Strategic Considerations in Choosing an Offshore Bank License


Opening your own bank abroad is becoming increasingly difficult. Some global factors have had a negative impact on the economic situation in the world. In particular, offshore zones, which previously prevailed when choosing a place to establish a business, have suffered. Some offshore jurisdictions have not issued financial licenses for several years, although the law allows this. Among other things, there is an outflow of international clients. Some countries have completely stopped registering offshore banks. Nevertheless, other offshore companies are still popular among foreign founders wishing to obtain an offshore banking license. In this article we’ll try to get closer to international banking regulations and figure out how to make the right choice when choosing an offshore jurisdiction for banking licensing.

Our team provides fully-covering services for the establishment and licensing of commercial structures. We work with hundreds of jurisdictions worldwide, particularly, we help with firm registration offshore. Our lawyers have extensive expertise and a wealth of professional knowledge being more than enough to get offshore bank licenses.

Offshore Bank Licenses: Key Factors in License Selection

Offshore banks are legal financial structures that can be registered by companies or individuals in order to achieve financial security, stability and freedom. Today, many businesses and individuals benefit from owning such business projects. The main advantage of obtaining such official permission is unlimited financial freedom and security, the ability to provide global financial services and increase your income using the funds of such companies.

By registering this kind of organization, the investor is looking in advance for ways to return the investment through tax planning, reliable savings of funds, asset protection and other advantages that such a bank provides. In terms of banking license considerations, tax planning or asset protection that is often provided by onshore banking institutions is significantly less effective in comparison with the benefits that you receive using your own business of this kind.

Before applying for a banking license, you should research the tax rates and regulatory framework of each available jurisdiction. Consider next-mentioned license selection factors.

  1. Countries may set their own requirements for mandatory annual license renewal fees. This can be quite a significant amount, for example, from $10,000 in Belize. If your business is not designed for large transactions, and the withholding tax is charged at a high rate, then this option is not always justified.
  2. New rules for the actual presence of a business require an office, a legal address, and sometimes the management of an international bank directly offshore. This also matters, both in terms of expenses and business profitability.

Country of origin, incorporation costs and transfer pricing are of utmost importance for international bank licensing. The most optimal form of tax planning for world-class banking is the option when the source of income coincides with the place of registration. In this case, it is advantageous to accept tax residency and pay taxes in only one country.

According to offshore financial regulations, the following categories are distinguished among credit institutions operating offshore.

  1. Institutions with full authorization, also called unrestricted class C banks. They hold a permit that allows them to conduct any financial transactions in the country of their registration. In addition, they have the right to cooperate with clients outside offshore. They may also handle trust transactions.
  2. Unlimited institutions. They can only cooperate with a limited number of clients. Their list is provided in the issued permit.
  3. Managed financial institutions. They carry out their work on the basis of a bank that has a general permit. Their cooperation is formalized by a special agreement.
  4. Representative banks that simultaneously receive permission to operate offshore, as well as to establish an office in another country.
  5. A banking-type credit organization that is allowed to carry out only certain types of operations.

Operational Advantages and Challenges

Minimizing taxation by opening offshore companies is a popular way of doing business among capital holders. Offshore companies offer obvious advantages, however, and a number of disadvantages that holders of banking permission to operate may face. Let’s look at the offshore banking benefits organizations provide to entrepreneurs.

  1. Soft tax conditions for non-residents.
  2. A citizen of any country can register a company.
  3. Partnership is possible for both individuals and legal entities;
  4. Some offshore companies allow promotional offers without denomination.
  5. Lack of tax inspections.
  6. Wide range of permitted activities.
  7. Access to a wide range of financial products.
  8. Increased anonymity of personal and commercial data.
  9. High level of asset diversification.
  10. Relatively low cost of the permit with a simple renewal procedure.
  11. The absence of strict restrictive rules established in other countries.

This type of permit, as a rule, has a simplified procedure for obtaining. Here it is important to determine the key requirements for the newly created company applying for licensing as a banking business.

Now let’s look at the possible difficulties that entrepreneurs will have to face.

As before, classic offshore companies do not require accounting and financial reporting immediately after the creation of a business. However, a year ago, the British Virgin Islands, Seychelles, Panama and some other jurisdictions introduced the norm of accounting and filing financial statements into their legislation. Submission of reports to the tax authority is carried out upon request.

Another parameter operates on the same principle. Creating an offshore company in a classical jurisdiction guarantees the absence of an audit. However, countries that offer low tax rates have audit requirements.

If the creation of an offshore company takes place in a low-tax jurisdiction, then you need to check in advance whether there is a signed Agreement that allows you to avoid double payment of taxes with the country where the activity will be conducted. A foreign company often operates in other countries. This may result in taxation of her income in the territory of a particular country of which she is not a resident. At the same time, the offshore company is obliged to pay taxes in its jurisdiction.

The most important component of your banking application will be the qualifications of the people behind the project. You can assume that all applicants have capital and a professionally written business plan. The decision to grant you an offshore banking license will be made by the regulators based on the trust that the founders will conduct their business in an honest manner.

You can ask our qualified experts for help. We will become your reliable allies on the path to establishing your business project. Don’t put off making your commercial dream come true – contact us.

The article’s author is Denys Chernyshov – founder and CEO of the globally-famous organization Eternity Law International.

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