Day By Day© by Chris Muir.


Tuesday, March 22, 2011

Offshore Banking Overview - Opening a Foreign Bank Account

Cold cash at Bank of Antarctica!
The following are various notes I took online about opening a foreign bank account.

This was from "The arrival of President Obama in the White House has seen the proposal of several anti-offshore initiatives, including the Foreign Account Tax Compliance Act, which has given the US Internal Revenue Service new tools to "detect, deter and discourage offshore tax abuses." The legislation, approved by Congress in March 2010: imposes a 30% withholding on US source payments to foreign financial institutions, foreign trusts, and foreign corporations that do not agree to disclose their US account holders and owners to the IRS; requires taxpayers to disclose their foreign accounts on their US tax returns; increases the statute of limitations to six years for failure to report certain offshore transactions and income; clarifies when a foreign trust is considered to have a US beneficiary; and treats substitute dividend and dividend equivalent payments to foreign persons as dividends for purposes of US withholding."

SO: I do not recommend opening a foreign bank account in order to hide money acquired in the US from Uncle Sam. You can still use a foreign bank account to protect your assets from possible creditors, lawsuits, etc., but unless you want to get taxed 30% off the top, you still have to choose a jurisdiction that discloses your identity to the IRS.

HOWEVER, opening a foreign bank account because you are doing business in a foreign country and earning money in that foreign country makes sense. The first $80K/year of your foreign income is not taxed by the US. And there are some countries that don’t tax foreign income, so what you can do is earn in one foreign country and bank in another, and keep your US citizenship.

In general:

• In most cases you must be physically present in the foreign country to open a bank account, despite the bullcrap that some websites say while trying to get your business.

• They may require extra documents that they don’t require in America and each bank is different even in the same country as to what they require, so you need to inquire at the banks before traveling

• Spammy online “offshore” law firm websites may be not law firms but really lead-generators that sell your info. If you use one even if they refer you to a lawyer you destroy the privacy of the lawyer-client relationship you could have got.

Latin America in general:

• must have an introduction to the bank from someone who is from there (a professional).

• Takes months in some cases. You can apply but then your application sits there.

• Fairly low initial deposit requirements, even lower if you deposit their currency instead of dollars or euros

Costa Rica: must have residency status. So forget that if you are in a hurry.

Panama: Decent bank privacy laws. You will need at least these documents, and possibly others.
    Notarized & apostilled copy of Passport
    Notarized & apostilled copy of Drivers License
    Bank Reference Letter
    Professional Reference Letter (from a Doctor, Dentist, Lawyer, Accountant, Real Estate Agent, Insurance Agent, etc.)

And then it could take weeks, unless of course you believe the spammy websites that try to get your business, they say they have an inside track.

One site said:

Offshore Bank Account Tips:
Open separate offshore Panama accounts in Euros and in USD.

Bring at least two bank references and two trade references to open your offshore Panama bank account.

Be prepared to fully describe your business activities and where the funds originated. Each reference must be addressed specifically to each bank. A general letter will not do.

Each bank reference to open the Panama Bank Account cannot be more than 30 days old.

You'll need about $5000 USD to open the Panama bank account as the initial deposit.

Choose a Panama bank where it's difficult to open the account. Banks that are known to be easy are more often scrutinized.

Hire a Panama lawyer to facilitate the opening of the offshore bank account. He or she will help with the paperwork, the introduction to the offshore bank and the explanation as to why you're opening the Panama offshore bank account.

The bank interview is face-to-face. Don't ask for a telephone interview. If a telephone interview is granted, you'll be asked to show up at the offshore bank, in Panama, within thirty to sixty days.

The best reasons for an offshore bank account, in the eyes of the bank, is to buy real estate, start a business, or start a legitimate business project.

Be prepared to answer these questions:

Where is the business? (Consider a mail forwarding service or a virtual office in Panama.)

Where is the money coming from?

What do you offer, sell, market, or distribute?

How many transactions and volume do you expect in the next six or twelve months?

Why Panama? (Shipping, internet access, infrastructure, availability of legal counsel, e-commerce, tourism)

Channel Islands: apparently you can open an account there online. But it being England would make it a poor choice for anything but asset protection.


The Royal Bank of Canada site says you can open a Canadian bank account by mail (apply online, then they mail you a welcome packet) with a US passport or drivers license and a letter of introduction from your previous (or current) bank in the US that has a signature on it. It didn’t say whether they need you to mail them the original documents or what. All your documents must have the exact same name on them, and none can be expired. If you want to open your account in US dollars, there are other requirements for ID and you need to be there in person. If you want a debit card you have to show up in person also.

Switzerland: You need to be there in person, and the minimum deposit is pretty high.

Liechtenstein: They do a lot of foreign banking there, you have to show up in person, but they recently handed a disk to the Germans with the information of a bunch of Germans who were tax-dodging by banking there. Also you can’t bank anonymously there anymore. So I’d say they’re not safe for that purpose, but as far as economies go, they seem fairly safe.

Singapore: Credit Suisse moved their international banking headquarters to Singapore in 2005. Singapore tends to only care about tax evasion if it’s their taxes.

I made this joke at the top about the Bank of Antarctica, then found out there is some joker company out there selling fake Antarctic money, here is an Antarctic dollar: LOL!

1 comment:

Anonymous said...

Hi congrats for your blog!
I would love to know about offshore banking and IBC in Belize if you know anything.
Also about TIEA
Do I also need to show up at the bank?
Thank you