Offshore account (foreign currency account)

What is an offshore account
Offshore account refers to an account opened in an overseas bank, from which customers can freely transfer funds without being subject to restrictions in their home countryforeign exchangeRegulation. As long as the bank client discloses the information of the offshore account and pays taxes based on personal income, holding an offshore bank account is legal.
For example: registering a UK company to open an account at Hang Seng Bank in Hong Kong, which is an offshore account; registering a UK company to open an account at Bank of Communications in mainland China, which is an offshore account.


Advantages and disadvantages of offshore accounts
The advantages of offshore accounts
1Free fund transfer: Offshore accounts are equivalent to bank accounts opened overseas, and funds can be freely transferred from offshore accounts without being subject to domestic foreign exchange controls.
2Deposit interest rate and variety are not restricted: Deposit interest rate and variety are not subject to domestic regulatory restrictions, and are more favorable than similar deposit interest rates of domestic and foreign banks, with flexible deposit and withdrawal. Especially for large deposits, they can be customized according to customer needs in terms of interest rates, terms, etc., making them flexible and convenient.
3Exemption from deposit interest tax: The Chinese government exempts deposit interest tax on the interest of deposits and withdrawals from offshore accounts.
4Improving the comprehensive operational efficiency of domestic and foreign funds: Many banks can provide comprehensive services with both onshore and overseas banking functions, reduce the comprehensive cost of funds, accelerate the turnover of domestic and foreign funds, and improve the efficiency of fund utilization.
5Domestic manipulation, overseas operation: It is very convenient and free to use offshore accounts to receive and pay foreign exchange. However, cash cannot be deposited into offshore accounts. As offshore accounts are opened in the name of overseas companies, the foreign exchange received from offshore accounts belongs to the income of overseas companies and not to your domestic company. Assuming a company has a certain amount of business volume overseas, using an offshore account to receive payments can provide a reasonable tax arrangement for the company and have great benefits for its future development.


Disadvantages of offshore accounts
1.Offshore banks are also a common place for criminals to launder money, hence their reputation is not good.
2.Encourage residents to avoid or evade taxes.
3.Due to its absence from the depositor's residence, there may be inconvenience in the depositor's services.
4.The starting savings amount for opening an offshore account is generally higher, so it mainly serves individuals with higher incomes.


Types of offshore accounts
Hong Kong dollar savings account, foreign currency savings account, Hong Kong dollar exchange account(Check account), USD cheque account, Hong Kong dollar financial account, foreign currency financial account, Internet account, import and export letter of credit(LC)


The difference between Hong Kong accounts and domestic offshore accounts
1.Different stability:
Hong Kong is an international financial center,The inflow and outflow of funds are completely unregulated,High stability,Account usage tends towards internationalization
Offshore accounts are accounts opened by foreign banks within China,Therefore, influenced by Chinese policies
2.Different fees:
Local accounts in Hong Kong are charged in proportion to the size of the remittance finance,Offshore account charges per remittance
Compared to domestic offshore accounts, Hong Kong local accounts have higher account management fees and remittance fees
3.Different account opening conditions:
Hong Kong local accounts require a passport or pass to be carried,Certificate issued by a Hong Kong accountant or lawyer
Domestic offshore accounts only require carrying company information and identification documents(ID card or passport
4.Account usage varies:
Local accounts in Hong Kong can be withdrawn directly by cheque or company card,Cash deposit.
Offshore accounts cannot retrieve existing cash,Remittance instructions can only be made through online or fax means.
International commonly used offshore account opening locations
London The oldest and most developed capital market, with offshore and onshore account consolidation operations.
Hong Kong Similar to London, many Chinese companies establish offshore companies and open accounts there, which has recently been highly praised by European and American companies because Hong Kong has better confidentiality than London.
Singapore Similar to Hong Kong, but with stricter regulations, offshore and onshore operations cannot be fully consolidated
Cayman Seychelles Financial centers in pure offshore port types such as the British Virgin Islands have good confidentiality, but may not necessarily have services under letters of credit.