Offshore Banking


Offshore banking usually refers to the practise of opening an account with a bank based in another country (typically a country with non-restrictive tax regulations). Offshore banking can also refer to foreign currency banking transactions.

Some businesses rely on offshore banks as a way of protecting their assets. Because the storage or control of some assets can be moved to another country, certain taxes that are normally levied in the home country are effectively bypassed and extra expenses are avoided.

Offshore banking is also useful for contractors that spend a lot of their time doing work overseas or for foreign clients. By having an offshore bank account, they are no longer tied to their home country’s banks for their regular transactions which can possibly take place anywhere in the world. Except for some specific type of services, offshore bank accounts provide a selection of services similar to what are available from local banks.


A trust is a type of legal arrangement that involves transferring control of your assets to a trustee that holds them on behalf of the beneficiary. Usually a trust is created for a specific purpose, such as avoiding certain taxes.

A trust is also useful for avoiding costly probate procedures related to disposing of assets after the owner passes away.

Once the trust is created, assets are legal transferred to the trust fund. At this point the assets cannot be taken back by the person initiated the transfer.

Offshore trusts work in a similar way to normal trusts. The main difference is that they are set up in association and under the legal control of offshore trustees which are usually located in countries and territories considered as tax havens. (e.g. the Bahamas or the Channel Islands).

Offshore Trust Types

Collection Trust

Normally, a collection trust is arranged with relatively limited authority for the trustees (the party responsible for maintaining the trust). The assets and any generated income is held in the collection trust, with payments made to the beneficiaries at agreed-upon intervals.

> Holding Trust

A hold trust is usually arranged to hold specific assets (e.g. shares in another company). Given that this is a trust, it is managed with the benefit of the beneficiaries taken into account. For instance, a holding trust that is charged with holding shares will manage and vote those shares in the best interest of the trust holder.


If you are considering an offshore investment, banking service or any other financial activity that is conducted offshore, a very important factor that will determine how well the matter turns out is the jurisdiction you choose to host to hose your offshore services or accounts.

Selecting a jurisdiction can be a relatively complicated decision. The factors and conditions to consider are many: economic and political stability, laws and regulations concerning statutes of disclosure, the available business infrastructure, and the geographic region where the jurisdiction is located.

The following is a list of the most common offshore jurisdictions:

  • Bahamas
  • Bermuda
  • Cayman Islands
  • Cyprus
  • Dubai
  • Gibraltar
  • Guernsey
  • Hong Kong
  • Ireland
  • The Isle Of Man
  • Jersey
  • Liechtenstein
  • Luxembourg
  • Malta
  • Mauritius
  • Monaco
  • Netherlands Antilles
  • Panama
  • Seychelles
  • Switzerland

Since each of these jurisdictions has its own laws that regulate the financial dealings of offshore companies, you should consult with your solicitor regarding the legal scenarios involved for each of the jurisdictions you are interested in before making your final decision.

Certain jurisdictions may also require residence status for foreign nationals that are looking to set up businesses or bank accounts within their territory. Therefore you should also consider if you have long-term plans for working there, or whether it may be a place you with to retire to.

Offshore Corporations

Before setting up an offshore trust, bank account or payroll service, you need to put up an offshore corporation in the country or territory you will be basing your offshore transaction in. Another option is to buy an available Shelf Company.

As soon as the IBC has been formed, or the Shelf Company has been purchased, you are then allowed to set up an account of that corporation in the country you choose, with any offshore bank available there.

> International Business Corporations

IBC’s are corporations with highly regarded secrecy and non-disclosure policies that are only allowed to conduct business in any country except in the one they were created in. An IBC created you create in Malta, for example, allows you to do business through the IBC in any country except Malta. However your IBC is not restricted from doing any banking in the country they were formed in.

> Shelf Companies

Instead of putting up an IBC, you have the option of buying an existing Shelf Company. Usually these type of companies were already registered in the prior tax year. This is an ideal choice if you require an offshore company that can be shown to have existed for several years or months, or if you require a company that was set up in the previous tax year.

Charges & Fees

> Agent Fees

Usually, only an agent properly registered in the tax haven can have an IBC formed on a foreign national’s behalf. The local agent charges a fee to have this service done.

> Government Fees

The advantage of establishing an offshore bank account in a tax haven is that it obviously releases you from having to pay typical business-related taxes (i.e. personal or corporate income tax, foreign investment tax, capital gains tax, withholding tax, estate tax, value added or sales tax). However, the government of the tax haven will be charging an incorporation fee for the IBC or Shelf Company you put together.

> Nominee Director’s Fees

An offshore company is required to nominate one or more directors. This can either be the individual that sets up the offshore company, or an appointed nominee director. The nominee director will have no actual knowledge of the corporation’s affairs or accounts, nor will they have influence on the corporation unless given the founder’s express permission. The nominee director is a resident of the country where the IBC is founded and acts under instructions from the founder of the IBC.

In order to arrange for the services of a nominee director, you will have to negotiate with them a fee.

> Trustee Fees

A trust is normally managed by one or more trustees, and the same goes for offshore trusts. Trustees will charge fees for their service, and the amount is to be negotiated between you and your appointed trustee.


> Asset

An asset is any property with a cash value, such as real estate, equipment, savings, and investments.

> Bearer Shares

Any corporation is owned by its shareholders. In most countries, every share that is issued by a company needs to be registered with a government agency, so the government and other agencies know who owns each share in a company, and how much each share was traded for. Offshore companies generally issue bearer shares. These shares belong to the person who holds them, the bearer, and are not registered with a central authority. As such bearer shares may be bought and sold without records of who owns the share or how much was paid for the share.

> Deposit

The money you put into a bank account.

> Electronic Banking

Most banks and building societies now allow their customers to access their bank account details electronically, using a computer, interactive television, or even their mobile telephone. Electronic banking services now also encompass almost the full range of services available from a bank, including setting up payments, applying for loans and mortgages.

> Equity

Equity is the value of your home when outstanding mortgage amounts and other loans have been subtracted. Thus, if your home is valued at £100,000 and your outstanding mortgage is £75,000, you are said to have £25,000 equity in your home. Equity can be turned into cash quite easily, as many companies are willing to offer loans secured against any equity you have.

> Financial Statement

A financial statement is a written record provided by the bank which records your financial circumstances and transactions. The financial statement generally includes a record of the money entering your account, the money paid out and your current balance.

> Fixed Rate Loan

A fixed rate loan is a loan with a set rate of interest that either does not vary for the entire life of the loan or is set or ‘fixed’ for a specified period (months or years).

> Income

Your income is the total amount of money you receive from all sources, including wages, commissions, bonuses, government or retirement benefits, compensation claims, interest and dividends on all investments.

> International Business Corporation (IBC)

An IBC is a corporation that is created in a tax haven and is typically authorized to do business anywhere in the world except its home country.

> Net Income

Your Net Income is the total amount of your income minus any expenses and taxes you pay.

> Trust

A legal arrangement where control of assets is transferred to a trustee who then holds them for the benefit of a third party, the beneficiary.