Bermuda is one of the traditional offshore destinations for those looking to diversify their assets or optimize tax. Over the past decade, the offshore industry has been, indeed, affected by numerous leaks that have made it even more difficult for entrepreneurs to go abroad.
While some countries look like dead ends, Bermuda has managed to retain its status. It has remained one of the most transparent nations out there, providing high-quality results without breaking any international laws or standards.
Bermuda's reputation is still clean. Despite maintaining a tax-friendly environment for entrepreneurs, the island nation has not been targeted by larger countries trying to enforce their own rules into foreign territories.
Other than that, Bermuda offshore banking is, indeed, an opportunity. The financial sector is extremely stable, and banks are used to dealing with clients regardless of their nationality or location. If you are after offshore banking in Bermuda, this guide will help you understand how the system works.
A few words about Bermuda
Bermuda covers 21 square miles only. It is wrongfully considered to be part of the Caribbean – while not too far, it is not part of the archipelago. The country is a British Overseas Territory and is located about 650 miles away from the USA.Despite being located in the middle of nowhere, Bermuda has almost daily flights to London. It is also well connected to many cities in the USA, not to mention Canada. Basically, the tiny country is linked to the whole world. Furthermore, it is in the Atlantic Standard Time – great for global business.
Over its history, Bermuda has always been a remote financial center for high net worth individuals and entrepreneurs. It has always attracted high-quality business. In fact, the country has a blue-chip record of respecting all the global requirements and standards in terms of practices.
Furthermore, partnerships with different countries also provide business-related advantages.
Apart from compliance, Bermuda is also appreciated worldwide for its transparency. If other tax havens have been targeted for hiding information, Bermuda has crystal clear and strict rules. It has more than 120 partnerships with different countries.
Apart from Switzerland, Bermuda is the only country in the world awarded by the EU for its insurance regulatory regime. It also has a bunch of qualifications from insurance commissioners in the USA, hence its appreciation.
Now, in terms of Bermuda offshore banking, the country is somewhere in the middle. It gives you great advantages in terms of banking, tax optimization, and asset diversification, but it is also widely appreciated all over the world, so you do not have to hide anything.
Top notch banking reputation
This is probably one of the main reasons wherefore so many entrepreneurs and business people choose Bermuda. Some people see it as a tax haven, which it is. But others see it as a top notch place to bank, which it is.Bermuda stands out when compared to other tax havens, regardless of what jurisdiction you pick. Based on what happened in the past decade, take a look at Panama, for example. It is also referred to as a tax haven, but what happens to its banks?
Local banks have been involved in a plethora of scandals – most of them related to celebrities and tax evasion. Shady activities are also part of the game there – plus, such leaks occur every now and then, so chances are you will find even more later on.
Banking regulations are strict, but well balanced. Bermuda is clearly trying to avoid all the shady stuff that could bring customers over. But at the same time, it does take privacy and financial freedom seriously, so local banking clients do have a bunch of benefits.
While such moves may affect its reputation as a tax haven, Bermuda wants to retain its transparency, so it has applied more rules to ensure there is no room for illegal activities. It is very likely to protect its reputation by applying various international standards as well.
Friendly approach towards foreigners
Now, while there are plenty of destinations referred to as tax havens, the truth is not all of them have managed to upgrade their services in order to accommodate foreigners. Doing everything yourself in such places is almost impossible.Apart from the language barrier, you would have to go through a sophisticated bureaucratic process. Most commonly, you will need to hire specialized services to help out in the process. The good news is Bermuda is different and has adjusted its services to accommodate foreigners.
Not every banking jurisdiction out there is used to dealing with international clients. It is not necessarily a bad thing. It does not mean that you should not bank there. However, opening an account is a bit of a challenge then – the same goes for managing it.
Bermuda is different though. The local financial sector has dealt with customers from all over the world. There are no issues, regardless of your citizenship. You could be Austrian, Mexican, or Japanese. Local banks will not be confused but direct you accordingly.
Most banks also provide services for international users only – you can also open remote accounts in some of them. Obviously, each bank has its own rules and regulations, but it is worth double-checking everything upfront.
Tax optimization benefits
Most people reaching Bermuda are interested in tax optimization – this is the main benefit of this jurisdiction. Sure, stability and a high level of professionalism are also important, but overall, you want more money.Bermuda is a tax-friendly country, and it shows in its popularity. Business profits are not taxed at all. The same goes for capital gains, as well as any other form of income. With these thoughts in mind, a local bank account might actually help with your tax planning.
