Best Offshore Jurisdictions to Get Your Banking License in 2023

Aspiring to open a bank abroad is no longer a simple feat, especially for US citizens. The COVID-19 pandemic, the FATCA regulations, geopolitical tensions over Ukraine, surging inflation, global crackdown on offshore banking, and stringent OECD standards have all contributed to the challenging landscape.

In Belize, financial licenses have not been granted for years despite being permitted by law. The same goes for Luxembourg and the Cayman Islands. The latter are experiencing a decline in international clients due to more attractive conditions in other countries. Dominica has even ceased offshore bank registration. However, countries like Puerto Rico, Panama, Lithuania, and the UK remain popular choices among foreign investors seeking an offshore banking license.

In the past, countless jurisdictions were considered the best for obtaining a financial license, and many of them were offshore locations. As we enter 2023, the number of such jurisdictions has significantly reduced. Nevertheless, these jurisdictions still exist, and it is crucial to identify the most advantageous, straightforward, transparent, and cost-effective options for obtaining a banking license while taking into account the tax and income implications.

Why are offshore banks feeling the pinch? 

In recent years, there have been significant transformations in the banking licensing industry as far as offshore jurisdictions are concerned. These changes have primarily resulted from the implementation of the International Standards for the Exchange of Tax Information, the Common Reporting Standard (CRS), and the Foreign Account Tax Compliance Act (FATCA).

The banking industry faced its first major shock in 2012 when FATCA was introduced, followed by compliance with global regulatory bodies in 2013 (BEPS plan). This was also when concerns arose regarding the so-called blacklist, and tax authorities began to actively intervene. Consequently, laws had to be revised to align with global community standards. This led to almost complete de-offshorization and a loss of confidentiality in some cases.

After the turbulence subsided, giving way to customary discussions and routine work matters, not only island territories once deemed dubious have found themselves on the list of offshore zones. Nowadays, European countries also come with the benefits of low or even zero tax rates through their specialized zones and privileges offered to international companies.

In 2023, offshore jurisdictions are no longer just places of exile for escaping capital from all nations. Instead, they are prestigious countries with ideal business conditions and registration procedures for international corporations, including financial institutions that hold banking licenses.

No doubt, penalties are still in place. To obtain tax relief or prove full payment of bills, you must navigate through many layers of scrutiny and bureaucracy. This can involve being investigated by the bank’s internal security service and undergoing extensive background checks by inspection and control agencies for every single thing. Information required can range from the beneficiary’s place of residence to past employment history, income earned, previous fines, social connections, outstanding debts, and even details such as the fuel consumption of their vehicle. The process may indeed feel like a journey through the depths of hell.

Top offshore banks to secure a banking license in 2023

Although obtaining a license for financial operations in offshore, midshore, or onshore jurisdictions is challenging, it is still feasible. However, one should be well-prepared for the process and not expect it to be fast and affordable. In a prestigious country with a stable economy and fierce competition, purchasing a banking license or completing all the formalities within a month is hardly possible.

The best offshore banking licenses in Puerto Rico

Puerto Rico is a US territory that offers unique advantages for those seeking a lower tax burden. With no requirement to comply with FATCA regulations and a relatively low tax rate of just 4% on international profits, it’s no wonder that Puerto Rico is becoming an increasingly popular choice for entrepreneurs and investors. To qualify for the program, a minimum capital amount of USD 5,000,000 is required, with USD 250,000 deposited into a government account.

One of the main advantages of Puerto Rico as an offshore jurisdiction is that US citizens may file a zero IRS income tax return. Zero dividend tax rates for non-residents are another bonus. A downside of setting up a company in Puerto Rico is that Law 273 requires a banking institution to have 4 to 5 local employees, register an office, maintain unencumbered assets or financial securities permanently on hand for a value of at least USD 300,000, and provide proof of tax benefits for US citizens. Failure to comply with the legislation results in a tax increase of up to 35%.

FYI: Only companies registered under local legislation can obtain a banking license in Puerto Rico. The license is issued for 15 years with 2 subsequent renewals for 15 years each.

Offshore banking license in Vanuatu

Here are the requirements that the founder must meet to obtain a banking license in Vanuatu:

• submit proof of financial standing and deposit no less than USD 500,000 into their account 
• complete identification as a beneficiary and establish a company under the country’s laws
• hire local employees and obtain approval from the registrar.

What is more, Vanuatu allows for a Forex license and has no income tax or capital gains tax. For additional information about the country, we encourage you to consult International Wealth experts.

Panama as an offshore jurisdiction to get a banking license

In Panama, non-resident founders may obtain a license and start banking operations. Depending on the requested license type (general, international, combined, or a license for a foreign bank’s representative office), all established norms must be observed:

1. confirm the origin of assets
2. provide all previously legalized founding documents 
3. register the company in Panama and open a bank within the jurisdiction (for foreign financial corporations, this can be a subsidiary)
4. hire a local director (a legal or natural person)
5. deposit USD 3,000,000 (for an international banking company) and USD 10,000,000 (for a general license). The trigger balance is USD 250,000.
6. Obtain the license and proceed with financial transactions.

