Best Offshore Jurisdictions to Get Your Banking License in 2022

It is getting increasingly trickier to open your own bank abroad, and the US citizens have it the hardest.  A combination of factors, including COVID-19,  FATCA, geopolitical disputes over the war in Ukraine, accelerating inflation, global deoffshorization, constant and pretty tight IRS control, and new OECD regulations resulted in a perfect storm. This became a real challenge for way too many.

You may have heard that Belize hasn’t issued a singe license of the kind for several years already, even though it is legally possible. International customers migrate from Luxembourg and the Cayman Islands to countries with more favorable licensing environments. Dominica does not incorporate offshore banks any longer. Puerto Rico, and Panama, and a number of other offshore jurisdictions, on the other hand, still enjoy great popularity with those foreign incorporators that wish to cut their taxes and get an offshore banking  license.

It is not going as good with offshore bank licensing today as it was before. It was possible to get your license in dozens of them earlier, and in 2022  this number dramatically reduced to its minimum. What is important here is that they still exist. You need to just find out where you can get your license the easiest, the simplest, and the most affordable way. You certainly need to know as well how it will impact both your income and taxes.

Why are Offshore Zones Already Overcrowded with Banks? 

Bank licensing has gone through major transformations lately. The changes were driven by International regulations on tax information exchange, CRS Standards and FATCA. 

International banks took a first hit in 2012, right after FATCA was put into effect. In 2013 BEPS project subjected them to the influence of global regulatory authorities. It was around the same time that the so-called “black list” stirred up a storm in the industry, and the fact that tax authorities did their bit in this game added fuel to the fire. Laws were amended to meet international industry standards as a result. This brought about virtually total deoffshorization and resulted in lack of confidentiality (that was nominal in some cases). 

The dust finally settled, and the heated argument turned into routine everyday discussions. It was then that not only insular territories which were recognized as rogue, but also some European countries received their offshore status. They are now offering a chance to use not just low, but in some cases even zero tax rates. Each of these countries provides a separate territory and grants special privileges to international companies. 

Offshore jurisdictions in 2022 are nothing like the exclusion zones they were before, that sucked capital out of the whole world. They are more like successful enough countries with the best business and incorporation environment one can find globally. This is also true for financial corporations with a banking license.

Life is life, and even offshore residents pay penalties. To enjoy their tax benefits or to confirm that their accounts have been paid in full, offshore companies will have to go through their “nine circles of hell”. Not only will they be subjected to in-house security checks, but also their beneficial owners will be virtually “scanned” by various inspection authorities to audit the compliance with each and every one of the legislative requirements. They will study each aspect of the beneficial owner’s life with a magnifying glass to verify their places of residence and military service, their income, fines and penalties paid, their friends, debts, and even mileage on their cars.

Best offshore jurisdictions to get your banking license in 2022

This may look like a daunting challenge, but getting an offshore, midshore, or onshore banking license is still a real thing. This certainly requires a lot of thorough preparation and may be about sweat, blood, and tears, so you should really not pin your hopes on a “quick and cheap” registration. There is no way you can buy a banking license or have all your documents processed within 1 month in a high-profile country with a stable economy and a sophisticated market. 

Best offshore banking licenses in Puerto Rico

Puerto-Rico is one of the US territories where FATCA is not applicable and profit tax for international companies makes 4% only. Minimum capital requirement is USD 5,000,000, and a part of this amount shall be transferred to the central government account.

The main advantage of Puerto-Rico as an offshore territory is that the US citizens have the right to submit zero income tax returns to IRS. Besides, zero tax rates may be applied in case of dividends paid to non-residents. The most obvious flaw here is that bank founders shall provide jobs to 4 to 5 local bank specialists, as Law 273 stipulates. They shall also incorporate a local office and have their tax privileges confirmed (in case of US citizens). Where the founders fail to meet these legislative requirements, the tax will increase to 35%. 

Your offshore banking license in Vanuatu

Here’s what you shall do if you are a potential bank founder who wishes to get their banking license in Vanuatu, known as one of the best offshore jurisdictions in the world:

•  prove your financial status and deposit your account with at least USD 500,000
• be identified as a beneficial owner
•  incorporate your company under the local laws currently in force
• hire locals to work for you
• get an approval from the registrar.

Vanuatu has some other benefits as well. Forex licensing is accepted here, while you don’t have to pay any income tax or capital gains tax. International Wealth experts will gladly provide you with any further information on the advantages of Vanuatu.

Getting an offshore banking license in Panama

Even non-resident founders can get their banking licenses and start a banking business in Panama. The main requirement is to comply with the local laws and regulations. Here’s what you shall do:

• prove the origin of your assets
• submit all the constitutional documents (the latter shall be duly legalized)
• incorporate your company in Panama and open a bank in the same jurisdiction (in case of foreign financial corporations, it may be a subsidiary).
• hire a local director (either a legal or a natural person).
• deposit USD 3 mln (in case of an international banking company) and USD 10 mln (general license cost). The minimum balance shall make up USD 250,000
• get a license and set to work.

Any income originating outside of Panama (in case of an international offshore banking license) is tax-exempt.

Background information on offshore jurisdictions and banking licenses

Purchasing an offshore turnkey license is not as easy as it may seem to some business people. You need to get a corresponding approval from the regulatory authorities and submit all the necessary documents, as is the case with company incorporation from scratch.

Summary of the best offshore jurisdictions to get your banking license in

The above information suggests that offshore banking licenses are still very much “alive”, even though OECD and EU impose multiple bans and make exaggerated claims on the subject. It is quite wise to carefully study all the requirements for potential applicants and analyze the tax systems of the countries, including where these may relate to the applicant’s permanent residency. Your choice, in this case, will be much more reasonable and well-grounded.

Please note that incorporation and licensing costs in case of an international offshore bank may either amount up to USD 50 mln or be comparatively low (like in Vanuatu). Believe it or not, If you try to do it all by yourself, your expenses will at least double.

We strongly encourage you to turn to International Wealth experts and lawyers for an initial consultation. Here’s what they will do for you:

• provide you with detailed information and analysis of tax systems and available banking licenses in various offshore jurisdictions
• help you to pick up a country to register your business in
• open a settlement account for you;
• draft your documents and secure certification and  legalization thereof under the corresponding legal requirements
• rent an office for you and assist you with “turnkey” business incorporation in any offshore jurisdiction, with a banking license and an opened account.

We are ready to answer any of your questions anytime. Please note that International Wealth experts will assist you on a fee basis. You may pay for the company’s services in any hard currency, including, inter alia, Bitcoin.