Should You Open a Bank Account in the Country of Incorporation of an Offshore Company?

Do offshore companies have to open their business bank accounts in the country of incorporation? 

Perhaps this question is relevant for all companies planning to set up a company offshore. Many people have the idea that when a company is registered, for example, in BVI, then it must have a business account with a BVI bank. 

However, this is not always necessary. Modern business does not require companies to open accounts in the country of incorporation. Why is that so? Learn it from our article.

Account in an offshore jurisdiction

Why Open a Business Account for an Offshore Company?

Almost any business needs a business bank account. Basically the only exception is for companies that are set up to hold shares or real estate.

The offshore bank account is used for transactions with customers and suppliers (payments for goods and/or services, and income from sales). That is why many companies spend a lot of time and resources on finding the best banking option for servicing their cash flow! 

After all, the quality of control and management of funds, the level of confidentiality and business protection depend on the right choice. 

So, for the purposes of this article we will assume your offshore company needs an offshore bank account. What next? The offshore bank account is usually used for:

  • protecting family assets;
  • export and import operations;
  • accumulation of funds for large investments in new projects or IPOs/ICOs;
  • enhancing control over cash flows;
  • savings for retirement.

However, your chosen offshore jurisdiction is not necessarily where you find the best financial expertise. Certain countries and territories offer favorable conditions for company incorporation, but their banking infrastructure is on the limited side.

Where is Best to Open an Account for an Offshore Company?

In addition to conventional banks located in the jurisdiction of incpoorporation, you can open a bank account for your offshore company with the following institutions:

  • foreign private bank (Switzerland, Cayman, Monaco, Andorra, USA etc);
  • offshore payment system;
  • neobank.

The last two payment institutions specialize in providing online financial services rather than traditional banking. Today, they do not yet have a similar range of services compared to private banks, but their online capabilities are growing rapidly. In general, the development of online banking makes banking services available regardless of a company’s location. 

Therefore, it is really not at all necessary to open a bank account in the country of incorporation of the offshore company. It is better to focus on the quality of services rather than the specific jurisdiction.

Main reasons for opening an account in a country other than the country of incorporation

  • Limited banking infrastructure available – for example, Marshall Islands has great corporate legislation but no offshore banks.
  • The existing banks are too small and/or do not provide the necessary range of services.
  • You need to diversify your cash flows.
  • The service quality is not the one you expect.
  • Stringent requirements of the clients.

Offshore companies as a rule should have not just a single account, but several business accounts depending on the type of business and the need to perform various tasks. And it is not even necessary to open the main account in the country of incorporation of the offshore company. If the country or territory of incorporation cannot offer financial services that meet the requirements of your business – then both the main and additional accounts should be opened with foreign banks and/or payment systems and/or neobansk.

What are the Most Convenient Offshore Locations for Company Incorporation and Opening a Business Account?

Countries and territories with low tax rates and a favorable attitude to foreign businesses are convenient for establishing an effective business structure that would allow legal optimization of the fiscal burden. 

However, many offshore jurisdictions do not have a well-developed financial infrastructure that could provide quality processing of transactions. Let’s have a look at the jurisdictions where it is possible to open a business account for a local company, and where it is recommended to use foreign banks.

Nevis: convenient jurisdiction for incorporating a company with a business account

In practice, setting up an offshore company in Nevis is relatively easy. The jurisdiction has the following advantages: 

  • No taxes on income from foreign sources (subject to local substance rules).
  • It is possible to register a company and open an account without visiting (although a trip is highly recommended)
  • The jurisdiction offers a high level of asset protection – one of the two top asset protection jurisdictions in the world.
  • Barriers to “fantasy lawsuits”  against a Nevisian company.
  • No currency controls.

Setting up an LLC or an IBC is relatively easy for offshore clients in Nevis. Banking is provided by one of two local banks, but both are good.

Examples of jurisdictions where you don’t have to open an offshore company account

The Marshall Islands and Georgia are quite popular when it comes to setting up a business. However, local legal entities are not required to open accounts with the local banks. On the contrary, they have to look for payment institutions in other jurisdictions to be able to enjoy all the benefits of the country, and for a variety of reasons:

  • The Marshall Islands have limited banking infrastructure. As of early 2021, there are only 3 banks operating here. They are unable to provide offshore banking services and therefore they are not very popular with foreign-owned companies.
  • Georgia has stringent requirements to non-resident beneficial owners. The country has quite a well-developed banking system, but it is rather difficult and time-consuming for a company with foreign founders to open a business account.
  • The United Kingdom despite being a fintech hub, the British banks are well known for rejecting accounts of local companies that have foreign owners. There are some good exceptions though, such as 3S Money, that our staff are happy to advise you on.

Together with that, the aforementioned countries offer significant business advantages: 

  • No taxes in the Marshall Islands and low taxes in Georgia and England.
  • It is easy to register a company – you can get the Certificate of Incorporation either the same day or overnight.
  • Minimum bureaucracy to legal entities. 

The corporate laws of the Marshall Islands, Georgia and UK do not impose stringent requirements on foreigners and their companies. It is quite easy to establish and conduct business using local companies, but you will have to open accounts with a foreign bank and/or payment system and/or neobank.

In the European Union/EEA too, there is a single market in banking services. For example, if you have a company in Portugal it is quite permissible for it to do its day-to-day banking in Lithuania, Croatia or Switzerland and the government in Portugal cannot legally object to this.

Myth vs Reality: Why Is Opening a Bank Account in the Country of Incorporation of an Offshore Company Sometimes Considered Mandatory?

Let’s take a closer look at the myths that make people think that bank accounts must be opened in the country of incorporation of an offshore company:

  • It is easier to open an account in one’s home jurisdiction. This is not true. Foreign banks/payment systems/neobanks may offer more favorable terms to a company than payment institutions in its home country.
  • An offshore company with the account with a local bank looks local. This is not true. Compliance services of foreign counterparty payment institutions will require disclosure of ownership structure and will see the real foreign owners.
  • It is difficult to provide information on account history to the supervisory authorities and banks. This is not true. Payment systems/foreign banks/neobanks provide clients with the possibility of generating statements and various reports via online banking systems – for example integration with Xero.

So, is it necessary to open a bank account in the country of incorporation of an offshore company? The answer is a resounding no. It all depends on the company’s objectives and goals, type of business, local bank requirements and many other factors.

We would advise you to contact us instead of searching for financial institutions on your own. With our experience and knowledge, we can ensure that we find the foreign banks and/or payment systems and/or neobanks that will be best suited to your needs.

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