Guide to Offshore and Foreign Bank Accounts
Foreign accounts are subject to strict reporting requirements of FATCA and other Treasury and IRS rules. Failure to follow the law in the regard can result in harsh civil and criminal penalties. Nonetheless there are legitimate uses for these accounts as long as the law is complied with.
The IRSBe 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), ifThe 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, andThe value of the account exceeds $10,000 at any time during the calendar year.
Legitimate UsesWhile 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.
Opening a Foreign Bank AccountUnless 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.
Choosing a Foreign BankAs 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.