How to Do Offshore Banking
Mysterious and seemingly illegitimate, offshore banking captures the imagination of novelists and movie-goers. "Offshore" implies some sort of secret vault hidden away on an island somewhere in the Caribbean or the Bahamas. Having an offshore account simply means storing cash or other assets in a bank located within another country. Regardless of money being stored in an offshore account, you must still report money held in offshore accounts to the Internal Revenue Service.
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Things You'll Need
- Proof of identiy
- Residence verification
- Proof of nationality
- Deposit for the account
Instructions
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Determine what countries and jurisdictions offer bank accounts to foreign customers. Belize, Switzerland, the Cayman Islands and other areas offer offshore banking accounts. Each offers particular advantages, and depending on the tax laws, one may be more preferable to another. Reasons for setting up offshore bank accounts differ greatly. For example, running an international business often requires taking payments in foreign currencies.
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Decide what types of investments the account will hold. An IRS regulation states that any U.S. securities purchased with a foreign account must be reported. Foreign securities in a foreign account do not have to be reported. Cash deposits may come with a minimum required amount that must be met. Some banks do not have any minimum requirements for opening an account. Once deposits are made, however, these requirements become active. Earning interest may be subject to foreign and domestic withholding laws.
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Show proof of identity, residence and nationality. The one essential item needed is a passport. Substitutes, such as driver's licenses, are not acceptable. Legal proof that the source of deposited funds is legitimate is also necessary. International money laundering laws require strict proof that potential customers are not criminals and do not engage in criminal activity. Taking a letter of reference from a domestic bank can establish a relationship with foreign banks.
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File a Report of Foreign Bank and Financial Accounts each tax year in which you hold at least $10,000 in an offshore bank account. Complete Form TD F 90-22.1 to report foreign bank and financial accounts and mail to:
U.S. Department of the Treasury
P.O. Box 32621
Detroit, MI 48232-0621
Failure to report money held in offshore bank accounts can hold penalties as much as 50% and possible persecution.
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References
Resources
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