Offshore banking has never seen so much press coverage as it has lately.
With this in mind it seems like an appropriate time to try and dispel a few myths and do something to try and help the wider Superyacht crew community understand a few things about banking.
*FACT: Offshore banks CANNOT be used to hide your income from the tax authorities at home.
If anything, having an offshore account will put your financial life under more scrutiny. This is mainly due to a thing called the offshore disclosure facility which requires all offshore banks to disclose the dealings of their clients to the relevant authorities, just in case you are trying to hide something.
Non-disclosure of income is an offence in most countries and you can face heavy fines and/ or time in prison as a result. Our advice, don’t even try it. Pay what you owe. We have discussed this before in other articles and so won’t go into it here.
It is not all bad though. In reality there is nothing illegal or wrong with having an offshore account. If it suits your needs and you are happy with the pros and cons then go for it. The key question here though is does it suit your needs?
Let’s look at your needs.
- If you work on a Yacht, generally offshore (not in the waters of your home country) you may not be required to pay income tax (all countries are different so please check)
- You are paid in a currency that is different from your home currency and therefore need a foreign currency account.
- You cannot open a foreign currency account at home or in any other country due to residential status (or lack thereof)
If ALL of the above apply to you then an offshore account may be appropriate.
Certain offshore accounts are useful for you purely due to some the following reasons;
- Multi currency accounts.
- Foreign currency debit/ credit cards
- Good internet banking/ wire transfer facilities
- Easy to use
- Some have Yacht crew friendly ID validation (useful for those of you who are not resident anywhere)
However, there are plenty of negatives you should be aware of too;
- You cannot hide your money here. Do not believe anyone who tells you otherwise.
- Generally a high minimum balance is required.
- Fees. Everything costs money. Offshore banks are generally more expensive than others so review card fees, exchange rates, and annual fees.
- No interest.
- Offshore banks are of no help to your credit rating
- No borrowing (generally speaking)
- More difficult to get a mortgage if you bank offshore
- Increased scrutiny by tax authorities (therefore it is essential to be squeaky clean when it comes to tax and income declaration)
With all of the above in mind it is important for you to understand why you are opening an offshore account and if this is actually suitable for you.
It is always important to remember there are options. These may include onshore currency accounts of which there are now quite a few in the UK (and Australia for example) Normal current accounts in European countries if you qualify, or various offshore accounts for those of you with limited options.
So, What next?
Before you blindly follow the advice of others have a think about your needs. What do you want the account for? What are your financial plans for the future as all of this matters.
Most crew (like the rest of us) stick with the first bank account they open as we are creatures of habit, therefore make sure the one you pick is right for you.
Those of you from AUS, SA, and NZ will probably be thinking you don’t have a choice due to the fact that your home country is a different currency to your salary. Think again, there are plenty of options onshore and it is important to know these before you make your decisions.
Be wary of any companies or “independent financial advisors” who only present one option when it comes to banking. If there are no choices on offer you have to question whether this is either independent or indeed advice. The people who present you with one option are generally only doing this as it benefits them, rather than you.
Ask questions, find out alternatives and don’t settle for the first option. The person who can present you with five choices and outline the pros and cons of all of them without trying to steer your decision has obviously spent some time researching the subject and is actually independent.
To conclude, you may work on a Yacht and enjoy many benefits of doing so but, like it or not you still live in the real world. You cannot avoid tax or your obligations. So ask yourself this question with your future in mind, “Is an offshore bank account right for me?” If it is go for it, but make sure you are aware of the alternatives before you apply.
If it isn’t, or you are unsure have a look here and then get in touch with us so we can give you some advice.
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