What is important to know when choosing a foreign bank in 2018

Recently, an increasing number of citizens, concerned about their future, the future of their family or business, face the issue whether it is possible to open an account in a foreign bank and what is required for this? Which bank to choose for this: European, offshore bank, etc.? Historically, (and sometimes it is quite justified) the trust to a foreign bank is higher than to local institutions, and obtaining, for example, a loan is possible on more favorable terms than in Ukrainian banks, moreover, many people wish to keep the confidentiality of their actual income.

Regardless of whether you want to open a foreign bank account online in offshore or onshore jurisdictions, a number of aspects need to be considered and analyzed when choosing a bank. That is why the company Finance Business Service works with more than 100 banks around the world. We ask only really necessary questions in the process of selecting banks for our clients.

The current situation in the banking shows that financial institutions are increasingly facing problems of unexpected loss of correspondent accounts in US dollars. In general, the US is only a part of the global pressure on the international banking sector, we should not forget about the OECD program on automatic information exchange, and about the guidance of the BEPS. The complexity of automatic exchange for international banks is not only in the risk of losing a significant number of customers, but also in understanding what and whom to provide as part of the exchange. Tension in the banking sector is clearly traced through the complication of the procedure of opening accounts and building of long-term cooperation, directly influenced by the financial regulators of international banks.

In such a situation, real risk diversification is possible only if you have a spare foreign bank account. It is worth mentioning the risks of owning a bank account in only one country. The vivid examples are the hacker attacks on financial institutions of different countries, the volatile policy of central banks, often aimed at reducing the number of financial institutions in the country, etc. The main criteria for choosing a bank

  1. Before choosing the most suitable bank for opening an account, first of all, you should determine the goals that you need to achieve using this account. They can be very diverse:
    • Saving of personal funds;
    • Private investment of private funds;
    • Earnings on the Internet or online commerce;
    • Sale of goods and services to foreign partners, etc.

    If the purpose of opening an account is a standard commercial activity with a large number of incoming and outgoing payments, then the most important criteria for choosing a bank will be the speed of the transfers carried out by the bank and the convenience of managing the account; in particular - the availability of a remote account management system (Internet bank), as well as the average cost of one transaction. It is also important to clarify whether the bank is working with the list of currencies you need. In the case when the main task of opening an account is to keep the financial resources already earned by the entrepreneur, usually attention is given to the bank’s reliability rating. The interest on the deposit will be relatively low in the banks of high reliability category (“AA” and higher), which is due to the conservative investment policy of the banks of this group. If an entrepreneur raises the issue to make his free funds, untapped in the main business, continue to “work”, creating additional income, then one should consider the option of opening an account in one of the investment banks that place client’s funds professionally in international stock markets, getting relatively high interest income.

  2. Is it necessary to visit a bank to open an account? Many customers prefer to open an account without going to the bank. Opening of accounts is possible remotely, subject to certain requirements of the bank. In addition, in some cases, you should be prepared for the possible need to meet with a representative of the bank in Kyiv or in one of the regional offices of the bank, for example, in Europe (depending on the bank).
  3. Tariffs, cost of service, availability of necessary bank products When analyzing tariff rates, it is necessary to pay attention to the availability of additional bank commissions, for example, for considering a package of documents for opening an account, etc. At the same time, it is important to clarify the fate of these resources, if the bank refuses to open an account - as the tariffs of banks may specify that these commissions are not returned. The banks of Europe (Liechtenstein, Switzerland, Austria, etc.), being respectable and reliable - mainly refer to savings banks. Tariffs for their services are much more expensive than in commercial banks with a priority rate for conducting banking operations. The availability of certain bank products may sometimes become a key factor when choosing a bank. Some banks offer cards that do not contain the owner's name, some cards require special transfer from the account, others are attached directly to the account, etc. Brokerage accounts will be necessary for transactions with securities, FOREX-accounts - for the operations in foreign currency markets.
  4. Do you want to give minimum information about yourself and your business to the bank? The general trends in the world financial system are such that now almost all banks request a lot of detailed information about the business and its ultimate beneficiaries. Banks are forced to comply with the requirements imposed on them by law, otherwise they can incur catastrophic amounts of fines, remain without a license ... The list goes on. Be very careful if your counselor / lawyer recommends working with the bank, arguing that “this bank does not ask anything”. There is a big risk that then you will look for the specialists to return your money earned for years of hard work.
  5. Bank secrecy. If this is one of the main criteria for you and your business, then, on choosing a bank:
    • pay attention to the international agreements of the jurisdiction in which the bank you are interested in is registered, about mutual assistance and the provision of information to other countries;
    • choose a country with high standards of bank secrecy and strict laws regarding the disclosure of bank secrecy (Switzerland, the Cayman Islands, Hong Kong, Singapore, etc.)
  6. The availability of personnel with the knowledge of the Russian language, Russian-speaking Internet banking, technical support in Russian. This is an important point for many customers.


