Diversify your savings with foreign bank accounts

Overseas bank accounts can help you take advantage of financial opportunities around the world - if you know what to look for.

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Saving or investing overseas lets you access different financial products and interest rates while protecting you against potential economic downturns. And because foreign banks like attracting overseas money, you have plenty of options.

Why invest overseas?

If all your money is tied up in Canadian investments — whether it’s in shares, property, cash or some other type of financial asset — you’re highly exposed if the local economy takes a downturn.

Putting money into overseas accounts allows you to diversify your savings, providing protection against any dips in the Canadian economy.

Investing overseas also lets you access different accounts, services and benefits that might not be available in Canada. For example, you can take advantage of better interest rates elsewhere or get in at the ground floor of a foreign economy that’s set for rapid growth in the near future.

Do banks want foreign customers?

Yes. It’s in any bank’s best interests to attract money from wealthy customers all over the world. If you’ve figured out that there’s an attractive opportunity for foreign investors in another country, chances are there’s a bank that’s figured out the same thing and is eager for your business.

How do banks attract foreign customers?

Many global banks have specialized international banking departments to help make it as simple and stress-free as possible to open an overseas account.

For example, with a global presence in 82 countries and territories, HSBC’s international banking service can help customers with cross-border banking, overseas investment opportunities and buying property outside Canada.

There are also thousands of other local banks in countries all over the world looking to attract overseas investors.

Foreign bank account reporting requirements

If you hold foreign property that at any point in the year totals more than $100,000 CAD, you must report what you own on Form T1135 when submitting your taxes.

The Income Tax Act defines “foreign property” as money, real estate, stock investments, patents, copyrights, precious metals and gold certificates, among other things (see the CRA website for more details). As of 2015, the CRA has made it simpler to report property valued under $250,000, however property valued over this amount must be reported in more detail.

The penalties for not paying your taxes are stiff and can range from fines to jail time. The CRA accesses and analyzes all international electronic funds transfers over $10,000 for signs of suspicious financial handling, and the Offshore Tax Informant Program offers financial rewards for reporting information pertaining to major international tax evasion schemes.

If you’ve failed to declare any/all of your assets in the past, you can file a Voluntary Disclosure Program (VDP) application to avoid prosecution. You’ll have to repay your taxes with interest, but at least you can avoid ending up in court.

How do I compare and choose foreign bank accounts?

Before choosing a foreign bank account, factor in:

The regulations in the country

The regulations that national governments impose on foreign investors differ greatly from one country to the next, so you’ll need to research a country’s regulatory structure before deciding if it’s the right destination for your money. Is it easy for foreign citizens to open an account? How will the account be treated by local tax authorities? Is the banking industry in the country stable, secure and well regulated?

Political or environmental risk

Political and economic instability can spell disaster for a country’s foreign investors, so make sure you choose a country with minimal upheaval or risk of civil unrest or economic collapse. You’ll also want to factor in environmental risk — natural disasters can have a severe impact on the local economy, especially in smaller countries.

The language barrier

Don’t underestimate the difficulties that the language barrier may pose when establishing and maintaining an overseas account. Look for a bank that is capable of producing account statements, overviews and tax reports in English.

The safety of the bank

Once you’ve chosen a country you can start looking at the products and services offered by individual banks. How long has the bank been operating? Is it properly regulated by the relevant authority? Does it specialize in managing accounts for foreign investors? Look for a safe, stable and insured bank.

The type of account you want

Next, consider the type of account you want, such as a chequing account, savings account or investment account. A savings account will let you take advantage of a country’s high interest rates, while a fee-free chequing account can be useful for managing overseas purchases.

Account features

Look at account interest rates, fees and benefits to see which one stands out from the rest. Also remember to examine how easy a financial institution’s online banking portal is to use — it’ll likely be a crucial part of how you manage your money.

Account access and management

Finally, compare the ways in which you can access the money in your account. Is the account accessible via phone and online banking? Does the bank in question have any branches in Canada? How easy will it be to withdraw funds and close your account if necessary?

Tips for offshore banking

Before opening an overseas bank account:

  • Ask for advice. Ask a financial adviser or accountant for advice on choosing a country and a foreign bank account to avoid potential pitfalls and make an informed choice.
  • Benefit from local expertise. If you’ve decided to pursue investment opportunities in a particular country, you may want to enlist a financial planner or investment adviser with local knowledge in that country. He or she will be able to talk you through the regulatory requirements, opportunities and risks of the local investment market.
  • Consider money transfer options. How will you transfer funds from your Canadian account(s) to a foreign account if you need to? This is especially important if the account you want to open requires a minimum deposit. From bank wire transfers to specialized online money transfers services, there are plenty of options to explore. Find out more in our detailed guide to sending money overseas.

Bottom line

There are banks all over the world willing to accept money from Canadian investors. Research your options and compare rates against Canadian savings accounts before choosing a new bank.

Frequently asked questions

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