Thanks to the Panama Papers scandal, offshore banking has never seen so much press coverage as it has lately. With offshore accounts commonly used by yacht crew, we hear from Mark Upton of CrewFO to try and dispel a few myths about banking.
“Offshore banks cannot be used to hide your income from the tax authorities at home,” states Upton. “If anything, having an offshore account will put your financial life under more scrutiny than an onshore.” 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.
Image courtesy of CrewFO
However, it’s not all bad. “In reality there is nothing illegal or wrong with having an offshore account,” Upton continues. “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?’”
Upton outlines some of the key factors to look at when considering offshore banking:
- You work on a yacht, generally offshore (not in the waters of your home country) and therefore 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,” cautions Upton. According to him, 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 that are not resident anywhere)
However, there are plenty of negatives that Upton believes crew 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 – 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)
- Difficult to get a mortgage if you bank offshore
- Increased scrutiny by tax authorities
With all of the above in mind, it is important for crew to understand why they are opening an offshore account, and if this is actually suitable as there are always other options. These may include onshore currency accounts, of which there are now quite a few in the UK, normal current accounts in European countries if you qualify, or various offshore accounts for those of you with limited options.
“Before you blindly follow the advice of others have a think about your needs, what you want the account for, and your financial plans for the future as all of this matters,” adds Upton. “Those of you from Australia, South Africa, and New Zealand 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.
“You cannot avoid tax or your obligations and 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.”
Find out more information from CrewFO on Offshore Banking here.