Everything you need to know about opening a bank account abroad: conditions, taxation, options
There is a growing interest in opening a bank account abroad among people with international connections, who are doing business or who simply want to diversify their finances. However, there are details of opening an international account that many people are not aware of. For example, in the majority of cases, the Hungarian tax authorities receive the data of the foreign account.
If you're thinking about opening an account abroad, you should read the article explaining how:
- What are your options for opening an international account?
- What do you need to know about the tax information exchange agreement?
- What are your options for opening a bank account abroad outside the CRS zone?
- Why can opening an account in Dubai be a good alternative?
Let's get started!
Opening an account abroad: what are your options?
In today's globalised and digitalised world, opening a bank account abroad is easier than ever. There are financial companies that let you open an international account in multiple countries from the comfort of your home.
Opening an account with a traditional international bank
Traditional banks offer one of the most reliable alternatives to opening an account abroad. However, the process typically takes longer and banks often impose stricter conditions on foreign customers. For example, they need to have a registered address in the country for a private account or a registered office for a company account.
This type of foreign bank account can be a good option for you if you are building long-term financial relationships in the country.
Opening an account with a fintech company
The explosive growth of digital banks and fintech companies has not only radically simplified the process of opening an account abroad, but has also made international transactions cheaper and faster.
One of the biggest innovations introduced by these modern financial service providers is the provision of multiple international bank account details for a single account. While at traditional banks you typically have to open a separate account for each currency, with a multi-currency account at a fintech company you can have local accounts in US dollars, euros or pounds sterling, for example, without leaving Hungary.
You therefore have several options for opening a bank account abroad. But it is also important to know which authorities control the details of these accounts and how.
What is AEOI (Automatic Exchange of Information) and how does it affect opening a bank account abroad?
The Automatic Exchange of Information (Automatic Exchange of Information or AEOI) is based on mutual cooperation between tax authorities around the world. Under AEOI, information is regularly and automatically transferred between the taxpayer's source country and country of residence, without any special request. This allows for the regular transmission of "bulk" taxpayer information between the taxpayer's source country and country of residence for various categories of income (e.g. dividends, interest, etc.).
The Automatic Exchange of Information includes due diligence and reporting systems such as the Foreign Account Tax Compliance Act (FATCA) and the Common Reporting Standard (CRS).
What is FATCA?
FATCA stands for Foreign Account Tax Compliance Act. On 4 February 2014, the Government of Hungary and the Government of the United States of America concluded an intergovernmental agreement to support the automatic exchange of data and the implementation of FATCA provisions between the tax authorities of our countries.
Common Reporting Standard (CRS)
The Common Reporting Standard is a global financial accounts standard for the automatic exchange of information between tax authorities, developed by the Organisation for Economic Co-operation and Development (OECS) in 2014. Since then, many countries around the world have joined the CRS, including all member states of the European Union. A List of CRS countries is constantly growing.
This means that if you open a bank account abroad in a country that has signed a CRS tax information exchange agreement, your account-holding financial institution will automatically send your account details to the tax authority in your country of residence at certain intervals..
What are your options for opening a bank account abroad outside the CRS zone?
If the to open a foreign bank account outside the CRS you should consider opening an international account in one of the following countries:
- North Macedonia
- Dominican Republic
Practical experience of opening a bank account abroad
Financial institutions providing basic banking services operate in the vast majority of the world. But there's a difference between opening a bank account in a European Union country and opening one on the other side of the world.
in a European Union country
These countries have different requirements and offer different options, so before you start opening a bank account abroad, we recommend that you consult an expert.
Opening a bank account in Dubai
A Opening a bank account in Dubai also an option to consider if you want to open an account abroad. In Dubai, many financial institutions offer companies a favourable alternative and do not transfer account details to tax authorities in other countries.
To open a bank account abroad, you can choose between traditional and digital banks. Here are some examples of financial institutions where you can open an account:
- Mashreq Bank
- Mashreq Neo - the digital bank
- Emirates NDB
- First Abu Dhabi Bank
- Dubai Islamic Bank
- Abu Dhabi Commercial Bank
- WIO Business
Starting a company in Dubai
A Starting a company in Dubai has become an increasingly popular choice for Hungarian entrepreneurs in recent years.
- Tax advantages: A Dubai taxation is famous for its extremely favourable conditions. There is no personal income tax, and low corporate tax and VAT. Moreover, the latter can be 0% under certain conditions.
- Free trade zones: Dubai has various free trade zones where businesses can benefit from additional tax breaks and relaxed regulations.
- Stability and infrastructure: Dubai's economic stability and advanced infrastructure are attractive to entrepreneurs. Modern business services and financial institutions are available.
- A global business hub: Dubai stands out as a global business hub for the Middle East and Asian regions, making it easier to reach surrounding markets.
However, it's important to know that to open an account and set up a company in Dubai, the owner of the company must have a residence permit and a local ID card, among other requirements.
A Dubai visa, or more precisely a residence permit, is a prerequisite for opening a corporate bank account in the emirate. Currently you can choose from the following business visas:
- Visa for business owners in Dubai
- Investor visa for property buyers
- Work visa
- Dubai freelancer visa
If you are not sure which visa is best for you, contact us feel free, we will answer all your questions!
Opening a bank account abroad: a summary
There can be many reasons for opening a bank account abroad. There may be personal or business needs, or tax reasons. With the rise of digital banking, it is now easy to open a bank account in another country, even from Hungary. What many people do not know, however, is that the data of this foreign bank account - according to the Common Reporting Standard - is in most cases also available to the Hungarian tax authorities.
If you want to avoid this, you should consider opening a foreign account in Dubai in conjunction with residency, or in a country that is not a member of the CRS.
If you want to open a bank account abroad, either a retail or a business account, it is important to know that the application to open an account must be carefully prepared. The financial institution will assess whether the customer has a genuine and legitimate interest in opening a current account in the country. This could be, for example, whether they live or work in the country where the bank provides its services. You may need to prove that you are legally resident in the country. It may be an advantage, or even a condition, to have a retail current account with a domestic bank. For those who live in a European Union country, many financial institutions have more permissive conditions for applying to open an account as a citizen of another EU country. Financial institutions in some countries require you to live in the same country as the financial institution. It can be a legitimate interest if you live, work, own property or have a company or even a partner in your business in that country. A financial institution is always curious to know why a customer does not want to open a current account in the country of residence and can legally refuse an application to open an account without any serious justification. This is why thorough preparation is necessary.
And if you need experienced and professional support for opening a bank account in Dubai or setting up a company in Dubai, feel free to contact us!