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5 advantages of international banking for expats

21st April 2020

The Author: David Cooper

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Financial strategist, investment adviser and Sales Director for United Advisers

An offshore bank offering international banking is a bank located in any country other than the account holder’s home country. An account held in an offshore bank is therefore often described as an offshore bank account.

While international banking and offshore bank accounts are often negatively perceived as a way to avoid paying tax (which in fact is illegal), they boast legitimate financial advantages for expats over domestic banking arrangements.

While the term originates from the Channel Islands being ‘offshore’ from the UK, the term is used figuratively to refer to any bank regardless of its location; hence, some banks in countries such as Switzerland and Luxembourg are considered offshore banks.

Let’s take a look at the top five advantages of international banking for expats.

1. Tax efficiency

Some offshore locations have a reputation for low or zero tax rates, which make them attractive banking options for globe-trotting expats.

Be aware, however, that as an offshore bank account holder, you are still required to pay tax on interest earned from offshore savings. After all, tax avoidance is illegal. The benefit is that interest on savings is paid before deducting tax. This is of course more favourable than countries such as the UK, for example, where tax is deducted before adding interest.

Taxation can be a tricky area to navigate, not least because tax legislation continually changes across both onshore and offshore jurisdictions. Also, the specific tax advantages to which you are entitled depend on your personal circumstances.

Keep in mind there are many international tax intricacies to understand, such as reporting and annual tax filing. To avoid falling foul of fines or penalties when it comes to your offshore savings and tax obligations, always seek professional advice before opening an offshore bank account.

2. Convenience and greater flexibility

As with any domestic bank account, you must meet the due diligence requirements of opening an offshore account. However, you won’t need to visit the bank in person. You can then access your offshore bank account 24/7 from anywhere in the world either via a web browser or mobile app.

International bank accounts are often available in multiple currencies, which is convenient if you need to make or receive payments in different currencies – often a key benefit for expats living and working globally.

3. Investing

Investing from an international bank account is relatively straightforward and can give you access to investment opportunities that may not be available in your home country, or where you currently reside. This is an attractive feature for expats leading international lifestyles.

Depending on your situation, investing from an offshore account may offer you many advantages including tax benefits, asset protection and greater privacy. Keep in mind, however, that offshore investing attracts greater regulatory scrutiny and higher costs.

Most offshore banks offer tools to help you build your investment portfolio. Your choice of offshore bank account, however, needs to be structured around your risk profile and financial goals, so it’s wise to seek professional advice before making a decision.

4. Easy transfers and lower exchange risk

International bank account holders can make transactions in more than one currency including sterling, euros and US dollars. Making transferring funds between countries plain sailing. Offshore accounts also generally offer good exchange rates and allow you to move money between accounts in different currencies without the fees.

Of course, fees and exchange rates are dependent on the bank and type of account you hold, but the advantages of having your savings and investments in a secure offshore location with tax advantages is a win-win for expats who move regularly.

5. Lending and Credit

International banking is effectively a private banking service, so lending and credit facilities are often more flexible and tailored to your specific needs. You may find you have access to much more competitive mortgage rates, particularly if the property is in a mainstream market like the UK.

International banking has many advantages for expats and is worth considering; however, as with any financial arrangement, it’s always best to talk to a financial adviser before taking the plunge.

Challengers to traditional offshore bank accounts

With the rise of fintech companies and multi-currency accounts, more online international bank accounts are available; they take minutes to open and provide easy and secure international money transfers.

Of course, different accounts offer different benefits and it’s necessary to do your due diligence before opening an account online, but companies such as Revolut, N26, Monese  and Capital One 360 are challenging traditional banks by driving down overseas banking costs and currency exchange costs. There are number of great savings apps that you can use to manage your accounts virtually. We’ve reviewed the most popular savings apps here in our article “6 apps to develop great savings habits“.

Opening an international bank account

Before opening an international bank account, there are many factors to consider, so it’s always wise to seek professional advice.

At United Advisers Group, we are well-versed in international banking and are experienced in working with expats to open offshore bank accounts, especially in Switzerland, Luxembourg and Spain. The bank account best suited for your needs will depend on your nationality, your tax residency, your employment contract and how long you intend to stay in the country for.

Making the most of offshore investments as an expat

Once you have opened your international bank account(s), speak with your adviser about the opportunities available to you when it comes to offshore investments.

Offshore investments offer expats a number of benefits, most notably tax efficiency. However, there are several other benefits as we explain in our post on retirement planning for expats.

Additional international banking services for expats

Our international banking expertise also extends to International Pension Transfers and Overseas Property Services.

We can help you to understand the different pension options available to you as an expat and take you through the common pitfalls’ property buyers face when purchasing abroad.

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