We wish to think, when preparing to become a client of a foreign bank, a potential client chooses his own bank himself. But the reality is that everything is exactly the opposite in banking for non-residents. The bank always makes a decision to open or not to open a bank account for you as non-resident. And it will not risk the existing customer base, the license, the freedom of the bank’s executives and the Compliance officers, because they are responsible (up to their freedom) to ensure that risky and problematic clients not to be included in the number of bank’s customers. Banks have their own and often quite vague list of characteristics that should be initially inherent to a potential non-resident client.

The company Finance Business Service is ready to help you and take painstaking and extensive work on itself. We suggest answering the questions of a specially designed brief for the professional choice of a foreign bank to open an account. It includes a number of issues, best adapted to the general banking standards and requirements. Based on the answers provided, we analyze and select the most suitable financial institution in accordance with your goals and plans.


By registering a company abroad with the help of Finance Business Service, you receive special tariffs for the package of services, while the standards of the constituent instruments of the companies registered by us meet the strictest requirements of international banks. Thus, the documents will be ready for immediate submission to the bank you need.

In a press release of January 29, 2018, the Council of Europe announced the second set of additional directives on the negotiations detailing the position of the EU-27 (27 EU Members without the UK) regarding the transition period with respect to Brexit. These directives give the Commission the authority to initiate discussions with the UK on the terms of Brexit and establish a transition period, no longer than until December 31, 2020.
During the transition period in the UK, full and constant application of the EU legislation is provided. However, the state will no longer participate in the EU administration and the decision-making process.
On January 30, 2018, the EU Commission published a document warning the companies of the key challenges in the customs and VAT that they will have to be overcome when the United Kingdom is not a Member of the EU. If no other transition period is agreed between the EU and the UK, the European Customs and VAT regulations in the UK will no longer apply from March 30, 2019, as the UK officially announced its intention to leave the EU on March 29, 2017. This document provides a brief overview of the customs and VAT implications that will arise from the actual date the UK left the EU. From the date of delivery to and from the UK, it will be qualified as imports and exports, rather than intra-Community sales (including the filing of customs declarations, the application of customs duties, etc.).
The document also emphasizes that a number of licenses (for example, customs licenses, the status of the Authorized subject of economic activity) issued by the UK government will no longer operate in the EU and the imports to the UK will no longer be able to use the preferential tariff agreements concluded by the EU with third countries.
A number of other issues, such as the impossibility of the UK to use the European MOSS system and VAT refund procedure after the end of EU membership, are also briefly considered. Moreover, the British companies will be treated as non-EU companies, so they may need to appoint a fiscal representative in a number of Member States for their local registration as VAT payers.
On November 7, 2017, the UK government also published a draft law on taxation (cross-border trade), which is part of the basic legislation establishing the British legislative framework in the field of customs and VAT. At this stage, there are no detailed provisions on many issues. The bill has passed the second reading in the Parliament on January 9, 2018. At present, there is no declared position regarding the transition period, but it is expected in the upcoming government statements.
According to the information document to the British bill, it is designed in such a way to be flexible enough for a range of possible outcomes of the negotiations, including a transition agreement and a scenario where the agreement has not been reached.
In any event, there is uncertainty in the final form that Brexit will acquire and its timing. In this regard, it is recommended for the British companies, as well as European companies with British ties and interests to prepare for the worst possible option, the so-called “complex Brexit scenario”. Along with other issues for the settlement, the implications for VAT and customs clearance will be central to the preparation of Brexit.

