Resident and non-resident or offshore bank account
Discrimination of non-EEA residents when opening bank accounts
Advantages of an offshore or non-resident account
Banking options for businesses and private individuals
EMI - electronic money institution as a banking option
Offshore means “in a foreign country, especially in order to take advantage of lower taxes or costs or less stringent regulation.” Taken from Oxford Languages.
Opening a bank account is essential for any business. All businesses need a tool – a company. Bank account complements the tool in a natural manner and makes the business activities possible. While opening a bank account is quite routine for many businesses operating locally (it takes only a visit to the nearest bank), it has become quite problematic if a bank where you want to open an account is in a different country. It has become even more problematic if you wish to open a bank account abroad and do not wish or have no possibility to travel there, and if you need to open the account remotely.
The banks have very tight regulations nowadays when it comes to opening accounts for non-residents (both for companies and private persons). These regulations are even tougher if you wish to do everything remotely, via email. Every applicant will be scrutinized, checked and asked to answer dozens of questions in the application forms. All answers must be substantiated by the relevant paperwork. Moreover, the account opening efforts will be doubled if a company bank account is needed, because the documents will have to be collected not only for the company director, shareholder and the owner but for the company itself. Also, nominee directors and shareholders (if used for the incorporation) will not save you from the necessity to disclose all personal information to the bank. Moreover, the bank will also require all personal data or due diligence for the nominees as well thus making the whole procedure even more complicated.
We would also have to note that not all countries are treated equally when it comes to the account opening. We omit sanctioned countries because all banks ban them. However even citizens of countries or companies registered outside of EEA (European Economic Area) will have problems opening non-resident bank accounts remotely. There are 30 EEA countries and 249 countries in the world. This means that residents of about 200 countries will have problems should they wish to open a non-resident bank account for themselves or their companies. Some banks screen such applicants out on an early stage, some will tell you that you do not fit during the complicated account opening procedure when you have lost much of your time already, but practically all banks situated in the EEA will discriminate the applicants coming from non-EEA parts of the world.
Non EEA residents were able to avoid this discrimination earlier by registering a company in the EEA and then applying for a bank account as an EEA legal entity, however now the banks require the proof of company presence in the country of registration, e.g. office space lease contract, office employees contract, etc. Fulfilling these requirements (called Economic Substance) may be out of the small or even middle business budget.
Despite of the above problems with opening a bank account, having the additional account and a company in a tax friendly country can be worthy of the efforts. An extra company and a bank account mean much more freedom and flexibility in handling funds and optimizing tax burden. This is probably the main reason why business people around the world are still looking for incorporation and opening offshore bank accounts (corporate and private) outside the countries where they are tax resident.
A non-resident bank account can be also called an offshore bank account, because one of the meaning of the word “offshore” is: “situated, or registered abroad, especially in order to take advantage of lower taxes or costs or less stringent regulation”. So offshore bank really means a foreign bank, situated not in yourcountry.
If you are already here reading this, you are probably considering whether you or your business can make good use of the bank account abroad. Let’s see the pros and cons for a personal account and a corporate one.
Personal non-resident or offshore account would allow to diversify your assets, which is always a wise move even in good times, not mentioning the bad times (crises, pandemic, etc.). Such account would allow securing some means offshore thus enhancing your financial stability for the future.
If you combine a tax friendly jurisdiction to register your company with an offshore bank account you will have much more freedom to channel cash flows in the most favorable for your business ways.
Now let’s see the banking options existing currently for businesses and private individuals looking to open anon-resident or offshore account. The most tested and working option would be registering a company in a country with low taxes (there are a few, we will discuss them below) and opening the bank account in the same jurisdiction. Thus, the bank would consider the company as a resident entity, which will simplify the account opening significantly. Currently there are a few countries suitable for this option:
Romania, an EU member, micro company taxation is only 1%, which is incredible for a company located in the EU. It’s also worthy to note that micro means 1 000 000 euro annual revenue.
Cyprus, an EU member, resident company taxation is only 12.5%.
Poland, an EU member, resident company taxation is only 9%.
Montenegro, not the EU member (thus sharing no financial information with the EU and EEA members), resident company taxation is only 9%.
Gibraltar is also offering an interesting option. It is not in the EU since Brexit, although it is a part of the EEA (European Economic Area). A non-resident company is not taxable in Gibraltar and we can assist with opening a corporate bank account either with a bank in Belize or with an EMI (e-money institution).
EMI is a 21st century alternative to a standard bank gaining popularity. About 500 electronic money institutions (EMIs) are conducting business in Europe. EMIs are licensed (mostly in the UK, Malta, Lithuania, Estonia, Ireland, Cyprus, etc.) to provide financial services: open accounts (including IBANs) to receive and send payments, issue virtual bank cards, convert currencies, etc. Some EMIs, like TransferWise, have millions of customers. EMIs are more flexible than regular banks, in particular, they open accounts remotely online, and they are also more cost-effective for the customers. As EMIs do not participate in the deposit insurance scheme it is reasonable to use them for payments mostly and utilize standard banks for holding funds.
If you have decided that diversifying your banking options would positively affect your business and revenues, please let us know. We will be happy to assist with opening a non-resident or offshore bank account and incorporating you in a country with less stringent taxation (beginning from 1%) or no taxation at all.
We would be also happy to assist private individuals wishing to secure their assets. Just get in touch to discuss the existing options.