Expat Guide To Offshore Banking And Money Transfers

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Expats do not have to be wealthy to switch their money to an offshore bank or building society.

The stigma of offshore comes from individuals trying to evade taxes by not reporting their earnings from offshore accounts.

But hundreds of thousands of people send money around the world through offshore intermediaries every day without a problem.

Offshore branches going under

A tax crackdown led by the USA and Europe coupled with poor rates of interest paid by offshore banks has led to demand for the service shrinking.

Thousands of British expats need offshore banking but are finding money laundering regulations a problem.

The rules mean UK banks and credit card providers do not want expat customers, so are closing their accounts. The expats still need a bank, but many have closed leaving them  high and dry.

A few well known British banks still have offshore branches, including Santander, NatWest, Lloyds and Barclays. Ireland’s Permanent, along with Standard Life and Kleinwort Benson also offer some expat services.

Most are based in Gibraltar, the Isle of Man or Channel Islands.

Opening offshore bank accounts

Offshore bank accounts are opened direct with the branches or through their UK high street networks.

The rules are the same as in the UK. The bank will want to identify you, confirm an address and seek a financial history to make sure you are not bankrupt or steeped in bad credit.

They will ask about:

  • Why you want to open an account
  • The source of the money paid in, particularly if the sums are £10,000 or more
  • Your future financial plans

Paying tax on offshore money

Too many investors and savers failed to report wealth they held offshore in a bid to minimise their tax – often by telling lies about their fortunes.

Everyone should report their holdings on an annual tax filing.

Two new international laws make hiding money and investments offshore almost impossible.

  • The Foreign Account tax Compliance Act (FATCA) covers more than 100 countries and thousands of overseas financial institutions.

The financial institution must pass a report of any accounts controlled by American customers to the Internal Revenue Service each year.

The rules apply to any offshore accounts worth $50,000 or more held by US residents. The bar is raised to $200,000 for US expats.

  • The Common Reporting Standard (CRS) works in the same way as FATCA, but rather than lots of countries reporting to the US, around 50 nations send financial information between each other. Unlike FATCA, the CRS has no reporting threshold.

The information collected by the tax authorities is cross-checked against tax filings to make sure the correct details of overseas accounts have been reported.

Deposit safeguards for expat cash

Protecting your money should a bank go to the wall is vital due to the sometimes huge sums concerned.

Onshore, the Financial Services Compensation Scheme (FSCS) offers protection on across all accounts held by one bank for the same consumer up to £85,000.

Offshore banks have different compensation schemes depending where they are – outside Europe safeguards are rare, while centres such as Gibraltar and the Isle of Man have developed their own.

However, the rules are different for each, so make sure money on deposit is not over-exposed.

Foreign currency accounts

Expats can open foreign currency accounts with UK offshore banks – generally in Sterling, US dollars or euros.

A good rule of thumb is to have an account denominated in your local currency to avoid losing money if exchange rates move too much.

Expats transferring money overseas

Moving money overseas with a bank can cost a fortune, but specialist money transfer firms are willing to do the job for much less.

Disruptive technology firms, such as TransferWise or the new expat app deVere e-Money Vault have made the process quicker, cheaper and easier.

Services like these can handle one-off or regular transfers direct from the bank through a smartphone.

Another difference is the exchange rate and transfer cost.

Many banks and bureau de change advertise fee-free transfers, but adjust the currency exchange rate to collect a margin on the deal. That’s why the rate on a receipt is different from the advertised rates posted by the financial media.

Logically, if the transfer was really free, the provider could not keep trading.

The key is study any written estimate carefully and look for lots of small, unexplained charges that look innocuous but bump up the cost.

full article: http://www.iexpats.com/expat-guide-offshore-banking-money-transfers/

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