The format and methods of delivery of many goods refer them to the category of services, especially if they are transmitted over the Internet, such as e-books, music downloads, streaming of content. The regime of VAT for this particular subcategory of services provided electronically has undergone significant changes lately. In this blog, we will consider the requirements of the current European legislation, and we will try to cover the coming changes in this area in the next ones.
In accordance with the European legislation, came into effect from January 1, 2015, telecommunications, television and radio broadcasting, as well as electronic services, are subject to VAT at the location of the client, whether it is a business or a consumer, located in or outside the EU .
However, in order to ensure the correct taxation of these services, the supplier needs to determine the status of his client (whether he is a VAT payer), as well as his location.
The easiest and most reliable way to define whether a customer is a business or a consumer is to ask him for a VAT number. Suppliers can check the VAT numbers of their customers using the website of the VAT Information Exchange System (VIES): http://ec.europa.eu/taxation_customs/vies.
The location for the business (VAT payer) is defined as the country of registration or the country in which it has a permanent location and receives the service. The country of registration or the country in which territory he has a permanent address or usually resides is the location for the consumer (not a VAT payer).
If everything is more or less clear with telecommunications and broadcasting, but we should consider the concept of electronic services in more detail, since we face it more often than we think. In the European legislation, electronic services are defined as services provided through the Internet or electronic network, the nature of which makes their provision automated with minimal human intervention, as well as the provision of which is impossible in the absence of information technology.
There is rather extensive list of electronic services, but we list only the main ones:

  • digital products in general, including software and updates to it;
  • provision or maintenance of the presence of business or personal presence in an electronic network, such as a website or web page;
  • e-mail, automatically created from the computer;
  • hosting of web sites and web pages;
  • administration of remote systems;
  • online data storage, where specific data is stored and retrieved electronically;
  • access or uploading of photos, graphics or screen savers;
  • digitized content of books and other electronic publications;
  • subscription to online newspapers and magazines;
  • blogs and website statistics;
  • online news, traffic information and meteorological reports;

  • provision of advertising platforms, including advertising banners on the website / web page;
  • use of search engines and Internet directories;
  • access or download of music, movies, games on computers and mobile phones.

In order to declare and pay VAT (both in the EU and outside), a supplier can use the online declaration / payment method via Mini One Stop Shop (“MOOS”) by registering on the relevant web portal in the EU country, where he is registered as the VAT payer. It should be noted at once that this scheme is not an obligatory, but a simplifying measure. It allows taxable persons not to be registered in each of the Member States where their customers are located.
In practice, according to this scheme, a taxpayer registered in the MOOS in the EU Member State (state of identification) electronically submits a quarterly MOOS declaration which lists the supply of services to tax-exempt persons in other EU member states (consuming states) together with VAT subject to withholding. These declarations together with the VAT paid are transferred then by the State of identification to the appropriate consuming States through a secure communications network.
When cross-border services are provided to business, a client from another EU country (relative to the supplier) will independently pay the tax in the framework of the reverse charge mechanism. This system allows the buyer of the service to calculate the tax at the rate of his country and report on it by indicating the amount of tax payable in the declaration and the same amount of tax to the deduction. Actual cash flow does not occur, but the controlling bodies receive information about the movement of services within the EU.
The rules of VAT on the taxation of electronic services, telecommunications services, as well as television and radio broadcasting services can be visually presented as follows

The exception to the general rule is the rule of effective use and consumption. It is used when:

  • the place of delivery is in the European Union, but the services are consumed outside;
  • the place of delivery is outside the EU, but services are consumed in the EU.

