Offshore accounts 2023: guide to opening an offshore business accounts

What is an offshore account?

Offshore bank accounts are specialised accounts opened in foreign banks or financial institutions. There are two types of offshore accounts: personal offshore accounts and business offshore accounts. 

Personal offshore accounts are accounts opened in countries or regions outside of one's country of residence, and are solely for personal use. On the other hand, business offshore accounts are accounts opened in regions outside of the company's registered location.

Offshore accounts offer various benefits such as tax advantages, privacy protection, and capital mobility. However, these accounts must still comply with relevant laws and regulations designed to combat money laundering and tax evasion. This article will give you a better understanding of offshore accounts by introducing and analysing their advantages, target users, and the steps to open such accounts.

Offshore account: services, features, and comparison*

Banking services for offshore accounts in Hong Kong

Local banks in Hong Kong offer offshore account services. As a valued customer, you can open an offshore account at these banks. 

Based on the bank's specific requirements, some provide the flexibility to open an offshore account either online, through their International Banking Centre (IBC), or by visiting a branch.

Banking services for offshore accounts in UK

In addition to overseas branches of local banks, non-UK residents can also open accounts with local traditional banks. Most international bank accounts have minimal requirements, and customers are usually asked to  provide copies of their passport (verified by a professional), proof of address, proof of income, and other necessary documents, and deposit the funds within the specified period.

Banking services for offshore accounts in the US

You can open an US offshore account with the US branches of your local banks. Customers can either schedule a visit to the US branch with the assistance of Hong Kong staff or apply for a US bank account online. It's worth noting that local banks also offer offshore account opening services, albeit with specific minimum requirements.

Banking services for offshore accounts in AU

Certain Australian banks accept online applications of offshore account opening. Customers will need to provide their passport details, along with information like Taxpayer Identification Numbers (TIN), an Australian address, and phone number. It is also mandatory for the customer to visit Australia within one year. Nevertheless, there are some Australian banks that do not facilitate online account opening applications. In such cases, customers are required to physically visit a branch upon arrival in Australia in order to initiate the account opening process.

Please note that the offshore account services mentioned above are only applicable to personal offshore accounts. For details regarding business offshore accounts, please refer to the information below.

What are the differences between offshore bank accounts and local bank accounts?

Key features of offshore bank accounts

The key feature of offshore bank accounts is that in certain instances depending on the jurisdiction, there is the ability to transfer funds overseas without being constrained by regulations and restrictions imposed by the home country (such as foreign exchange controls). Moreover, once funds are transferred to an offshore account, whether for daily expenses, savings, or investments, these accounts can mitigate currency conversion losses and minimise transaction fees.

Key features of local banks accounts

Local bank accounts offer significant advantages in terms of convenience. Customers can directly approach staff members to address any queries or concerns. Moreover, many prominent local banks provide services for foreign currency accounts. This enables customers to carry out transactions and transfer funds through foreign currency accounts, but it is crucial to consider the supported currencies and associated transaction fees.

Benefits of opening an offshore bank account

Speed up international trades

When conducting international business with overseas suppliers, customers, and employees, transferring funds to foreign locations often takes half a day or more. This delay can cause considerable inconvenience. However, by utilising local bank transfers, funds can be promptly transferred to the accounts of suppliers and employees.

Lower the expenses associated with international trade

With international remittance, both the banks of the payee and the payer impose fees. For instance, wire transfer to the UK or the US carry a transfer fee of tens of dollars, whereas local bank transfers typically do not incur any transaction fees.

Diversified financial services

Companies with international operations may benefit from a range of financial services such as foreign currency hedging, investments, or even borrowing in foreign currency. To access these services, it is often advantageous to have an offshore bank account.

How do I open an offshore bank account?

Companies have the options to open offshore bank accounts directly with overseas banks or through local banks that have offshore branches. 

Requirements and procedures for opening an offshore account with the assistance of local banks

While it is relatively convenient to open an account through local banks, not all banks offer offshore account services to corporate clients. Additionally, customers should take into account whether the bank's branch network covers their overseas business operations.

Although the bank may provide assistance in opening offshore bank accounts, companies are still obliged to submit the necessary documents to comply with the local government and the bank's requirements for account opening.

Requirements and procedures for setting up an offshore account independently 

In general, obtaining an offshore account necessitates applying under the name of a locally registered or offshore company (such as British Virgin Islands, Cayman Islands, Bahamas registered companies, etc.).

