supported destinations and transaction limits. |
| Deposit protection | Verify the scheme, coverage limit and eligibility of your bank, account and depositor category. |
| Onboarding and ongoing service | Check remote access, verification requirements, support and treatment of future residence changes. |
| Costs and balances | Compare fees, FX pricing and minimum relationship requirements against actual usage. |
| Reputation and compliance | Consider regulatory transparency and restrictions that could affect your counterparties or payment routes. |
Regulatory information (including a bank’s listing on a regulator’s register) and the rules of a deposit guarantee scheme should be checked directly on a website. For information on offshore banking jurisdictions, see best countries for offshore banking.
How Much Does Offshore Banking Cost?
There is no universal opening fee and no minimum deposit required. If applicable, your bank will advise you of any current charges in relation to the opening of a new account(s) and also the required funds to be maintained in the account(s) and any associated charges if the minimum balance is not met.
- Opening or relationship fees (e.g., application fees, setup fees, etc.) if any.
- Minimum amounts required to be deposited and maintained in the bank account and any excess amounts thereover that may attract additional charges.
- Maintenance: monthly or annual account and service fees.
- Transaction Items — payments and foreign exchange: All international outgoing and incoming payments (by transfer) and all corresponding charges of correspondent banks worldwide, as well as all cross-border charges and currency conversions.
- Cards & Additional Services: Any optional charges for services? E.g., charges for issuing/replacing a card, foreign withdrawal charges at overseas ATMs, etc.?
- External preparation costs (e.g., certification, translation, etc.) and any other external fees that may be charged by third parties, including advisors and intermediaries.
Calculate the total cost for all transactions that you expect to make in a year and ask if all charges for the application (opening/setup, etc.) are refundable in case the application is rejected by the bank.
Risks and Trade-Offs of Offshore Banking
- Occasionally some inquiries regarding specific transactions as well as, from time to time, updates of the account holder’s financial information, account owner’s information, tax-resident status, etc.
- Costs: Charge to operate these bank accounts. There are minimum amounts to be held in foreign currency in these accounts in order to make opening them worthwhile.
- Currency risk: Your foreign currency account(s) may decline in value when expressed in your local currency, needed to settle your payment abroad.
- Risk of financial losses, political changes, and restrictions to payments and transfers by the foreign bank’s local branch.
- There is no deposit protection, and there may be special terms and conditions applying to you as a customer in your country or region that will not apply when you bank abroad.
- Risk that account will no longer be used for purposes other than which it was opened (e.g., the bank may close the account due to a change in local compliance policy).
- Recording extra transactions, in addition to those already recorded by you for other financial purposes, and extra information with respect to other financial matters, tax matters, etc., and your tax resident status.
However, for the purpose of weighing risks against the problem that your new account will solve, you should take into account the type of account that you intend to open (eg. receiving account/salary account vs. paying account/merchant account).
Privacy, CRS, FATCA and Modern Transparency
Privacy of bank customers' financial information, as well as information used to identify customers (and their beneficial owners) and other disclosure requirements, does not conflict with financial privacy and account holder information, or with public access to it.
Participating countries within the OECD Common Reporting Standard (CRS) have already begun the process of exchanging financial account information in connection with identically reported financial-account information with respect to tax-resident Reportable Accounts held by Reporting Entities. In addition to identifying the bank’s customers (and their beneficial owners), a number of disclosure requirements are imposed upon the bank, and such information with respect to all parties opening accounts is required to be kept by the bank. Accounts are required to be reported by the bank in connection with the information on financial accounts required to be reported under the applicable rules and have been classified by the bank under such rules.
FATCA — Reporting by Foreign Financial Institutions on U.S.-related accounts and reporting requirements of U.S. taxpayers with specified foreign financial assets.
In addition to completing Form 8938, U.S. persons who have more than a minimal financial interest in, or who have signatory authority or other authority over foreign financial accounts, in excess of $10,000 (aggregating all such accounts held during the calendar year) must also file a FBAR (FinCEN Form 114) with FinCEN.
Bank reporting requirements are distinct from an individual’s tax reporting requirements. It is wise to keep documentation of foreign financial accounts and notify foreign banks of changes in an individual’s tax residence status or other account circumstances as they occur.
Is Offshore Banking Right for You?
Useful offshore bank accounts will solve one or more problems for you. Whether opening an offshore account is worth it depends on whether offshore banks will accept you and on the value of the services they provide versus the costs and effort required.
Know in advance what you need the account for. Keep a record of all money that is deposited into it. Check if there are any reporting requirements. Find out the rules of the bank and the level of protection of deposits against bank failure.
We will be happy to evaluate on your behalf a particular personal or company account(s) that you are interested in opening, discuss your profile and required services, and assist with the necessary documents for the proposed account(s).
