Offshore banking is a term that is coined to define banking activities that are carried out from remote locations. The offshore banks typically work in the same way as conventional banks but with added flexibility; money can be swiftly moved around different banks, and in any currency desired. Businesses with investors from abroad tend to prefer offshore banking as it allows for management through the internet and over the phone.
Anyone looking to travel outside of the United Arab Emirates (UAE), the one thing to ensure is that the bank you apply for offers 24-hour banking, internationally recognized debit cards, and the ability to accept cheques in your preferred currency.
Offshore Banking in Dubai
Businesses have evolved over time and offshore banking has also gained significant interest because it allows flexible transactions and financial management around the globe. Dubai has been at the forefront of innovation and Dubai came up with a scheme with the introduction of Dubai International Financial Center (DIFC), which allows free trade in Dubai.
However, there are a couple of important things that need to take into consideration if you are to apply for an offshore company bank account in Dubai. One of the prerequisites of offshore banking is that you must hold a valid residence visa. Offshore banking will enable you to then freely import and export funds. Dubai has witnessed an extremely lucrative outflow of money in recent times.
Dubai has a long list of leading bank investors which has boosted the reputation of the city globally. Some examples of the major banks operating in the UAE include HSBC offshore, Abbey National Offshore, ABN Amro, Dresdner, and Barclays; all these banks have their headquarters in the emirate. With the introduction of DIFC, Dubai is expected to make room for more offshore branches of some of the world-leading banks.
Current Status of Offshore Banking in UAE
As it stands, all the banking activities of the emirate are under the umbrella of the UAE Central Bank, which also comes with a lot of restrictions. However, no restrictions have been imposed on depositing and sending different currencies to and from the emirate. You are allowed to send and receive money from any currency denomination you want from any part of the world.
In order to open an offshore banking account, a minimum balance of $10,000 is required to be maintained. It is important to understand that opening the account will also have tax implications in your home country as well, which might require you to seek financial help from a professional. The account opening procedure also requires you to produce certain reports and documents from your home country.
Why would one opt for offshore banking? Well, one of the main reasons why ex-pats set up an offshore account is to avoid having their assets sealed in the UAE banks.
Offshore Bank Account in Dubai
Since Dubai has established itself as a global business hub, many foreign companies are willing to open up offshore bank account in Dubai. The UAE banking sector is has a lot of attractive offers in place for businesses which include stable rates of local currencies against the USD, online and mobile banking, and no limits on money repatriation.
As mentioned beforehand, if you don’t own a business in the UAE then opening an offshore bank account is not recommended as it increases the checks and balances along with additional restrictions.
To list down a few reasons, here is why it is not recommended to apply for an offshore bank account for your overseas business:
- International bank accounts are labeled as a high-risk category by the UAE banks, which leads to banks carrying out excessive checks and balances for your company. This process can also lead to unannounced visits which can be considered a time wastage if the account is not approved.
- Disclosing and legalizing all the incorporated documents is the prerequisite which is not only a costly process but also something that not many private companies prefer.
- Banks tend to not take the risk of opening a bank account for a foreign company, which makes the task of doing so very difficult.
How to Open an Offshore Bank Account in Dubai
As mentioned beforehand, the best way to achieve the task is by setting up your own business in the UAE. The bank account opening procedure will not only be simple in this case but also cheaper and faster too.
To register an offshore company in the emirate, you will need to contact a registration agent. You can choose an accredited agent from the website of the offshore jurisdiction. The process of offshore company registration is rather simple and takes 2 to 4 working days and it will take around $1500 to $3000 depending on the application process.
If you choose a RAK offshore company then the following is the list of local banks you should consider:
The options significantly increase if you opt to set up your business in one of the free zones. Here is the list of banks you should consider:
- Emirates NBD
- First Abu Dhabi Bank
- Mashreq bank
- RAK BANK
- NOOR bank
- Emirates Islamic Bank
Lastly, a Mainland company will allow you to open an account the fastest. However, it will be much more costly when it comes to annual maintenance. According to banking officials, “it will require a local citizen as a sponsor with 51% of shares or service agent with 0% of shares.”
In order to open the account, you will need to pass the KYC, which requires three proofs:
- Proof of Identity
- Proof of Residency
- Proof of Wealth
Once the KYC process has been completed, you will need to make an initial deposit which can range from $350 to $2000.
Documents Requirement for Offshore Bank Account
Although the list of documents required for opening the bank account is extensive but here is a compilation of all of them. Since the process is tedious, you should apply for at least 3-4 banks which will increase the chances of approval.
- An extract from the bank account of the parent company and/or the personal account of the founder for the last six months
- Accounts that will be used as evidence for some of the transactions in the statement (3-5 accounts will be enough)
- Letter of recommendation from the bank of the country of the founder
- Personal CV with relevant experience
- Documentary evidence of running a similar business (not offshore) at least for 3 years in either UAE or another country with audited financial statements
- The business plan of the future company with forecasts for turnover, suppliers, and customers
- Legal documents for a company in the UAE and identity cards of the owners
- UAE entry stamp in the passport
For corporate accounts, the following documents will be required to be submitted:
- Memorandum and Articles of Association
- Certificate of Incumbency
- Certificate of good standing-attested
- Client profile
- Company brochure and description
- Bank documents for last 6-12 months
- Certificate of documents by the Ministry of Foreign Affairs
Features of Offshore Bank Account
Not only does offshore bank account benefit individual account holders, but it also is a powerful means of protection and convenience for offshore businesses. Here are a few important features:
- 24/7 availability
- Tax benefits
- Assets protection
- Privacy and security
- Higher interest rates
- Currency diversification
- Investment opportunities
Financial Services Provided by an Offshore Bank
There is a wide variety of financial services which are provided by an offshore bank, but here are the most important ones:
- Savings account.
- Corporate administration.
- Fund management.
- Trustee services.
- Loans – both commercial and personal.
- Global debit and ATM cards.
- Trade finance.
- Letters of credit and trade finance