Offshore bank account: What it is and how to open one

Key takeaways:

• Offshore bank accounts let you hold funds in foreign currencies, reduce FX costs, and manage international payments more easily 

• They can be useful if you work with overseas customers or suppliers, but they often come with high fees, lengthy approval times, and heavy compliance requirements.

• Modern fintech platforms like Airwallex give you many of the same advantages, including multi-currency accounts, local payment rails, and better FX rates, without the high fees, lengthy approvals, and compliance paperwork of setting up accounts in other countries.

Managing money across borders isn’t easy. Between currency conversions, international transfer fees, and local banking rules, things can get complicated fast. That’s why many businesses use offshore bank accounts as a way to hold foreign currencies, simplify payments, and stay in control as they expand globally.

In this guide, you’ll learn what an offshore bank account is, when it makes sense to use one, what the pros and cons look like in real life, and what alternatives are available if you want a simpler way to manage international money.

What is an offshore bank account?

An offshore bank account is simply a bank account you open in a country outside your home market (somewhere you don’t live or run your main business).

Functionally, an offshore bank account works like any regular account. You can receive payments, send money, and hold balances. The main difference is that you’re banking in a foreign jurisdiction, often to manage international income or expenses more easily.

Businesses usually open offshore accounts to hold foreign currencies, pay overseas suppliers, or collect payments from international customers. Some also use them when expanding into new markets, especially before setting up a local entity.

You’ll often find offshore accounts in countries known for stable banking systems and strong financial regulations, including Singapore, Switzerland, Luxembourg, Jersey, or the Cayman Islands. That said, offshore banking isn’t limited to these locations. Many businesses also open accounts in whichever markets they operate in most, simply to make their day-to-day payments smoother.

Why you might use an offshore account

Offshore banking often sounds complicated, but for many businesses, it starts with simple, practical needs. If you work across borders, you may run into situations where a local account just doesn’t cut it.

Here are four common reasons businesses open offshore accounts:

1. Support international expansion

As you enter new markets, offshore accounts let you manage your regional revenue and expenses without setting up a full legal entity right away. It’s often a first step before committing to a larger local presence.

2. Collect international payments 

With an offshore account, customers can pay you in their local currency using their local payment methods, and you can receive the money through domestic systems like ACH in the US or Bacs in the UK. 

3. Pay overseas suppliers or contractors

When you pay suppliers from a local account in their country, payments usually arrive faster and with fewer fees. You also avoid relying on international wire transfers, which can be slow and unpredictable.

4. Hold foreign currencies

Instead of converting money every time you receive or send a payment, you can keep funds in the original currency and convert later when rates look better. This gives you more control over cash flow and FX costs.

Advantages and disadvantages of offshore banking

Offshore accounts can offer some useful benefits, but they also come with costs and complexities.

Here’s a quick overview of the main pros and cons. We’ll break down each point in more detail below so you can see what really matters for your business.

Advantages of offshore banking

Once you have an offshore account, it can give you more control over your money and how you manage international transactions. Here’s what it can do for you:

1. Hold and manage multiple currencies

Instead of converting every payment immediately, you can hold funds in the currency you received them in. For example, if you get paid in USD but operate primarily in SGD, you can wait for a favourable exchange rate before converting.

Platforms like Airwallex, let you set rate alerts so you know the best time to convert (without manually checking the FX rate everyday).

2. Reduce FX costs

Holding and paying out money in the same currency helps you avoid repeated conversions and high bank mark-ups.

For instance, if you receive payments in USD, you can use that USD to pay suppliers, cover ad spend on Google or Facebook, or pay SaaS subscriptions. Otherwise, you’d have to convert the money to SGD first, then back to USD when making these payments, which adds unnecessary costs and delays.

3. Collect international payments efficiently

As mentioned earlier, one common reason to open an offshore account is to make it easier to receive payments from overseas customers. Holding a local account in key markets lets customers pay in their own currency using local payment methods, which can speed up payments and reduce fees.

This usually makes sense if you regularly receive payments in the same foreign currency or from the same market. If the countries or currencies you receive payments in change frequently, an offshore account may not justify the setup and maintenance required.

