When you move abroad, chances are you will have paid little thought to how to manage your day-to-day banking affairs. Few of us pay little attention to out current account options anyway, after all, they are all much of a muchness and after you open one when you become a student, chances are you keep operating with that one until the day you die!
However, for expatriates banking basics become a little more blurred when multiple currencies come into the mix, and there are bills to pay in more than one nation. So should you close your UK bank account in favour of one abroad? Or do you need an offshore bank account if you’re going to be internationally mobile?
In this article we present the most fundamental yet simple and complete guide to offshore and onshore banking advice for expatriates.
At the bottom line expatriates four basic banking options, they can operate their main banking activity through their old account back in the UK, they can open a new account locally and use this for all their transactional activity, they can choose to bank offshore – or, they can combine the above three approaches. And the way that works best for most expatriates is to combine the use of a UK bank account for any local British bills, a new local account for day-to-day costs, and an offshore bank account for the management of the majority of their money.
Retaining a UK bank account makes significant and long-term sense for many expatriates. Unless you’re attempting to change your country of domicile and sever all ties with the UK forever, retaining a British banking presence will mean that if ever you want to repatriate, the path will be smoother for you. You may well find that you will not necessarily have to go through such rigorous client due diligence checks upon your return if you want to rent a property, raise a mortgage or even apply for a credit card for example. And in the interim, a British bank account will potentially allow you to manage any financial obligations that you still have in Britain with ease, such as paying a mortgage for example.
It does not make sense to earn your money abroad and then transfer it all back to the UK, incurring currency exchange costs and risks every time. Nor does it make sense to manage international finances through a British account or to necessarily make your financial affairs known to British authorities when you legally have no obligation to do so – i.e., when you are no longer tax resident in the UK.
Opening a local bank account in your new nation of residence may also make a lot of sense and even be a requirement. For example, your employer may demand you have such an account into which your salary can be paid each month. You may also need such an account to have utilities connected to your new property, to get a mobile phone, rent a house, raise a mortgage or purchase a car for example.
However, it is not usually in your best interests to bring all of your capital and wealth onshore to your new nation of residence and bank it locally. For a start, you don’t have to, and if you do then your capital is immediately in the tax system of the country in question and it is very difficult, if not impossible, to change your mind or reverse this situation in the future. For the vast majority of expatriates there are severe taxation disadvantages to bringing all of your money onshore into your new nation of residence. You are strongly advised to discuss your individual situation at length with a financial adviser, and to not make any decisions before you have covered everything with that adviser. Remember, why keep all your money in your new country of residence when you don’t have to, and when there are very real advantages in not doing so?
And finally, an offshore or internationally located bank account can be an incredibly secure and flexible account ideally suited to those who live an international lifestyle – i.e., expatriates. Such an account can mean an individual has maximum accessibility to their assets, and offshore banks generally provide multiple account access options – from online banking to telephone banking. What’s more, offshore banks often attempt to entice new customers by offering them handsome incentives in the form of advanced products, services and tools to allow them to make the most of their deposits.
For many expatriates there are also specific taxation advantages to be had from banking offshore, the most commonly accessible advantage is that if you are able to invest offshore, or keep some of your money offshore in a bank account, then there are usually ways to defer any tax liability until a time when it is convenient for you. This often proves to be financially beneficial to the majority of expatriates, no matter what their financial situation – i.e., you don’t have to be a multi-millionaire to take advantage of the benefits of being an expatriate.
Without tax deducted on a regular basis, your bank deposits and investments will grow a lot quicker. In addition, depending on how you structure your affairs, you may also legitimately only be required to pay tax on the growth that you bring into your new country of residence.
Remember however, that when it comes to your finances and how you manage them, the decisions you make are purely personal and based wholly and exclusively on your own personal circumstances and preferences. Therefore, if you are in any doubt about how best to proceed, seek qualified financial advice.