Should I open an International bank account today?
There are many and varied reasons why you might find an international bank account attractive right now.
If you travel between countries for business you may already know that an international account can provide great flexibility and various options for managing your finances.
Today, because the international banks have removed previous eligibility criteria, these accounts have reduced in cost and are available to more people.
You may be aiming to generate more income from your interest or thinking about opening an international bank account for safety reasons. Using an international bank account means having the ability to keep your cash and investments in more than one country. This could be an attractive strategy to reduce any perceived risk associated with the government or banking industry of the country in which you live. Your international bank will not be exposed solely to the Italian economy.
Alternatively, your strategy could be to invest in an alternative currency or simply just saving for the future in another country, thereby removing the temptation of withdrawing and spending your savings every month at your local bank!
Many people set up international bank accounts to exist alongside or in addition to their local bank accounts for one or more of these features, and for other reasons.
Accessing your money
Your money can be accessible in your home country (eg. Italy) by use of a Debit card linked to your international bank account. Your account may be in Euro, USD, GBP or another currency, and you may have different currency accounts. Today your international bank account provider can usually set up separate accounts for each currency you request, at little cost.
Holding multiple currency accounts is usually difficult or costly at your local bank. However this is not the case for an international or offshore bank account. This is quite useful if your business charges, bills or your clients are in a different currency to your home country; if you receive a pension or investment income in a foreign currency; or when you receive transfers from family or savings in different currencies.
Leaving your money in the account can help avoid the frequent international transfer fees and the risk of a poor exchange rate upon transfer in the short term.
A word on currency transfers: although all banks provide this service, most are not interested or willing to be competitive in providing it! Hence it usually pays to use the services of a specialist money transfer company. We have been using and recommending money transfer companies for several years as a cost-effective and convenient alternative for all of your foreign currency transfers.
You can control when to transfer money between currencies (for example when the exchange rate is more suitable or has recovered from any recent weakness). Your money can also be transferred online between your different currency accounts whenever you may need to re-balance or rearrange your accounts (for larger transfers you usually should consider a money transfer specialist).
Also, payments can be arranged in different currencies from the same accounts, for example when you travel for business or pleasure.
You can obtain a debit card for each currency you need, for the country where you are travelling or wherever you need it.
Bank accounts and taxes
Often what is important to consider, aside from interest rates and the features of international bank accounts, is the following:
Your international bank provider is not subject to the laws and rules imposed by your local (Italian) government upon local banks ie. to deduct taxes immediately from your investment income.
This is a significant benefit. A common misconception however is that having an international bank account prior to coming to Italy means you can avoid declaring your account or overseas income to the tax authorities. This is clearly not the case as you are still required to report annually on all your interest and other investment income as part of your annual taxation form lodgement.
In April 2014, Italy proposed to introduce an automatic tax deduction of 20% on international money transfers into the country. Essentially this law aimed to turn your local Italian bank into a tax collector by forcing Italian banks to withhold this tax from every amount transferred from abroad into your Italian bank account (this would have only applied to the bank accounts of individuals resident in Italy and not to corporate accounts or to non-residents).
Holding an international account in the currency you need and using that account to draw funds periodically as you need them (e.g. by debit card or credit card) can avoid the need to make transfers directly to an Italian bank. Although this proposed law to immediately tax money transfers was not implemented in 2014, as previously planned, managing your money held abroad in the above way, means one never needs to be concerned about the prospect of tax being deducted immediately from money transferred into Italy.
International accounts used to be quite expensive and hard to obtain, plus it was more difficult to understand the strength and safety of the banks providing them. Times have changed however, and now such accounts are more convenient, cost a lot less and are accessible to almost everyone.