Offshore Banking

Information about the benefits of offshore banking and how to go about setting up an account...

What is Offshore Banking?

An offshore bank refers to a bank located outside of the investor's country of residence or domicile. It provides banking services mainly for clients who are not physically residing in the country of the bank. Offshore banking in Canada is legal as long as funds are disclosed to the Canadian tax authorities.

To Whom Does Offshore Banking Apply?

Offshore Banking generally applies to any investor who is interested in setting up an overseas bank account. This could be an investor looking to diversify and keep their investments in more than one place, to invest in financial products not available in their home country, or to invest in a more favourable tax environment to protect their assets.

What are The Main Benefits of Offshore Banking?

Diversification of investments internationally

Diversification is key in wealth management. Investments in an individual’s home country are subjected to various regulatory, geopolitical and social conditions that are beyond the individual’s control. Offshore Banking allows investors to move some investable assets offshore, where the financial infrastructure, stability and security are beyond that offered by the home country. As a result, the risk of the combined investments is reduced.

Favourable tax environment

This is one of the main reasons for banking offshore, especially if the offshore bank is in a “tax haven”. One of the benefits is that an offshore bank account could be set up in a country of lower tax jurisdiction than that of their home countries. For countries which do not tax income earned outside of home countries, an additional advantage for investors would be that investment interests paid by offshore banks are non tax deductible – which is advantageous to investors who are not taxed on international income.

Heightened banking confidentiality

A major advantage promised by offshore banks is the privacy of its client's financial matters. Almost every offshore bank is established in a jurisdiction that promises to provide a higher than usual level of financial privacy into the affairs of their clientele.  In most circumstances, these banks are under no obligation to reveal details of clients’ investments if requested by their home countries.

Access to foreign investments and products

Offshore banks are well-positioned compared to local banks in that they allow investors to gain access to banking products that may not be available in their country of residence. For example, in a local market, Foreign Exchange (FX) products could be limited, but in another country a wider range of FX products could be available, especially if the market is very sophisticated in FX.

Can Anyone open an Offshore Bank Account?

This is very much dependent on the country in which the investor is resident. There are some countries whose Offshore Wealth Policies mandate that their residents are not legally permitted to set up an offshore account. Offshore banks are set up to be in compliance with various countries’ Offshore Wealth Policies.

It is therefore important to consult the various offshore banks for advice.

Opening an Offshore Bank Account

How do I start?

Banks have their own account opening processes. It is important to contact the bank for detailed instructions. Most banks would have an enquiry or application form on their website. If possible, visit the branch personally to find out more.

Required documents

When opening an offshore account the following documents and pieces of information are typically required by most banks:

  • Passport
  • National ID
  • Bank Statement (where fund will be taken from)
  • Information on: basic personal background, source of funds, purpose of setting up account (all these are commonly required information as part of the bank’s set-up process for investments)

How to Use an Offshore Bank Account

Offshore accounts should come with the following basic features, which should be accessible online:

  • Savings account
  • Multi-currency account
  • Time deposit
  • Global fund transfers

All offshore bank account holders have access to the following advisory services, be it in person or via phone/online:

  • Relationship manager to advise and manage investments
  • Product specialist to advise on specific investment products
  • Portfolio counsellor to advise on balancing across the different investments in a portfolio

Investment services

Below is a list of investment products commonly available for most offshore accounts. These products are mostly available online, by phone banking and via a relationship manager. It is best to consult the individual offshore banks for their detailed product offering.

  • Bonds
  • Stocks brokerage
  • Foreign exchange
  • Investment funds
  • Equity-linked products
  • Mortgages and lending
  • Insurance
  • Financial products not available in home country
Information provided by Citibank IPB Singapore Tel: +65 6224 5757