An offshore captive bank license is a wholly- or partially-owned subsidiary of a company that acts as a bank for the benefit of the parent company or group (usually the same company that owns the bank), its customers, clients, and suppliers.
An offshore captive bank is allowed to establish, maintain and operate a business office in country and conduct most types of banking business with its members. The only limitations being that the bank may not issue a check book to any depositor nor provide any current deposit or checking facilities for the transaction of offshore banking business. The minimum capital requirement for an offshore captive bank license in Belize is US$1,000,000. The annual licensing fee for an offshore captive license is US$15,000.
- I use Belize as an example and several jurisdictions offer international captive banking licenses.
An offshore captive bank may have up to 25 members or partners. Each member must be approved by the central bank. The captive bank may only send wire transfers and do business with those listed in its license.
Offshore captive banks generally offer all the basic baking services such as safe keeping of deposits, investment management, merchant banking, lending, letters of credit, credit enhancement, and financing. Some benefits of these business units include:
- Zero taxes: The bank pays zero tax to Belize, thus the ability to retain earnings in this low tax jurisdiction may result in significant tax savings or deferral for the partners.
- Lower taxes: Transferring savings and investments to the captive bank means less tax liability for the bank partners since their country of origin (the US, etc.) has higher tax rates.
- Easy access to funds: Due to banking laws, it may be easier to move around large sums of money through correspondent accounts.
- Lending: Partners may wish to take loans from the bank which result in the transfer of interest to the bank and minimizes profits or taxable gains in their country.
- Leasing: The bank may purchase property and lease it to the members.
- Debt Factoring: The bank may lend on member’s accounts receivables with the same tax benefits as above.
Please contact me at info@premieroffshore.com if you have questions about obtaining an offshore captive bank license. To find out more about my firm, check out www.premieroffshore.com
BELIZE CITATIONS:
International banks are licensed in Belize under the International Banking Act. The Act establishes two categories of international banking license in Belize: an “A” Class – Unrestricted license and a “B” Class – Restricted license.
What we call a captive bank is a Class B international restricted license. For a legal description, see page 24 of 55, section 17, at https://www.centralbank.org.bz/docs/fss_2.3_iba/iba-revised-edition-2003E28ECA29362C.pdf?sfvrsn=2