Money moves all over the world. The world’s coins, banknotes, and deposited bills add up to 36.8 trillion dollars. But it is hard to estimate for sure how much money there is in the world.
One reason why is foreign banks. Many people offload their money to other parts of the world. This may sound deceptive, but it can be legal and profitable.
What laws do you have to comply with when opening a foreign bank account? What are the benefits of doing so? How can you avoid taxes legally?
Answer these questions and you can decide for yourself if a foreign bank account is right for you. Here is your quick guide.
1. Foreign Bank Account Report
You must be careful following all regulations when you have a foreign bank account. You must fill out a Foreign Bank Account Report (FBAR) every year with the IRS.
Your report must detail your financial interest and the aggravate value of your account. If your value exceeds 10,000 dollars, you may be liable to higher taxes. You do not need to report an account that a government entity owns or that is in your retirement plan.
2. Foreign Account Tax Compliance Act
The Foreign Account Tax Compliance Act (FATCA) is a regulation on foreign banks. They must file a report to the IRS on the assets held by American citizens.
The IRS will compare this report to your FBAR. If they notice inconsistencies, you can expect an investigation into your financial holdings. Report accurate information to your bank and do not hide any of your holdings.
3. Investing in Other Countries
The best way to use your offshore bank account is to invest in other countries. Select a bank like the National Bank of Ethiopia known for helping its country with economic revival. Work with your institution on micro-lending and other efforts to help small business owners.
4. Tax Avoidance
Tax avoidance does not have to be illegal. You can invest your money in an offshore retirement fund, especially if you plan on retiring in another country. You can buy a home somewhere else and receive a tax break for it.
Tax evasion is the use of illegal methods to avoid paying taxes. Rely on tax credits all you want and make foreign bank account loans. But avoid underreporting your income while doing so.
5. Avoiding Interest
Domestic interest rates can go up and down very rapidly. The IRS permits people to put money in countries that have stable markets.
But keep in mind that your fortunes may change. Prepare to move your money into another account. You can sign up with an international bank that has branches all over the world for easy transfers.
What to Know About Foreign Banks
Foreign banks are a great resource for your financial portfolio. You must cooperate with all IRS regulations. Submit a Foreign Bank Account Report every year, and comply with the Foreign Account Tax Compliance Act.
See what you can do to invest in small business owners abroad. Keep your money in an institution that helps local people.
It is okay to avoid taxes and interest rates. But be honest when you reporting your income and be prepared to transfer money back home.
The world is waiting for your money. Spend it wisely by reading our financial guides.