Try to see things from a different direction too.
A local bank account will allow you to buy and sell shares, especially when it comes to local investment funds. Indeed, you will make some profit from them. But then, you are not a resident, so you will not have to pay tax on this form of income.
Professional banking system
Last, but not least, apart from joining a tax-friendly environment with a top-notch reputation, you will also be treated accordingly. Banks in Bermuda meet all the requirements, regardless of how high your standards are.Gain access to quality bank accounts, solid services, and a top notch customer service. You will be treated better than in your own country. How come? Simple. Foreign banks have not been allowed in Bermuda until recently.
Even when they came over, foreign banks had to merge with other banks for easy access. For instance, HSBC came to Bermuda in 2004. However, it has to merge with the Bank of Bermuda in order to gain some local presence.
This means every bank in Bermuda is tied to the local economy. Both local and foreign banks are integrated with the local financial system. The economy is part of the game. This means they have a higher stability, as they are not inflated with foreign currencies.
The local currency is mostly tied to the American dollar, which is relatively stable. Unless the dollar drops overnight, you should not worry about your bank account – less likely to happen, though. As for the customer service, the infusion of foreign banks has definitely helped.
Banking options are limited
Now, before digging into Bermuda offshore banking procedures, you must be aware of both the positive parts and the less positive ones. Compared to a bank in a well-developed country, banks in Bermuda will not give you as many options – they are less diversified.There are quite a few major options to choose from, but you are still limited. Go to the UK, and there are dozens of banks ready to welcome you as a customer, just to help you get an idea about what to expect in Bermuda.
Obviously, you should not expect a few dozen banks in a small jurisdiction. But then, compared to other countries, Bermuda has limited options. Take the Bahamas, for instance – there are two times more options there.
In other words, while you do gain access to a high-quality banking system in Bermuda, you need to ensure local banks will actually meet your necessities – otherwise, they become completely useless. You might as well bank elsewhere.
Limited deposit insurance
Double check the deposit insurance when interested in Bermuda offshore banking. Unlike most expectations, the deposit insurance is quite low, especially for such high-quality banks. Plus, it does not really make sense, considering the fees.You may find this a bit unusual, but you could not even benefit from deposit insurance until 2011 – no bank in the country offered this feature, yet it was extremely common all over the world. Local bank deposits can only be insured for up to $25,000.
It is five to ten times less than what other jurisdictions can offer. It is a decent option, but far from what you might expect if you want to diversify assets or conduct business in Bermuda. It does not mean that local banks are likely to shutdown anytime soon.
But then, it is still a risk that will put a lot of people off.
Things change quite often, though, so keep an eye on this aspect.
Relatively high fees
Now, Bemuda offshore banking is not a free process, but it will cost you money. Different banks have different fees, so it depends on what you are trying to do – again, double check your needs and the services offered by each bank.Overall, no matter what fee you are considering, you will find Bermuda to be quite expensive.
For example, you may end up paying around $10 to maintain a checking account. No one needs to maintain such an account. As a general banking rule, you must meet a minimum deposit. If you do, there are no fees associated with maintaining the account.
It sounds a bit weird if you think about it. After all, Bermuda does not charge too many taxes, so you might expect banking to be just as convenient. The truth is that a banking sector is a good option for the government to generate some money, among a few others.
Banks have to pay high taxes in Bermuda, and – guess what – these taxes are transferred to clients in one way or another. This is why the fees are so high, and you will need to pay maintenance for pretty much everything.
Local banks also expect a lot of high net worth individuals and business people to come over, so the staff is highly trained. You will talk to qualified professionals and not just some random employees – all these services come with a cost.
A series of misconceptions
Finally, Bermuda is associated with the offshore industry – maybe because this is the main reason wherefore a wealthy foreigner would go there. It has a mint reputation, but at the same time, you have a bank account abroad.This would not necessarily be a problem, but your bank account is in a country with a tax haven reputation. The average person does not know too much about tax optimization and asset diversification at all.
The only things they know about offshore applications relate to some leaks and scandals pushed in by the press. Therefore, when you deal with a local social worker or a bureaucrat, chances are they have no clue what wealth management means.
Instead, you show up with a bank account in an offshore haven, so they will assume you are trying to hide money. The bad news is that this kind of concept is less likely to go away too soon, so offshore applications will always be associated with money laundering.
