I just wanted to share a very interesting article I just read with you: Reporting Requirements for US Taxpayers with Offshore Companies.

I know a few US expats who will find it very useful, and started emailing them. I then realized this info deserved more and wanted to spread the word a little. Tadaa !

Should you know of other good source of info on this topic, I’d love to read them. Do feel free to post them here under so we can check them – thanks !

In any case, you should be careful when choosing your overseas bank to ensure your money is safe.

Your Offshore Bank

The first step is to select the bank which will best suit your needs. Your choice will depend on a few factors:

• Entry Fee?
  I like to work by elimination. The first check you should do is ask yourself how much you’d like to allocate to your offshore bank account. This will make sure you don’t lose time considering banks which would not consider you.
• Where is it located?
  The location in itself is not that important. What is important is whether this location is politically and economically safe. It also is good to check whether you understand the language spoken in this location, and if they have sufficient English speaker to assist you should you not. You should be be able to reach your bank easily, and preferably be able to go there should the need arise
• Does it offer internet banking?
  Internet banking is bliss. It alows you to easily manage your money from abroad and you escape the time-lag usually suffered when dealing internationally. A must have in my opinion.
• What charging structure?
  Of course, do check the bank charges associated with your offshore account. We would not want you to loose your monies over crazy banking fees, isn’t it.
  

Your Bank Credentials and Legislation

You should always check your bank’s credential befor signing up with them. How long have they been around? Do they have a parent company? Do they have a history you can refer back to? With banks such as HSBC or Lloyd’s it is quite easy to do your due diligence. It sometimes is more difficult with smaller Caribbean ones.

Following your bank’s location, different laws and regulations are in place. You should quickly check

• Privacy Regulations
  Ensuring that your selecting offshore entity has no obligation to release your personal or business information, can allow you to enjoy great deal of privacy & confidentiality. Of course, you never are 100% safe. But unless suitable evidence can be shown to prove that you have been involved in criminal activities, such as money laundering or drug trafficking, you should be good to go.
• Double Taxation Agreement or Treaties?
  One of the many advantage of offshore banking is that once your assets are held offshore, they are unreachable by domestic courts. You should check though whether your offshore jurisdiction has any double tax or tax exchange treaties. Many offshore jurisdiction are trying to clean up their branding. Hence they have passed agreement and treaties with onshore authorities to exchange information with each other. This does not work when you are still residing outside of your home-country. But should you reside in your home-country and wish to keep your information private, you always have the choice of paying a with-holding tax on your profit (such agreement is in place between the Isle of Man and the European Union).

Account Opening Process & Security

Opening your account offshore may not be as straight forward a process as entering a counter and signing a few documents. Every serious bank will try to define the real owner of the funds on the account, and will due-diligence a few things before it can accept your application. They need to make sure your funds are genuine, and it ensures your bank accounts for your monies along the way, starting from the moment you open your bank account.

Most banks will request for the following documents:

• Certified Copies of passport and ID
• Proof of address (employment contract, utility bill, bank statement etc.)
• Description of your business / job and source of the funds

Should you open a corporate account, it may also ask for the following

• Letters of reference from lawyers, auditors, accountants etc.

My preferred banking institution

I personally like to work with two institutions

Lloyds TSB Offshore offers a great account with a very reasonable entry fees (USD100). Their facilities are not optimal, but the service is very decent. And at such a low entry fee, you can start enjoying all the benefits of a reputable offshore banking structure.

Close Private Banking is more exclusive. The entry fees are not as reasonable as Lloyds (£20,000), but you get what you pay for. Great services and extensive banking facilities.

It is true that expressions like “offshore” and “tax haven” have no agreed standard definition, which is a problem. I understand why they prefer to be called “international finance centre” – the expression is a lot less tainted than “offshore”.

Why, of why?

No, it doesn’t. It simply is a result of a great PR to answer the mis-conception the offshore term has received over the past few years due to international efforts against money laundering, tax evasion and terrorist funding. Hollywood did not help either…Not that these are not serious crime, but their number pale in comparison to the number of legit investments and accounts held in “offshore” jurisdiction. Therefore, offshore centres are trying to not throw the baby out with the bathwater by changing their brand image. Pretty smart.

But does it really makes a difference?

No it doesn’t. The fact that we name something differently does not change its substance. I don’t want to go philosophical here, but a word is slightly more than the signification one gives it. Hence changing their appellation from offshore to international finance centre does not change the way your account or platform work, its benefits and restrictions.

Time will tell…

At the end of the day, this will only succeed if people stop using the term offshore to designate such centres. And this battle is far from over! Old habits are hard to get over – especially in england!!

The Isle of Man is a ’so-called’ low tax economy with no capital gains tax, wealth tax, stamp duty or inheritance tax. This means that for non-resident (i.e. if you don’t live there) you don’t pay tax. This alone explain why so many people like the IoM. As simple as that. But there is more to this tiny island than a simple tax-attractive piece of land.

In order to become one of the leading offshore center, they had to set in place protections laws that ensures your money will still be there when you will need it. There is no point building up wealth if something has gone wrong along the way with the company looking after your money. Therefore, the IoM protections mirror or exceed the investor those you will fin in jurisdictions such as the UK, the US and Australia.

Two that are particularly significant.

1975 – Plan Holder Protection Act
The first is the 1975 Plan Holder Protection Act which was updated last in 2000. It is there to protect investors against losing their money if their company did fail. The way this works is that each quarter, financial institutions have to pay a premium based on the size of funds they are managing into a central provident fund managed by the IOM authorities. This fund then guaranties 90% of the value of your account by law.

1996 – Financial Service Act
The second is the 1996 Financial Service Act of IOM. It regulates and supervises financial companies to be sure that investor interests are safeguarded. As an example, that they have to submit audited accounts every six months instead of annually like they would in the UK or US for example. This is for the IOM to be sure that client monies are properly accounted for. Another part of that law is that all assets under management by those companies must be held by a third-party custodian to be sure that a company can’t use client money to bail itself out should they experience financial difficulties.

On top of all that, the Bee Gees were born there! How not to like such a place !!