Open an Account for Your Company in an Offshore Bank

Published:Nov 17, 202309:56
Open an Account for Your Company in an Offshore Bank
Open an Account for Your Company in an Offshore Bank

Open an Account for Your Company in an Offshore Bank: You can open a corporate account in an offshore bank and gain some significant benefits from this. If you have an offshore company (that is, a company domiciled in a foreign jurisdiction), you certainly need a corporate account abroad. But even if all you have is a domestic company, it can also benefit greatly from an offshore bank account. Its horizons would be extended significantly by this financial instrument.

A corporate account in an offshore bank

An offshore bank account is simply a foreign bank account, an account that you open in a foreign country. The phrase doesn’t have to refer exclusively to small island states that offer perks to foreign nationals opening bank accounts there. It can also refer to any onshore country that is not the country of your residence/ citizenship. If you have an offshore company, normally you should be able to open a corporate bank account in the same country but this is not always the case. At the same time, it is not a problem if you cannot open a corporate bank account in the country where your company is registered. You are legally entitled to see financial services in another jurisdiction.

You have to bear in mind, however, that some banks will be reluctant to set up accounts for offshore-registered companies. You should also look at the matter from the opposite side: even if the bank agrees to take you onboard, you have to assess it carefully as not all banks are equally reliable. Besides, some banks charge high commissions, which would increase your operational costs.

Types of corporate bank accounts

Most companies that open accounts with foreign banks open current accounts and we will speak about some specifics of this procedure below. In addition to that, we will dwell briefly on the advantages that an investment account with a foreign bank can bring.  

Current account

A current account is a standard bank account that a company can set up to perform its daily business operations. A current account allows making payments to the suppliers and partners as well as receiving payments from buyers and clients. Besides, you can use your current corporate bank account for investment purposes. Please note that some banks are going to be more amicable if you set up a personal and a corporate account with them at the same time. The bank officers will feel more trust in you in this case.

You can use your current corporate account for keeping the corporate money there as well as for overdraft lending purposes. What types of companies are going to find opening an offshore bank account a comparatively easy task? (We are bringing up this issue because some types of companies will find the task rather difficult.) You stand a good chance to set up a corporate account with a foreign bank if our company is engaged in some sort of ‘visible’ business operations. For example, a transportation company or a construction company should not have too many problems opening an offshore bank account. However, the bank administrators will want to know what the company's annual turnover is anyway. Besides, they will want to find out who your partners are, including suppliers and customers.

Many banks (even though not all of them) require a security deposit: you have to have a certain sum of money in your bank account at all times. You can withdraw this sum of money only when you close the account. Speaking about a current account, the security deposit is usually rather insignificant. At the same time, much will depend on how high the account turnover is.

This may be frustrating but the requirements that banks put forward to clients are changing all the time. We do not live in a perfect world and various regulating and controlling organizations have been tightening the screws on banks in recent years. Banks, in their turn, have to tighten the screws on clients. Money management with offshore bank accounts is not a trivial task so you’d better seek some professional advice before you apply for opening a corporate account in an offshore bank. You need an expert who can offer you the banks that a) will be prepared to take you onboard and b) will come up to your standards. 

Investment account

An investment account is not the type of account that you use for current payments. Instead, you put the money in the bank and the bank invests it on your behalf. Some people hire external asset managers to make the investments. The most recommendable banks for opening investment accounts there are located in Switzerland, Liechtenstein, and Luxembourg. In normal cases, investment accounts earn their holders around 5% a year. If you hire an external asset manager, you will certainly have to pay him/ her but you may end up with a higher profit because external asset managers often make wiser investments than banks do. We do not mean to say that banks are inefficient, not at all. Some banks in the countries that we have mentioned above have vast experience in making lucrative investments. If you are thinking of opening an investment account in Switzerland, for example, you have to have at least a million dollars set aside for this purpose. Ten million will sound much better, however.

Factors to consider when choosing the offshore bank

Banks are trying hard to reduce all possible risks at the financial, legal, and political levels. For this reason, they are tightening the requirements to prospective clients. You have to realize that you might be unable to set up an account with a bank that you like. However, you might also dislike the bank that is prepared to provide services to you!

You have to find out if the financial services that the bank offers are easily accessible online. You also have to find out about the speed of the transactions and the commissions that are involved. The bank has to be ready to make and accept payments in the currency that you need. Please bear in mind that some European banks do not accept transactions in US dollars. If you would like to open a corporate bank account remotely, you have to ascertain that the bank that you are considering offers this opportunity. Some banks require a personal visit, which means that you’d have to travel to a foreign country.

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