why does the bank ask about foreign tax liability

Tax residence is part of customer due diligence

The bank asks this because it is required to establish the tax residence of each business customer as part of customer due diligence under the Anti-Money Laundering and Counter-Terrorist Financing Act. This due diligence is not only about money laundering risks, but also about correct tax reporting: banks must be able to report to which countries they must disclose account information. The latter is called CRS, common reporting standard, and operates via the same question as tax residence. That is why the question often appears together with questions about at which banks the enterprise maintains accounts: the bank builds a picture of where your business's money comes from and where it is tax resident.

For most businesses, the answer is straightforward: liable to tax in the country of establishment, as registered in the commercial register, and nowhere else. If the business has a permanent establishment abroad, a subsidiary, or invoices from a foreign location, then there may be a foreign tax liability. That is a factual question that your tax advisor or accountant can answer — not something you should make an assumption about here. If you have no foreign activities, then "no, only liable to tax in the country of establishment" is usually the answer that aligns with the rest of the file, such as also with questions about the ultimate beneficial owners of the company.

Where this follows from: the AMLCFT Act and the commercial register

The obligation to conduct customer due diligence, including establishing the tax characteristics of a client, is set out in the Anti-Money Laundering and Counter-Terrorist Financing Act. The basic details of the business — legal form, place of establishment, registration — are established under the Commercial Register Act 2007 and form the basis against which the bank assesses the stated tax residence. If the answer differs from the place of establishment in the commercial register, the bank will usually request an explanation or supporting document.