All expats have banking requirements at various levels. Sometimes frustrations keep us from achieving what we feel would be the ideal solution. A lot of expats either do not realise what they ought to be trying to achieve or else they simply are unaware of what banking facilities exist which they could use.
Getting by with a local bank where you live and perhaps hanging on to one in your home country is all very well but it can result in many unnecessary difficulties for you. Exchange controls in some Southeast Asian countries, such as Thailand, make it more difficult to transact than elsewhere. In others, such as Myanmar, true international banking is all but impossible due to the lack of a basic banking infrastructure.
Many expats find that they cannot have access to international banking with an account in their home country. They can also find that remittances into their home country are deemed as taxable income because they have “remitted” income there. Australia and New Zealand are included in this net.
When you start to use an offshore bank, you will find international transactions are not at all strange to them. This includes salary and other receipts as well as payments in a variety of currencies to and from almost anywhere in the world. Most offshore banks will also give you an ATM card so that you can withdraw cash instantly almost anywhere in the world.
In Myanmar, however, expats still face big hurdles when it comes to obtaining cash. The lack of basic banking services renders your international ATM card pretty much useless. Therefore, expats living and doing business in Myanmar have to rely on a “cash-and-carry” system for bringing cash into the country, on black market money changers and middlemen called “hundis” for international money transfers. Adding to the complexities is a somewhat odd requirement that your US Dollars or Thai Baht notes better be spotlessly clean and creaseless.
With the opening of the country to the outside world, new services and service providers are beginning to appear. ATM cash withdrawals are now possible using Visa, MasterCard, China Union Pay and Japan Credit Bureau cards, albeit an expensive source of cash. Western Union this month established ties with seven Myanmar banks, allowing for inbound wire transfers to locals, tourists and expats alike. Outbound wire transfer services are expected to be operational soon.
Myanmar banks have also begun forging relationships with a number of foreign banks. However, the introduction of fully fledged foreign bank branches may still be some time away; currently, foreign banks are only allowed to open rep offices and conduct joint venture operations, with no real benefit to expats on the ground yet.
Internationally, there are some favoured locations for offshore banking. These usually offer high security and confidentiality so that you can confidently carry out your banking business with ease on the internet. Beware of banks requiring high foreign currency balances to keep an account open. A professional adviser can let you know where the best locations and specific banks are located for your requirements.
Although tax havens offer a great deal of confidentiality to individuals the world is a shrinking place in terms of information available. Even banking in an offshore environment could res -ult in your personal details being available to your home tax office at some stage in the future.
Exchange of information between countries is becoming more common. In 2005 EU countries decided to share information between themselves on bank account holders. EU tax havens put up their hands in objection. So the EU Savings Tax Directive was born. If you are an EU citizen, holding an account in one of the European tax havens, the bank is now obliged to withhold tax from interest paid to you in lieu of exchanging information. However, if you are resident outside the EU you are exempt unless you return to live there.
Foreign Account Tax Compliance Act (FATCA) is another point in case. It is being rolled out by the US government worldwide in response to the growing number of US citizens who were discovered trying to evade tax by holding accounts overseas. The approach is two-pronged: banks and wealth managers are now required to report these holdings or withhold 30 percent tax from income from US financial assets they hold; and US owners of these foreign-held assets must now report them in their tax returns if they are above $50,000. A failure to report can invoke up to 40 percent penalties. However, if you are a US citizen residing outside the US, the reporting threshold is relatively high, at $200,000 for single and $400,000 for married tax filers. The practical effect of these burdensome requirements has been for a number of offshore financial institutions to close down accounts held by US expats and to refuse acceptance of new US expat applications.
Whilst it is probably essential for you, offshore banking is not the only option open to you. There are also investment options available which give you a higher degree of confidentiality and quality of safety of your investment. Of course these investments are meant for the longer term. Your offshore bank is ideal for day to day transactions rather than asset accumulation and growth. However, investment products are becoming more sophisticated today and there are some investment houses which have arrangements with banks so that you can use an ATM card to withdraw cash from your investment.
If the readers have any questions or feel like discussing their overall banking situation please contact the writer directly (see below), or Ryan Russell of Myanmar Business Answers on +95109401526915 or rrussell@nmsi.org.
Questions to the author can be directed to PFS International on +66 2653 1971 or email to enquiriesmyanmar@fsplatinum.com.
Andrew Wood has been an expat in Asia for 33 years and is Executive Director with PFS International, covering clients throughout Southeast Asia. He has been writing publicised articles for five years and has made a significant contribution to the PFS library of financial service subjects dating back over eight years. These articles which cover the complete A-Z of financial planning are available to readers on request. His articles have also been published in Bangkok Post and the Myanmar Times.