Efficient use and consumption take place when the client actually consumes the services not at the location, regardless of contractual terms and payment.
For example, the services for the provision of banner advertising on the website of the publication, provided by the company in Germany for business in the United States, as a general rule, are taxed at the customer’s place of registration, and, accordingly, the European VAT is not charged. However, if the website of the publication is used for an advertising campaign within Germany, the German competent authorities, using the rule of effective use and consumption, may decide that VAT is levied in Germany.
So, the essence of the legislative requirements for levying VAT from electronic, telecommunications, and television and radio broadcasting services is to ensure the suppliers to pay VAT for such services in each EU country in which they provide them. It may lead for many companies to a legal requirement to register VAT by the payers separately in each EU country where they have clients. This is the reason why the MOSS system has been created, by which the declaration and payment of VAT on several European countries can be made through a single electronic declaration submitted to the local tax authority.

The companies which have customers in the European countries have to determine the state in which their income is subject to VAT and related consequences with respect to the indirect tax.

The supply of “services” is defined as something that is not a “commodity”. Each supply of services should be analyzed in the light of the rules of the place of delivery in order to ensure the right accounting of VAT by the right person in the proper jurisdiction. It is especially important on making global sales that may lead to VAT obligations, and the rules of the place of delivery are the starting point for this.

As in the case of goods, there are different rules for determining the place of delivery (as well as, accordingly, the place of their taxation) for the services provided to the business (B2B) and services to the end user (B2C).

As a general rule, the provision of B2B services is taxed at the location of the client. In this case, the customer must provide the VAT number to the service provider, otherwise such a transaction is considered as B2C. If the client is a resident of a third country (not EU Member State) and does not have a European VAT number, he must provide documents confirming the conduct of his economic and business activities for his consideration as a business client.

The provision of B2C services (for end users), as in the case of the supply of goods, is subject to VAT at the place of registration of the supplier.

The mechanism for the tax collection in the case when the country of the supplier does not coincide with the country where the service is provided is similar to that mechanism that is used for the delivery of goods: when the B2B service is provided, the supplier issues a VAT invoice at a rate of 0%, and the customer reports on VAT by means of the reverse charge mechanism. When the B2C service is delivered, the supplier issues a VAT invoice at the rate of his country.

It is important to explain what the reverse charge mechanism is. This mechanism was created to simplify VAT reporting in 1993, when the European VAT was reformed to launch a single market. Its essence is that the responsibility for VAT accounting is shifted from the seller to the buyer. The recipient of the goods/services is obliged to declare both his purchase (input VAT), as well as the supplier’s sales (output VAT). That is, he displays in his declaration the amount of VAT (at the rate of his country) to pay and the same amount of VAT to deduct. Thus, two postings cancel each other in terms of cash flow. However, from the point of view of regulatory authorities, this is the way to report for this transaction. This information is also displayed in reports on the supply of goods or services for cross-border supplies (EU Sales List).

The mechanism for accounting and payment of VAT for various transactions is shown in the following table below:


Exceptions are electronic, telecommunication, TV and radio broadcasting services B2C, when the obligation on VAT in the customer’s country lies with the supplier. In this case, he can use Mini One Stop Shop (MOSS). We will discuss this topic in details in one of our following blogs.

In order to ensure VAT revenues in the country of actual consumption of the service, special tax rules were introduced at the place of effective use and consumption of the service:

