Overview of the offshore banking license

Overview of the offshore banking license

Seeking to set up a foreign institution in the sphere of finances that focuses on servicing clients-nonresidents or just find a haven for your wealth, you will need to obtain an appropriate authorization. Read on to discover key offshore banking license peculiarities and powers a holder gets after becoming authorized.

Key peculiarities of a license

According to the legislation, each finance-related institution in the low or no-tax, i.e. offshore areas should apply for an authorization. It is a permit granted by the appropriate agency that gives authorization to perform certain bank activities to clients who reside across the border. Under the applicable law, this legal right is issued by the state in which the institution is running, which means that its owner is not obliged to be a citizen of that country. Generally, these states feature attractive low taxation rates, meaning bank clients can greatly reduce their bills for taxes by using services there, rather than in the country where they reside. Nevertheless, many countries, including the USA, ask individuals who reside there to pay taxes on their foreign holdings, if their existence is proven.

The majority of institutions outside of onshore zones are not committed to run typical banking operations. As an option, investors aim to open a bank that operates exclusively to deal with the funds of a company they have registered in the country they reside. This helps them to reduce a tax rate and secure their privacy.

Overview of the offshore banking license types

Under the law, banks can obtain one of three classes of official approvals: “Class A”, or Limited which is divided into two another types: “B1” or “B2”.

  • The first type of license (“A”) is issued to well-established large banks operating cross-border. It empowers the provision of all services including cross-border offerings. Such an authorization is applied mainly for carrying out commercial activities outside the “onshore” zones. But the activities are bounded to servicing only nonresidents. For instance, a bank authorized in Cyprus could service clientele from any country other than Cyprus.
  • A class “Limited” is granted to small banks that have recently started their operation. This type of authorization regulates a clearly defined scope of activities of the institution, as defined in its terms. Mostly, banks with this approval have no right to take public contributions and can carry out solely those operations provided for in the terms.

Tax considerations

Singapore, Switzerland, Taiwan, Luxembourg, Hong Kong (as well as number of other states) have a lot in common: they are fairly considered the best offshore tax havens. Nevertheless, one of the most significant differences between them is distinctive approaches to taxing. Those jurisdictions that feature a strict legal framework will interact with the tax offices operating in the territory where license holders live. Additionally, some countries set low rates or even no interaction at all.

Practically all offshore zones will demand a yearly fee and a contribution from investors side in favor of an organization by buying its stock. The overall sums necessary may significantly differ, however the contributed capital almost always is much bigger than the yearly fee that is taken by the authorities. It guarantees that the business will stay “safe and sound”.

Usually, offshore banks ensure easy reach to the most beneficial countries in terms of tax minimization. In addition, some of their offerings may be carried out on an exclusive basis and one more advantage is the possibility of placing funds on deposits at higher rates. Other benefits include protection from financial break-through attempts, goodwill of legal tax heavens and minimum bureaucratic requirements: low price to open a bank, no need in a plethora of permits.

To sum up, features of offshore business greatly gain the advantage over the features of funds or other financial vehicles. What is more, the owners of licensed banking institutions can use many investment instruments, once accessible only to banks and benefit from lowered foreign exchange fees. We can assist you with obtaining an appropriate authorization or can offer you to consider offshore banking licenses for sale. Please contact our lawyers if you are looking for an expert assistance in obtaining a license.

Please contact us to get more information.

You can also see other offers in category Cryptocoins and licensing of cryptocurrency operations, ready-made companiesbanks for sale and licenses for sale.

Tags
Prev Next