Different banks throughout the world have different policies and fees. While some banks will allow you to hold an account with little or no fees, others will charge you a fee every time you transfer or wire money.
It’s important to do your research so you find banks that will work for your lifestyle.
There are many different countries to consider for your banking needs. Some countries have a reputation for banking safety while other banks are much more customer-friendly. One bank may offer lower fees, but does it offer high-interest on your deposits?
Can you bank in the United States and not pay US taxes?
While the United States has a complicated tax net that most people want to avoid, their banks can be a great option for non-residents.
As you go through this article, you’ll learn more about the things you need to know regarding banking in the United States and how you can bank in the US without having to pay taxes on your funds.
In this article, we’ll discuss:
- Why are offshore banks so expensive?
- Countries with Low Bank Fees
- Should you bank in the United States?
- Can you open a US bank account as a non-resident?
- How to Open a US Bank Account
- Types of Bank Accounts
- Best Banks in America
- Do you have to pay US tax if you have a US bank account?
- Can non-US corporations be taxed?
WHY ARE OFFSHORE BANKS SO EXPENSIVE?
Bank fees are going to vary from bank to bank and country to country. Some offshore banks have high fees, higher than those in the US.
In the United States, banks lend out your money. This is a big part of how the banks make their money. While this does allow banks in the United States to charge lower fees than some offshore banks in other countries, it also makes it a bit riskier to bank in the US.
It’s not as much of a problem now — your typical bank account is insured for $250,000 — but in the past when things crashed in the US like during The Great Depression, you couldn’t get your money back from the bank. It was just gone.
Offshore banks don’t lend out your money the way US banks do. This makes these accounts safer, but it also makes it so you pay higher bank fees. These fees are how offshore banks make their money.
Sometimes paying these high fees is worth it. A $40 monthly charge might be worth the amount you are saving by banking overseas. It is also good to consider, how much is it worth to you to protect your assets by moving them offshore?
Additionally, setting up a foreign bank account can assist you on the road to residency and ultimately citizenship.
COUNTRIES WITH LOW BANK FEES
The United States has some of the lowest bank fees in the world.
Still there are some international banks with low or no fees.
Banks in Georgia have low bank fees and high-interest rates. It’s also relatively easy to open an account there, not requiring a large deposit. Another bank with low fees is Erste Banka in Montenegro.
There are some great banks that have no maintenance fees at all. Evocabank in Armenia has no maintenance fees and no minimum deposit. ABA Bank in Cambodia also has no maintenance fees and only requires a $50 minimum deposit.
As you can imagine there are no set fees across banks in a particular country. While one bank might charge you $40 a month for your bank account, another bank in the same city may only charge you $10.
While it’s not always the case, typically a bank that charges you a higher maintenance fee is going to have better security and a better reputation.
SHOULD YOU BANK IN THE UNITED STATES?
The United States is a country a lot of people avoid when working on offshore planning. No one wants to deal with their high taxes or reporting requirements.
Still, banking in the United States is actually a great option. There are different types of banks in the US: retail banks, commercial banks, credit unions, and savings and loans banks.
The United States has the largest deposit insurance — $250,000 from the Federal Deposit Insurance Corporation, and US bank accounts owned by non-residents get $250,000 in insurance as well.
At the same time, banks in the US aren’t the safest in the world. They also don’t offer the highest interest rates. You can find much higher interest rates in other countries.
For comparison, banks in Georgia have some of the highest interest rates on deposits in the world. Both TBC Bank and the Bank of Georgia offer a rate of 9.4% on a one-year term deposit. Asaka Bank in Uzbekistan offers an even higher rate of 17% interest on a one-year deposit.
CAN YOU OPEN A US BANK ACCOUNT AS A NON-RESIDENT?
Yes. While it’s becoming more difficult to open a foreign bank account in some areas of the world, banking in the United States is relatively easy, even for non-residents.
Setting up your bank account is pretty simple and it’s not hard to send money back and forth, even if you’re sending the money to another country. Transfers usually go through quickly. Most other countries trust money that’s coming from the United States.
If you are currently a US citizen but plan to expatriate, you can keep your US bank accounts. You can also open bank accounts if you’re a former US citizen who has since renounced your citizenship.
HOW TO OPEN A US BANK ACCOUNT
Opening up a bank account in the United States is simple and easy. All you have to do is show up at your bank of choice (some offer online options) with the necessary documents.
The necessary documents include proof of identification (such as a passport), proof of address (such as a bill in your name or a rental contract), and either a Social Security Number or Taxpayer Identification Number.