  • B2C services provided by the intermediary are taxed at the place where the main transaction is taxed in which the intermediary participates. For example, a private owner of a villa in Spain wants to move furniture to his house in Germany, for this purpose he asks the intermediary to find a company that will carry out the transportation. Regardless of where the intermediary is registered, a Spanish tax will be levied for the commission, since the place of departure is the place of taxation within the European transportation of goods.
  • B2B and B2C services related to real estate are taxed at the location of this property.
  • Passenger transportation services (both B2B and B2C) are subject to VAT in proportion to the distance along the route in the territory of each country. For example, the price of a ticket for a bus trip from Poland to France via Germany will include VAT in Poland, Germany and France, which is proportional to the distance traveled in each of these countries. If the route passes through Switzerland, VAT will not be charged for the distance traveled in this country, since Switzerland is not a member of the EU.
  • Intra-European transport of goods B2C (goods departing from one Member State and arriving in another) are taxed at the place of departure.
  • Subsidiary to cargo services B2C services, such as loading and unloading services, are taxed in the Member State where these services are physically performed.
  • Services B2B and B2C for short-term lease of vehicles (up to 30 days, in case of vessels - up to 90 days) are taxed at the place where the vehicle is actually transferred to the client’s disposal.
  • Long-term rental services for vehicles B2C will be taxed at the place where a private customer is registered, he has a permanent address or usually resides, except for the cases when the service provider for renting a pleasure craft is registered in the same Member State in which he transfers the vessel to the customer.
  • Services for holding cultural, artistic, sports, scientific, educational, entertainment and similar events, both B2B and B2C, are taxed at the place where these events take place.
  • Restaurant and catering services of B2B and B2C are subject to VAT at the place where the services are physically performed. When these services are delivered in passenger transport operating within the EU, the tax is paid at the place of departure.
  • Electronic services B2C provided by suppliers from third countries to the customers in the EU should be taxed at the location or residence of the customer. For example, if an individual living in Hungary uses an American online library, the Hungarian VAT must be paid for the amount of the service of the American company.
  • Telecommunication, TV and radio broadcasting services B2C will be taxed at the place where the customer is registered, he has a permanent address or usually resides. If these services are provided by the suppliers from third countries to private customers in the EU, they are taxed at the place where the private customer uses this service. For example, a German private customer with a Swiss telephone service provider using his mobile phone in Germany will pay German VAT. When using his mobile phone during his holidays in Cyprus, Cypriot VAT will will be charged for his calls from Greece.

Each EU Member State is responsible for implementing a rule for the effective use and consumption of the service. In this regard, Member States have the right to decide on a change in the location of the provision of services (both within and outside their territory) for vehicle rental services or certain B2C services for the customers outside the EU if the place of service provision in accordance with the rules of the place of effective use and consumption differs from the place of service in accordance with the general rule. Such an opportunity is provided to EU Member States to prevent double taxation, tax evasion or distortion of competition.

As you can see, it is necessary to understand the nature of this service and the status of the client for the correct definition of the rule for the taxation of the service. But it is often not enough, as pan-European rules are just the tip of the iceberg. Since the VAT rules of each individual European country can differ significantly, in order to plan adequately the activities of a specific company with specific counterparties, it is necessary to study the practice of law enforcement in the relevant jurisdictions.

The existing European mechanisms for arbitration resolution of tax disputes on double taxation, prescribed in tax agreements and in accordance with the EU Arbitration Convention, do not always result in effective resolution of tax disputes. The recent monitoring carried out by the Council of the European Union revealed certain shortcomings, especially in relation to accessibility of dispute resolution mechanisms, as well as the length and effective conclusion of the procedure. According to the European Commission, the estimated figure of tax disputes on double taxation in the EU is about 900, with approximately 10.5 billion euros at stake.

In this regard, on October 10 this year, the EU Council approved the Directive to resolve tax disputes (hereinafter - the Directive). The directive is aimed at changing the current situation, when the scope for mandatory arbitration in dispute resolution is limited to the issues of transfer pricing adjustments and the profit distribution of related persons. Thus, legal persons and natural persons will be able to resolve all disputes related to the interpretation and application of agreements that provide for the elimination of double taxation of income and capital.

Among the key objectives of the new rules under the Directive are the following:

  • Creating an obligation on Member states to take decisions on all disputes originating in tax treaties and affect the tax position of businesses and citizens;
  • Providing an opportunity for taxpayers to unblock procedures at national courts;
  • Clearly defined timelines and standard period for each arbitration phase;
  • Extending the scope to all tax disputes between Member States that derive from tax treaties and other international agreements;
  • Mandatory notification of the taxpayers and publication of reviews of arbitration decisions.