Income earned outside of Panama is not subject to tax if you hold an offshore international banking license. 

FYI: Panama has recently passed a law that permits the use of cryptocurrencies as a form of payment in the country, even for commercial purposes and loans.

Financial license in Estonia

Estonia, while not being typically categorized as a low-tax offshore jurisdiction, does provide foreign investors with favorable conditions for legitimizing their cryptocurrency businesses and acquiring an electronic money license. Both of these areas fall within the financial sector and require a special license.

In 2023, foreign business owners in Estonia may acquire any of 2 financial licenses:

1. Electronic Money Institution (EMI) license in Estonia
2. Estonia cryptocurrency exchange license.

In either scenario, companies are exempt from paying taxes on reinvested and/or undistributed profits and may conduct business across numerous countries worldwide.

Czech Republic and its potential to obtain a banking license in 2023

To engage in banking activities in the Czech Republic, it is necessary to meet all the licensing conditions for the type of services provided:

• register a payment system (payment institution) in the Czech Republic
• obtain a license for a small payment service provider in the Czech Republic
• get a license to establish an EMI (electronic money) business in the Czech Republic.

Feel free to open a bank and obtain a banking license in the Czech Republic, with a minimum capital requirement of CZK 500,000,000.

Banking license in Sierra Leone

International Wealth profs provide expert advice and assistance to help you quickly obtain a banking license in West Africa. In addition to registering financial institutions, Sierra Leone comes with non-resident account services that are compliant with established global norms and laws. 

Here’s what you shall do to obtain a banking license in Sierra Leone:

• have a local office in the country
• meet a minimum capital requirement of approximately USD 2,000,000
• prepare and submit documents to launch banking operations
• wait for a response, which takes approximately 3 months.

Offshore financial license in Saint Lucia

Saint Lucia offers offshore banking licenses with minimal requirements for capital and the applicant.

• For international banking, a Class A financial license is necessary. The company must have a minimum capital of 1 million US dollars and conduct business with international counterparts.
• Alternatively, a Class B offshore banking license permits financial operations with a restricted group of individuals who belong to the declared counterparts. The minimum capital required for such a bank is USD 250,000, and an additional USD 100,000 is necessary to prove the company is financially stable. The said USD 100,000 shall be transferred to an account with any bank. 

Alternative jurisdictions to secure a banking license in 2023

Here’s what states belong to other highly sought-after jurisdictions offering banking licenses to foreign entrepreneurs:

• Malta, where you can obtain a license for issuing e-money (EMI).
• In Lithuania, a banking license also involves dealing with electronic currency, which is rapidly replacing fiat assets in the market. International Wealth experts will assist you with obtaining a financial license for e-money in Lithuania (EMI, PI).
• The UK’s banking license is both prestigious and expensive due to the jurisdiction’s reputation and broad customer base. Obtaining a financial license or Corporate Finance License in the UK is an opportunity to enter the global market by establishing a bank in one of the world’s prestigious jurisdictions.

Comprehensive guide to offshore jurisdictions and banking licenses

To expand your business into foreign territories, you need to understand the nuances of banking licenses in different jurisdictions. 

• Andorra and Luxembourg are more inclined to grant licenses to larger banks. The cost of a general license in Luxembourg can be staggering at the same time, reaching up to USD 30,000,000.
• On the other hand, the Cayman Islands prefer to issue licenses to investment and captive banks, and the cost of a banking license can be even higher, potentially reaching up to USD 50,000,000. Mind that it may not be financially feasible for foreign founders.
• With the landscape of offshore jurisdictions constantly evolving, Dominica is no longer considered a low-tax jurisdiction. It does not register international financial business companies as of 2023. This means that entrepreneurs seeking to establish an offshore banking presence will need to explore other options.

While some believe that purchasing a pre-existing banking license in an offshore jurisdiction is simple, in reality, the procedure can be quite complex. Approval from regulatory authorities is required, and all necessary documents must be provided, just as if you were registering a new business from scratch.

Summary: best offshore jurisdictions to obtain a banking license

It is evident that despite the stringent requirements organizations such as the OECD, FATF, and EU impose, obtaining offshore banking licenses is still feasible. It is vital that you conduct a comprehensive analysis of tax regulations and established protocols before registering a bank and an offshore company. Be sure to take into account your tax and currency residency status.

The costs associated with establishing and licensing an international offshore bank may range from above USD 50,000,000 to relatively low figures (for instance, in Vanuatu). Those brave hearts who dare to undertake the process independently should be aware that the total cost could double at a minimum in this case.

We suggest seeking preliminary guidance from seasoned professionals at International Wealth. The below services are in place to make your life much easier:

• guidance on tax laws and available banking licenses in offshore jurisdictions
• expert help in selecting the most appropriate country for business registration
• setting up a settlement account.
• preparation of documents and their legalization in compliance with regulatory requirements
• office rental and unwavering support with incorporating businesses in any offshore jurisdictions with a banking license and account opening, all under one roof.