Many people opt out of opening an offshore bank account because they think it is a tough thing to do. Opening an account abroad is almost as easy as doing it locally. All you need is a few documents and some time on the phone with the bank. For many banks, digital communication is sufficient.
However, having an offshore bank account comes with certain responsibilities and nuances. Before opening one, it is important to know how the system works and its pros and cons.
Let us go over a few things you should be ready to face:
1. You Must Remember To Declare the Account
Once people open an offshore bank account, especially when using anonymous banking solutions by CS&P, they may be tempted not to declare it to avoid paying taxes. Even if account holders aren’t planning to finance any illegal activities, they may just want to save some money.
By failing to declare the offshore account to the tax office, you may face large penalties. The size of the penalty may be equal to the amount of money you failed to declare. Meanwhile, avoiding declaration may lead to further investigation and prosecution. The potential jail term for US citizens, who do not declare their foreign accounts, is 10 years.
2. You Can Save Your Assets but Become Too Popular
Putting your money in an offshore bank account may be a great way to protect your assets in case of a lawsuit. Keeping large amounts of money in a local bank account may get you unwanted attention of the tax authorities.
If you have more than $100,000 on the account, the government may see you as a good target in times of political or economic confusion. If your money is safely on an account overseas, it’s safe from the government.
However, it is important to remember that large amounts of money on an offshore account can make you unwanted “popular” with the tax authorities as well. Be ready to keep proving that all your actions are legal and transparent.
3. Offshore Accounts Are Legal
Many people decide not to open an offshore bank account because it seems illegal. As long as you disclose all your foreign accounts, you have a right to keep your money anywhere in the world.
It is important to remember that if you fail to disclose and declare your bank account activities, closing the account does not erase your responsibilities. You will still need to file an accurate tax return. Closing the account may even be viewed as a way to conceal illegal activities abroad.
Also Read: Top 5 Ways to Manage Your Accounts Payable Successfully
4. Legal Advice Can Help You Make The Right Decision
It’s a good idea to get professional advice about the legal consequences of making mistakes with foreign accounts. A lawyer can also explain how you should act when opening and closing the account and declaring it to the tax authorities.
If you aren’t sure you are doing everything legally, it’s better to get a consultation. Opening an account is easy. Maintaining it may be complicated.
5. Read About Maintenance and Transnational Fees
Opening a bank account may not be too expensive. However, the maintenance may turn out to be high. Even though there are no hidden costs, the straightforward ones might be formidable.
Some offshore banks keep your money always available without lending it to borrowers or using it for their needs. They make a profit by charging the account holders certain maintenance and transnational fees. Consider the size of these fees when choosing an offshore bank.
Final Thoughts
Opening an offshore bank account is 100% legal as long as you are transparent about it with the tax authorities. It may be easy to open an account but a little tough to maintain it. Getting professional legal assistance can help you avoid unexpected problems.