To achieve these objectives, the Directive provides for the following:

  • Member States will now have a legal obligation to take conclusive and enforceable decisions under the improved dispute resolution mechanism; and if they do not meet such obligations, the national courts will take such decisions;
  • Taxpayers having tax treaty disputes can initiate a procedure whereby the Member States which have concluded the current agreement must attempt to resolve the dispute amicably within two years;
  • If no decision has been found at the end of the two-year period, the competent authority of each Member State must set up an Advisory Commission to arbitrate;
  • If the competent authorities fail to set up the Advisory Commission to arbitrate, the taxpayer can bring an action before the national court to appoint such Advisory Commission.

The Advisory Commission (as agreed by the relevant competent authorities or appointed by national court of the Member States concerned) consists of one chair, maximum of two representatives from each competent authority, and a maximum of two independent persons of standing. The Commission will have six months to deliver a final, binding decision that is immediately enforceable and resolves the dispute.

The Directive will be applicable to matters submitted after 1 July 2019, on issues related to the tax year starting on or after 1 January 2018.
Multinationals should welcome the Directive as a step towards improving access to tax dispute resolution mechanisms within the European Union. The new Directive establishes a European mechanism in which multinationals can access to resolve all tax treaty related disputes. It expands on the scope of existing mechanisms in the EU Arbitration Convention to cover not just disputes concerning profit adjustments of associated enterprises but also other tax treaty related disputes. In particular, disputes between Member States that are not related to transfer pricing that cannot be resolved bilaterally will be resolved by default through mandatory arbitration under the new Directive.

These changes in Europe work alongside the minimum standards agreed under Action 14 of the OECD BEPS Action Plan to improve the effectiveness and timeliness of mutual agreement procedures under tax treaties. The adoption of the new Directive means that European countries have gone further than the minimum standards, which did not include mandatory arbitration in dispute resolution. It is expected that the adoption of this Directive will put further pressures on the countries to agree their positions in mutual agreement procedures. Thus, the Directive will increase legal certainty, while creating a more friendly environment for business and investment in the European Union.

The adoption of the Directive is a timely improvement of dispute resolution mechanisms available to taxpayers, both for double taxation cases and cases involving difficulties in interpreting tax agreements. The Directive will cover a wider range of disputes, and Member States will have clear deadlines to agree on a binding solution going forward. This is likely to be important in the post BEPS environment, where tax certainty is difficult to obtain on a unilateral basis and where taxation disputes are likely to increase as tax administrations begin regular and focused audit practices on cross-border transactions.

    Exports of services - Ukraine

    July 12 the Verkhovna Rada adopted a basis the bill "On Amendments to Certain Legislative Acts of Ukraine (regarding the removal of administrative barriers to exports of services)." The adoption of this law will be an important step in the development of the export of services (particularly in the IT-sector) as will minimize bureaucratic delays and simplify the procedure of signing a foreign trade agreement, and accounting operations.

    Among the innovations:

  • the possibility of a foreign trade agreement not only on paper but in electronic form - by taking the offer (public offer), electronic messaging or billing invoice;
  • the abolition of exchange controls for the export of services (works) and intellectual property rights;
  • recognition of invoice primary records sufficient to confirmation of economic operations, and to confirm the agreement of non-resident counterparty price and other terms of the contract. Payment of invoice shall be deemed acceptance of works and replace signatures and seals;
  • the possibility of drafting primary and composite records in electronic form, as well as establishing new details: electronic signature, electronic signature or electronic signature of a single identifier;
  • a ban on bank demand translation of documents posted in English and documents contained in two languages, one of which Ukrainian or English.

The amendments proposed to the following legislative acts: the Law of Ukraine "On Foreign activity", "On the order of payments in foreign currency", "On Accounting and Financial Reporting", as well as a number of regulations.

Removal of administrative barriers is a necessary condition for the withdrawal of export services from the shadows, develop small and medium business and increase revenues into the country foreign exchange earnings.

Author: Olena Kutova

senior lawyer of the Finance Business Service company