4. Pay overseas suppliers efficiently

When you pay suppliers from a local account in their country, payments usually arrive faster and with fewer fees. This is especially important for eCommerce businesses that operate on thin margins or rely on seasonal products – like Christmas decorations or limited-time merchandise.

You only have a short window to sell these items, so paying suppliers quickly helps ensure your goods arrive on time. By using local payment methods, you also reduce extra costs and avoid delays caused by international transfers.

Disadvantages of offshore banking

Offshore accounts can give you more control over international money management, but they’re not without challenges. Here’s what to watch out for:

1. Higher setup and maintenance costs

Many offshore banks require a significant opening deposit or minimum balance. On top of that, monthly maintenance fees, transfer charges, and withdrawals all add up. For small businesses or those with irregular international payments, these costs might outweigh the benefits.

2. Strict compliance and documentation

Offshore banks perform detailed Know Your Customer (KYC) and Anti-Money Laundering (AML) checks, and they’re usually stricter when reviewing applications from companies based overseas.

In fact, if you’re a Singapore resident or run a Singapore-based business, your application will still fall under Monetary Authority of Singapore (MAS) regulations. That means banks may ask for extra documentation to ensure compliance with Singapore’s tax and anti-money laundering rules.

3. Limited deposit protection

Most offshore accounts aren’t covered by local deposit insurance schemes. If something happens to the bank, your funds may not be protected the way they would be at a domestic bank.

5. Extra tax reporting obligations

Having an offshore account doesn’t exempt you from Singapore taxes. In fact, you usually face additional reporting requirements under Singapore law and the Common Reporting Standard (CRS). You must declare any interest, income, and balances from your offshore accounts to the Inland Revenue Authority of Singapore (IRAS), or risk penalties for non-compliance.

How to open an offshore bank account

Opening an offshore account isn’t wildly different from opening a domestic one, but it usually comes with stricter checks, more paperwork, and longer approval times. Here’s what the process typically looks like:

Step 1: Choose your bank and jurisdiction

Pick a bank in the country or region that makes sense for your business – either where most of your customers or suppliers are, or where you want to hold a specific currency. Each bank has its own rules, so research fees, minimum deposits, and account options before you start.

Step 2: Submit your application

You’ll fill out an application with basic details about your business, why you’re opening the account, and how you plan to use it. Some banks may also ask about expected transaction volumes and the source of your funds.

Step 3: Provide required documentation

Expect to submit proof of identity, business registration documents, and proof of address. Some banks may also require notarised copies. If you’re a Singapore-based business, banks may also request additional documents such as declarations of tax residency or proof of business activities in Singapore, to comply with MAS regulations.

Step 4: Pass compliance checks

Banks will perform thorough Know Your Customer (KYC) and Anti-money Laundering (AML) checks to prevent fraud and money laundering. They’ll review your business activities, the source of funds, expected transaction volumes, and even the backgrounds of directors and shareholders.

To speed things up, prepare your documents in advance and provide clear explanations of your business operations.

Step 5: Pay your opening deposit

Many offshore accounts come with a minimum deposit or balance requirement, which ranges from a few thousand dollars to much more depending on the bank and jurisdiction.

Once you're approved, you'll usually get access to online banking, a multi-currency account, and sometimes a debit card. Keep in mind that approvals can take weeks or even months, so it’s not a quick process.

Which countries are best for opening an offshore bank account?

Offshore accounts can offer different benefits depending on the country you choose. Here’s a quick overview of some key jurisdictions and what they’re best known for:

Below, we’ll go into the specifics of each factor, including real examples, typical benefits, and why a particular country might suit your business.

1. Regulatory friendliness & ease of account opening

Some jurisdictions are simply easier to open accounts in, especially for non-resident companies or foreign businesses:

• Belize: Known for low capital requirements, remote-friendly onboarding, and relatively streamlined KYC for non‑residents. It’s often used by consultants, small businesses, or startups because you don’t need huge deposits to begin.

• Mauritius: Recognised for being business‑friendly, with international banks that allow non‑residents to open accounts with reasonable documentation. Remote banking solutions and less red tape make it attractive for entrepreneurs and SMEs.