To open a corporate bank account in the UK, generally, two conditions must be fulfilled:

1. The applicant must either be a registered UK company or an offshore company

2. The applicant must be a local tax resident, with the exception of the Channel Islands and Isle of Man

Applicants have the option to either visit local branches or get in touch with the bank's local corporate banking division. Some banks have introduced online account opening services in the aftermath of the pandemic. To proceed with the application, the following information and documents are required:

Company information:

• Company address, including postal code

• Contact information (landline telephone number, mobile number, email address)

• Companies House registration number (CRN) for limited companies and partnerships)

• Estimated annual turnover

Personal details of the shareholders and directors:

• Full name and date of birth

• Phone number and email address

• Current residential address (if residing at the current address for less than 3 years, previous addresses must be provided)

• Account number (for HSBC customers)

• Credit card and debit card details

Can overseas virtual bank accounts replace traditional overseas bank accounts?

The definition of virtual banks and its features

Virtual banks, unlike traditional banks, have no physical branches. They rely on the internet to provide a range of financial services such as account opening, transfers, deposits, withdrawals, and bill payments.  This means virtual banks can operate round the clock, offering lower fees and higher deposit rates than traditional banks. Additionally, virtual banks are still regulated by the local government and therefore enjoy the same deposit insurance protection as traditional banks.

Overseas virtual bank accounts

Similar to traditional banks, most virtual banks only accept applications from locally registered companies. Almost all virtual banks require the applicant or the significant controller of the company to be a local or tax resident, which may not be suitable for businesses and residents in Hong Kong.

Remote offshore account opening, transfers and deposit fees for overseas virtual banks

Virtual banks offer remote account opening services to cater to individuals who cannot physically visit a local branch. While the procedures may differ slightly across virtual banks, the general steps and required documents are as follows:

1. Begin by selecting the option to open a business account on the virtual bank's website.

2. Fill out a brief online application form, including the applicant's full name, address, and date of birth.

3. Provide company and business details, such as the registered name, registration number, and trade name (if applicable) of the company

4. Some virtual banks may request submission of the company's registration certificate or other registration documents.

5. Provide the names, addresses, dates of birth, and address proof for shareholders and directors.

6. Wait for the bank to process the application.

Overseas virtual banks offer a range of account tiers with varying monthly fees. The basic company account is usually free of charge, and supports local real-time transfers and cash deposits at ATMs. However, for international SWIFT transfers, a transaction fee of less than 1% is usually applicable across all corporate account tiers.

What are the considerations before opening an offshore account for your business?

It is important to consider the following factors when opening an offshore account for your business.

Before opening an account, it is crucial to have a clear understanding of your specific needs. For instance, consider whether you require the ability to make international payments to suppliers or employees. By doing so, you can streamline the process and avoid unnecessary fees associated with remittance.

Next, make sure you are eligible by reviewing the account opening requirements, along with the legal and tax regulations of the target country or region. Some banks only accept applications from local tax residents and registered companies so those might have to be ruled out.

After that, it is advisable to assess the level of legal protection and asset security provided in the local jurisdiction, including the bank's reputation, geopolitical situation, and any deposit protection limitations.

Lastly, consider the financial and time costs associated with opening an offshore account. Certain banks may have intricate account opening processes, or even require applicants to visit in person, or impose service fees and minimum deposit requirements. Applicants should weigh the costs against the potential business value.

Airwallex: the innovative fintech that offers alternative solutions that replace functionalities of offshore accounts

As previously mentioned, many offshore bank accounts exclusively allow registrations from local registered companies or local tax residents, posing challenges for foreign companies seeking to open an account. For small and medium-sized enterprises, registering a company in another country or region can be a complex process, requiring additional resources, manpower, and tax-related concerns.

Features and security of Airwallex

In comparison, Airwallex Global Accounts serves as a viable alternative to offshore bank accounts. 

With Airwallex, you can effortlessly open accounts in multiple currencies online, eliminating the need for local company registration or cumbersome on-site procedures. Enjoy the convenience of corporate accounts for seamless transfers, international transactions, and efficient management of global funds. Airwallex has implemented commercially reasonable administrative and technical measures to protect the funds collected for or received from customers in connection with our services.

The procedures and benefits of opening an Airwallex Global Account

Airwallex Global Accounts are available in more than 60 countries, allowing you to operate in your registered company's local currency. The Global Accounts come with local bank and branch codes and dedicated account numbers, allowing for local receipt in over 180 countries and transfers to over 150 countries. Funds can be credited as fast as the same day.

Opening a global account with Airwallex is not only convenient but also incredibly fast. For instance, you can open an Australian dollar account in Australia online, with payments prompt recorded and credited within the same day or the following day, all without transaction limits. 

With the continuous advancement of financial technology, more options are available for both individual and corporate customers. This transformative trend is reshaping the market landscape of traditional offshore accounts, and offering more convenient and comprehensive financial services. 

*Information as of November 10, 2023. Please refer to the official websites of banks and payment platforms for the most up-to-date information.