Different banks have different rules and regulations. Some banks may require you to prove your source of income and many have a minimum deposit amount required to open your account.
As a non-resident, it’s a little bit trickier to open a bank account online, but it’s definitely not impossible. There is a chance your request to set up a bank account will be denied but more commonly it will just take extra time. If you want to avoid this, it’s much easier and faster to open your bank account in person.
TYPES OF BANK ACCOUNTS
As a non-resident, you can open a personal or corporate bank account in the US.
A personal account in the US can come in two types: a checking or savings account. It shouldn’t be hard to set up a personal bank account, asas long as you have the right documents.
Personal accounts are easier to open than corporate accounts. Many banks won’t let you open a corporate account for a foreign company. You might be able to if you already have a great relationship with the bank, but most likely you’ll have to have a US-based company. Non-residents can set up an LLC in the US pretty easily.
Keep in mind that a lot of US banks only accept US dollars. If this is the case, you may have to pay a conversion charge. Other than that, your bank fees in the US are going to be low and still can save you a lot more money than banking overseas would.
HOW CAN A SAVINGS ACCOUNT LOWER YOUR TAXES?
In the United States, there are different types of savings accounts. Some savings accounts can help you to save money on your US tax if you are a US person.
Individual Retirement Accounts
Money you invest into a Roth Individual Retirement Account (IRA) is taxed before you deposit it. As such, none of the interest made on that money will be taxed.
Any money that you contribute to a Traditional Individual Retirement Account is deducted from your income. This lowers your tax burden for the year. You don’t have to pay tax on the interest earned while it’s kept in the account. However, again you do have to pay an income tax when you take the money out.
Education Savings Accounts
A Coverdell Education Savings Account can be used to pay for education expenses. Distributions made for qualifying expenses are tax-free. However, any money that is left in the account when the beneficiary reaches 30 years old is distributed and taxed.
A 529 Account is similar to a Coverdell account, but unlike the Coverdell account, a 529 plan has no age limit. A 529 Account allows you to save for education costs through either a prepaid tuition plan or savings plan. These accounts grow tax-free and some states offer tax benefits for money contributed into a 529 plan.
BEST BANKS IN AMERICA
The best bank is going to depend on your situation. Really, the answer to “What is the best bank?” is going to be answered differently by different people.
It is often easier, as a non-resident, to open an account with a larger bank. The five biggest banks in the United States are JPMorgan Chase, Wells Fargo, Citibank, Goldman Sachs, and Bank of America.
Interestingly, however, the best banks for personal finance according to Forbes Magazine are Centennial Bank, First Merchants, Community Bank, Citizens Business Bank, and Axos Bank.
DO YOU HAVE TO PAY US TAX IF YOU HAVE A US BANK ACCOUNT?
Just having a bank account in the United States doesn’t make you liable to pay US taxes. If you are not a US person, you only have to pay US tax if your business is run by people living in the United States.
If you are a non-resident of the United States and do run or do business in the US, you can have a US bank account without paying any US tax.
While you would typically have to pay US tax on interest income you get from a US source, the interest from your bank account is the exception. Interest from bank deposits is exempt from taxation if you are a non-resident.
CAN NON-US CORPORATIONS BE TAXED?
What if you’re a US person living outside of the US with a non-US corporation. Your non-US corporation is going to be taxed based on its operations within the United States. If your business doesn’t operate in the US and you have no employees there, you’ll be fine.
However, you as a US person are still subject to federal income tax. If you spend all of your time outside of the US you can get a tax exemption through the Foreign Earned Income Exclusion.
There are two ways you can pay yourself through your non-US corporation: dividends or salary. Money that is moved from your non-US corporation to you can be subject to tax.
If you decide to bank in the US, it doesn’t matter as much where you incorporate. If you decide to bank offshore, many foreign banks require you to have incorporated within their country in order to get a bank account there.
As an example, Hong Kong has some of the most stable and secure banks in the world. In order to get a Hong Kong bank account, you have to have a Hong Kong-based company. If you are set on having a bank account in Hong Kong, that’s really going to limit your options for where you incorporate.
When diversifying your assets, you might want to consider having multiple bank accounts in different countries. This way, if all hell breaks loose in one country, you’ll still have access to the assets you have stored elsewhere.
Still, it’s important to research where you want to bank. It’s possible to find a bank that will keep your money safe without charging you a ridiculously high bank fee.
An equally as important to remember, the best bank for you is going to be determined largely by your relationship with the bank. While you can do research on which banks have the highest interest rates on term deposits or lowest bank fees, one of the most important qualities of a bank is how well they treat you as their customer.