2. Banking infrastructure & international payment support

If your priority is strong multi‑currency services, digital banking tools, and robust infrastructure, look for countries with advanced financial ecosystems:

• Hong Kong: A strong choice for international banking infrastructure, especially if you operate in or near Asian markets. It offers wide support for major currencies and digital access, though political and regulatory changes require additional planning.

• United Kingdom (London): Offers excellent multi-currency support, advanced online banking tools, and integration with global payment systems. Ideal for businesses with international suppliers or clients in Europe.

3. Stability, reputation, and investor protections

Businesses choose these countries not just for day-to-day banking, but to protect their funds, benefit from strong legal systems, and ensure long-term financial stability:

• Switzerland: Traditionally a gold‑standard jurisdiction with a long history of stable regulation and strong asset protection. Even with modern transparency laws, Swiss banks remain attractive for businesses that value security and established banking tradition.

• Luxembourg: A well‑regulated EU financial hub with strong protections and access to European markets, especially for holding companies or wealth planning.

4. Tax‑friendly or strategic business hubs

These countries are popular because of tax structures or geographic advantages – but you’ll still need to weigh regulatory and operational realities:

• Cayman Islands: No direct taxes on income or capital gains for non‑residents¹, making it appealing for corporate holding structures and global businesses.

• United Arab Emirates (UAE): Particularly Dubai and Abu Dhabi, which offer zero personal income tax² and strong infrastructure for global traders and service businesses.

Make, manage, and move money globally with Airwallex

Offshore bank accounts help you expand internationally, reduce FX costs, and hold money in multiple currencies. But between the paperwork, fees, and long approval times, they can end up creating more work than they save.

That's where Airwallex comes in. Our platform offers the same advantages as an offshore account, without the red tape. You can open local currency accounts with bank details across multiple countries and regions in minutes. Once that’s done, you can collect and hold funds in 20+ currencies, and pay global suppliers using fast, low-cost transfers that move over local payment rails, all from one platform.

Whether you're scaling into new markets, managing overseas teams, or supporting international customers, Airwallex lets you operate like a local business from anywhere in the world, without setting up a single foreign entity.

Frequently asked questions (FAQs)

What's the minimum deposit for an offshore account?

The minimum deposit for an offshore account usually ranges from $1,000 to $10,000 or more, depending on the bank and country. Some smaller or more accessible banks may allow lower amounts, while premium banks or traditional hubs like Switzerland often require higher opening balances.

Is offshore banking legal?

Yes, offshore banking is legal in most countries. Businesses, expats, and international investors commonly use offshore accounts to hold funds, make payments, and manage multiple currencies. The key is to use these accounts transparently and comply with tax reporting and local regulations in your home country to avoid penalties.

How does an offshore account affect my taxes?

An offshore account doesn’t exempt you from taxes. You still need to report any interest, income, or balances held offshore to your local tax authority, such as the IRAS in Singapore. Failing to declare these can result in penalties, so it’s important to stay compliant and keep accurate records of all offshore transactions.

How do I choose the right offshore bank for my needs?

To choose the right offshore bank, start by identifying your specific business needs. Consider where you operate, which currencies you handle, account fees, digital banking capabilities, and how easy it is to manage the account remotely. Pick a bank that fits your actual day-to-day operations so that you can manage your international payments more easily.

Can businesses open offshore bank accounts?

Yes, businesses can open offshore bank accounts to manage international operations. These accounts let you hold foreign currencies, pay overseas suppliers, and collect payments from customers in other countries. Just keep in mind that banks will require documentation about your company and its activities, and you still need to comply with local tax and reporting rules.

Sources:

1. https://www.investopedia.com/ask/answers/100215/why-cayman-islands-considered-tax-haven.asp

2. https://u.ae/en/information-and-services/finance-and-investment/taxation

This publication does not constitute legal, tax, or professional advice from Airwallex, nor does it substitute seeking such advice, and makes no express or implied representations / warranties / guarantees regarding content accuracy, completeness, or currency. If you'd like to request an update, contact us at [[email protected]]. Airwallex (Singapore) Pte. Ltd. (201626561Z) is licensed as a Major Payment Institution and regulated by the Monetary Authority of Singapore.