Investors looking for a high-interest savings account will have to open one offshore. Low interest rates provide little incentive for you to place your money in a U.S. bank, and offshore savings accounts also have a privacy level not found with U.S. banks. However, U.S. citizens are required to report and pay income tax on all of their income, so the high interest your offshore savings account earns must be enough to offset any additional taxes.
Go online and search for foreign countries that offer individuals personal savings accounts. Verify that U.S. citizens are allowed to open a savings account in the countries you select. For example, U.S. citizens can open a savings account in Switzerland, but not in neighboring Liechtenstein. Consider the privacy level you want your account to have. All offshore accounts provide you with a certain level of privacy, but if you want a 100 percent anonymous account, you must incorporate first as an offshore company before opening your savings account.Step 2
Research the minimum amount required to open a savings account along with the interest rate the bank pays. You can open a savings account with a U.S. bank for as little as $25, but overseas banks usually require a higher amount. For example, you must deposit a minimum of $1,000 to open an account in Panama that pays from 3.5 percent to 4.5 percent interest. In contrast, the Overseas First Federal Bank has a minimum deposit amount of $5,000, but pays only 3 percent interest.Step 3
Read the bank’s account terms and print a copy of them before completing the online savings account application. You'll also have to provide the bank with proof of your identity. Be prepare to fax or scan and email a certified or notarized copy of your valid passport; proof of your physical address, such as a current utility bill, bank statement or credit card statement; and at least one letter of reference from your current bank. Hold off wiring any funds until you receive confirmation from the bank that your savings account is open.
- Many countries give tax breaks to foreign account holders. Have your accountant calculate the tax impact from having an offshore savings account to see if it is worthwhile to open the account.
- The FDIC doesn't cover foreign bank accounts. Research the host company to verify that your savings account will be protected under their laws.
Based in St. Petersburg, Fla., Karen Rogers covers the financial markets for several online publications. She received a bachelor's degree in business administration from the University of South Florida.