Offshore Bank Accounts

Offshore savings

Basic banking offshore

Why expats should make offshore banking arrangements a priority...........

Many expats seem to wonder if they even need to set up an offshore bank account, thinking they can get away with using an account based in their home country combined with a local account in the country they're going to live in.

A recent survey found that 81 per cent of people fail to consider banking needs before they move abroad; 60 per cent say this is because of a lack of understanding of how offshore bank accounts actually work.

There's no denying that it is possible to live with a combination of a bank account back home and one based in your foreign country of residence. The problem with doing things this way, however, is the lack of true international reach on the part of the banks concerned.

Put simply, a combination of national regulations and the banks' own limited systems means it is highly unlikely that a 'home-country local' banking package will be operable wherever you are in the world. It may be fine to do things in this way if you are going, say, to retire to a foreign country and barely set foot outside it again.

But for anyone who may find themselves traveling at all frequently, a properly designed international bank account is pretty much a necessity if you want to avoid a lot of hassle.

For a start, you usually won't be able to access your account details around the world if it is a national package. If you think you can simply walk into an office of your high street bank in Dubai and transact on your home country account, you might find yourself cruelly disabused.

Next, maintaining a home-country local banking service will mean missing out on all the tax advantages of using an offshore account, which will accrue to you automatically through gross payment of interest.

In addition, the bigger offshore banks also provide a host of overseas services useful to expats, the most useful of these being multi-currency capabilities, internet banking and tax advice.

It should be straightforward to talk through your circumstances with a bank to help you determine which account would be best for you to open. It will depend on where you are going to and what currency or combination of currencies you are being paid in. It is easy with most large offshore banks to open one account in US dollars, and another or others in euros or sterling.

An expat may need to continue to pay into investments or pensions, to keep paying a mortgage, or support parents or children. By opening offshore euro and sterling bank accounts they can easily transfer the money they earn in, say, Malaysia for example, with an international payment to their sterling account in, say, the Isle of Man.

By doing this they can also choose the best time in terms of the exchange rate between the currencies to transfer money into the IOM account. It can also be used to set up direct debits and standing orders as you would do from home. This would mean that you really don't need to use your home-based current account, but may wish to keep it open for visits home and for a possible eventual return.

You will also need to set up a local account for your everyday business. This will also be needed to pay any utility bills in your new country. Hopefully, by planning you will be able to find a good balance between all your accounts and take advantage of tax-free savings.

Offshore accounts vary from high-interest accounts suitable for making the most of your money abroad to more basic accounts offering everyday functionality. It will pay to scout around and spend a little time doing your homework to find the best account before beginning your new adventure.

Finally: Before opening your first offshore bank account, it is important that you find out what the local tax situation is. In some countries, for example, individuals are taxed on their worldwide income, in which case having an offshore account is not going to do you any good.

Before you go away, it is essential to look at several banks to establish what kinds of accounts are available and assess them against your ultimate savings targets.

Print this page