An offshore bank account refers to an account in a low or no tax haven. A foreign account is any bank account outside the USA. US citizens are not prohibited from owning foreign and offshore accounts.
1
The IRS
Be aware that offshore and foreign bank accounts can never be used for tax avoidance. According to the IRS:
If you own or have authority over a foreign financial account, including a bank account, brokerage account, mutual fund, unit trust, or other types of financial accounts, then you may be required to report the account yearly to the Internal Revenue Service. Under the Bank Secrecy Act, each United States person must file a Report of Foreign Bank and Financial Accounts (FBAR), if
The person has financial interest in, signature authority (or other authority that is comparable to signature authority) over one or more accounts in a foreign country, and
The value of the account exceeds $10,000 at any time during the calendar year.
2
Legitimate Uses
While some experts claim a US citizen never should need a foreign account this is not true. Foreign and offshore accounts have many legitimate uses including:
1. Paying local expenses for US residents overseas;
2. Asset protection;
3. Conducting business abroad;
4. Certain types of foreign investments.
An attorney, especially one that is a part of a transnational law firm, should be consulted in all cases except no. 1 above before opening the foreign or offshore or account and to assist as needed in opening the account.
3
Opening a Foreign Bank Account
Unless you are resident in a foreign country, opening a foreign bank account can be difficult. Banks that solicit accounts over the Internet are often unlicensed and should be avoided. In other words, you may have great difficulty getting your funds back. Use of an attorney is recommended.
4
Choosing a Foreign Bank
As depositors at the Stanford Bank in Antigua learned, foreign banks, even ones with ties to the USA can be risky. The best foreign banks are those with affiliations with to AAA rated banks like Royal Bank of Canada, Royal Bank of Scotland, or Wespac to name a few.
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