Obtaining Your Own Offshore Banking License

By Andrew Rogerson LLB (Hons) TEP

Having one’s own bank is a very valuable asset. It opens the door to all manner of financial transactions using funds originating from Canada. Funds sent offshore to establish the bank are a straightforward overseas investment. Situated in the appropriate offshore location, the bank will pay much less in taxes than   in Canada and will able you to engage in very cost effective transactions. The appropriate category of banking license is widely known in the offshore world as a “Class B” license. This permits overseas investors to establish a bank that may conduct business with clients located anywhere, but the country of the bank’s incorporation.

In Barbados, this type of license is known as an “Offshore Banking License”. Minimum capitalization is BDS$2m authorised and BDS$1m issued. These figures are due to be increased, and the Central Bank is already applying higher limits. A licensed bank pays an initial and continuing annual fee of BDS$25,000. The Central Bank requires quarterly balance sheet reporting and filing of full annual accounts, along with a list of the licensee’s directors (one of whom must be a Barbadian). There are 53 licensed offshore banks in Barbados. Offshore Banks pay corporation tax on the same basis as International Business Corporations. They are exempt from withholding tax on payments to non-residents or other offshore entities, from customs duties on goods and materials imported for their offshore business, from estate duties on any of their shares, securities or assets owned by a non-resident, and from property transfer tax on the transfer of shares, securities or other assets. Their offshore transactions are exempt from exchange control, and they are exempt from ad valorem stamp duty. Obtaining a banking license is a matter of meeting fairly standard (but strict) criteria as to good character of owners and the ability to provide skilled personnel to run the operation.

An excellent alternative is Panama, where the license is known as a “Restricted License”. Required Capitalisation is a minimum of 3m Balboas (equivalent to US$3m). The licensing procedure takes 3-6 months, acting in concert with Panamanian banking lawyers. Panama is a sophisticated and stable world-banking centre. It is home to high level professionals in banking, law and accountancy. Panama has approximately 80 banks of which 30 are these operate under a Restricted License. All revenues from banking operations are exempt from Panamanian taxes.

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