What are the low-tax banks?

A low-tax bank is a financial institution that is registered in a jurisdiction that has favorable conditions for company formation, low lending rates and a high degree of personal data confidentiality. A state that protects banking secrecy and offers favorable tax rates for non-residents is chosen to establish a low-tax credit institution.

Such banks are authorized to serve exclusively foreigners who do not have local citizenship. Such institutions are prohibited from providing financial services to residents of the selected country. Low-tax banks allow foreigners to conduct their activities within the legislation of the offshore jurisdiction, which ensures the safety of capital and high confidentiality of client data. Registration of the institution is quite simple, and the demand for such services is growing every year.

Classification of low-tax banks

Registration of a financial and credit institution in a foreign jurisdiction provides for the necessity to go through the established procedure and collect a package of required documents. Altindustry lawyers undertake the organizational process and will help to establish a company in a tax-free zone within the specified period. Our specialists also ensure the request and obtaining of a license for financial activities, which is provided for by local legislation. Depending on the type of this authorization document, the following types of institutions are divided:

• Banks of A class.
  Provides a general license for a wide range of financial and trust services to businesses and individuals outside the institution’s home country.
• Banks of B class.
  The financial activity authorization allows to work only with a limited range of clients, pre-specified in the contract. Usually, new banks initially use this type of license and then switch to a full license.
• Managed banks.
  Financial institutions are registered as a separate company, but conclude an agreement with a bank that already has a general license and work on its basis.
• Representative banks.
  This type of structures provides for the registration of a legal entity and the parallel obtaining of a license for financial activities in another jurisdiction. The representative office in the second country will not be able to provide banking operations for clients, but it will give the opportunity to fulfill a number of other obligations.
• Bank-type companies.
  Financial and credit institutions of this type work with a limited list of services.

Sings of bank reliability

Financial institutions in low- or tax-free zones will be able to ensure profitable operations only if they guarantee quality service and favorable conditions for opening an account. Before opening an account with a bank, potential customers should be able to study:

• financial statements for the current year, publicly available on the institution’s website;
• full composition of shareholders who own the low-tax bank on the official web-page;
• real customer reviews published on independent resources or recommendations from acquaintances and partners;
• the list of services of the financial institution for clients and requirements for registration of individual or corporate accounts.

Financial institutions in low-tax zones are subject to more favorable liquidity requirements, which in turn may be accompanied by a greater risk for the client in terms of bankruptcy and inability to meet obligations. Established banks need to adhere to the principles of openness and publicity to prove their reliability and credibility.

How to open a low-tax bank?

It is possible to register a financial and credit organization in any of the well-known offshore zones. The most popular are Dominica, the Cayman Islands, Panama, Belize, Vanuatu, Samoa and Switzerland. The requirements for founders in each jurisdiction are different, but the general procedure is quite similar.

1. Selection of a specialization.
   Initially, the founder of the banking organization will need to determine the range of services that the future company will provide to customers. For example, commercial banks will provide an uninterrupted flow of payments in trading operations, investment banks will guarantee protection of assets and the possibility of risk diversification. The more services the bank will provide, the higher the requirements for the minimum authorized capital (usually from 30 thousand USD).
2. Licensing.
   Depending on the completeness of the services provided, it will be necessary to request a state license – general or limited. At this stage, the founders undergo a security check. Within the framework of legal support Altindustry specialists form a set of documents for the owner, which will provide reliable proof of the absence of fraudulent and terrorist motives of the founder of the company, as well as request an up-to-date certificate of criminal record.
3. Establishing an office.
   Although low-tax banks work only with non-residents of the state, they are obliged to have an actual representative office in the chosen country. Usually, the legal address of registration is enough, but in some cases it is required to organize a full-fledged office.

What is the attraction of low-tax banks?

A corporate account in a foreign bank of a low-tax jurisdiction is a matter of prestige and credibility of the counterparty. International payment requisites open up the possibility of expanding the market of services and help to establish business relationships with foreign partners. Foreign banks provide a high level of confidentiality and safety of capital for the client. On the other hand, registration of such an institution is also beneficial to its owner. The promising area of fintech is developing rapidly, and opening a bank in a low-tax jurisdiction has a number of important advantages:

• Flexible taxation.
  Many offshore jurisdictions offer tax exemptions for established financial institutions. The zero rate does not mean that there is no obligation to record income, but the cost to the bank owner is not as significant. There is often a fee to obtain a tax number and an annual fee.
• Bearable requirements.
  The terms of exchange controls and the domestic banking system do not apply to low-tax financial institutions. Such banks are not required to purchase Central Bank treasury bills or to be guided by the current discount rate in the state.
• Demand for services.
  With a competent approach to the registration of a financial institution with the help of Altindustry lawyers, the service provided will be in demand. High anonymity, confidentiality and the prospect of business going international, guarantee the demand for the bank’s services among potential clients.
• Multi-currency settlement.
  For a low-tax bank, there are no restrictions on the choice of monetary units. The financial institution can back up the operations of the parent corporation or close structures in any currency.
• Simple registration.
  If you cooperate with experienced Altindustry lawyers, the procedure of establishing a banking institution in a low-tax jurisdiction will be quick and cost-effective. Specialists will advise on the choice of a particular state, depending on the peculiarities and range of the company’s activities.
• Access to correspondent accounts.
  As a financial institution, the future firm will be able to conduct interbank transactions. Also, established offshore organizations are given access to the international lending market.