It makes no difference how honest you are. It makes no difference how transparent your wealth is. At the end of the day, dealing with officials will inevitably raise some eyebrows – people will want to know more, and they will naturally assume you are trying to hide something.
Now that you understand the pluses and minuses of Bermuda offshore banking, making a final decision is much easier. You are obviously aware of your needs, so you can tell precisely whether this jurisdiction is worth it.
All in all, here is what you need to do to open an account. The good news is lots of banks in Bermuda allow you to open accounts remotely. At the same time, the process is simple and straightforward – no fancy requirements.
Pick the perfect bank
Now, assuming you know what you need, you must check each bank in particular to find the best deal. The bad news is there are not too many banks to research, so the process is fairly quick and simple – at least you are less likely to waste too much time.Currently, there are four major banks to choose from in Bermuda:
Fortunately, all of them are powerful and well-rated. If they do meet your demands and requirements, you just cannot go wrong with any of them. Services are quite similar, as well as fees overall – however, it depends on what you require.
Some banks charge more for maintenance, while others charge more for wire transfers.
Research all account options, and even after you make a decision, come up with some questions. Get in touch with the customer service, see how they treat customers. Consider your due diligence on taxes and fees, not to mention interest rates.
Tackling the Bermuda offshore banking system remotely
Located in the Atlantic, Bermuda is a remote location. Indeed, it is well linked to European hubs, as well as the USA. But then, it is still an inconvenient place to travel to. Local banks know that, so the Bermuda offshore banking system can be used remotely too.Most people prefer this option not just because it is inconvenient to get there, but also because the process is intuitive and straightforward. There is no way you can get lost in the process, even if you have never opened a bank account before.
You will need a bunch of documents – they are similar for each bank, but you should still double-check. Most importantly, you will need to bring in some proof of identification – such as your passport. Other forms of ID may also be accepted.
All banks in Bermuda will ask for references. These references are normally obtained from your current bank. Statements from your current bank will also be required, not to mention proving the source of funds if you are about to make a big deposit.
Proof of address is required, too – usually a utility bill in your name. The purpose of the account will be required, too, so you need to be honest there and provide a credible story. Further documentation might be required if something seems sketchy.
Once you have all the documentation, you can submit everything over the Internet. Most banks have a form to submit all the data over their websites, or you can just send these details by mail. Next steps vary from one bank to another.
Also, it depends on the type of account you are trying to open.
Normally, you should be able to make a deposit as soon as your account is approved.
Going to Bermuda in person
Generally speaking, banks providing remote features for account opening tend to provide a low-quality service. You have no control over what is going on, and it is likely to take ages. Compared to other jurisdictions, Bermuda takes everything to another level, though.The procedure is streamlined, and everything makes sense – there are no difficulties whatsoever. Indeed, local banks are a bit strict about the required documentation, but at least you know upfront what to bring over.
With all these, you can still benefit from the Bermuda offshore banking system in person.
First of all, some banks only allow access to particular types of accounts should you do it remotely. Therefore, you might face some limitations. Going there in person will give you access to the whole package.
Basic accounts – such as a classic savings account – will not require you in person. The necessity to go there becomes obvious when it comes to specialized services. Simply get in touch with the bank first and find out more about the requirements.
Then, it depends on what you are hoping to get. Some people are after basic asset diversification. However, a complex offshore situation may require a face to face discussion and more checks. Going there face to face will prevent the hassle of going back and forth with different issues.
Besides, sometimes, opening an offshore account is an excellent opportunity to take a holiday. The Bermuda offshore banking system allows you to take a holiday in a beautiful location surrounded by pink sand beaches.
After all, you do need a bit of holiday after setting your offshore venture up. You need a few days off before you can get back to your daily grind, and Bermuda might be the perfect playground for yourself and your family.
As a short final conclusion, the Bermuda offshore banking industry goes in two different directions.
From many points of view, the banking system is almost flawless. Expect a high-quality system, highly trained professionals, transparency, and security. You have a few major banks, and you cannot go wrong with any of them. Plus, you can open lots of accounts remotely.
On the other hand, fees might put you off a little. There are not so many options either – only four major banks. It does not feel like you have too much flexibility when about to open an account, so you need to check everything upfront.
Nothing is perfect, and this system makes no exception either. If a particular account matches your needs, you can leave yourself in good hands. Make no compromises, though. No matter how advanced the banking system in Bermuda is, you need to know your priorities.
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