5 Tax Considerations for Expats

Posted on: 19th March 2019 in Expats Financial Planning

Looking to become an expat? Holborn Independent Financial Advisors (IFAs) in your new country of residence can help you out. All international Holborn offices offer a no-obligation financial review to new expats. 

Financially, there’s so much to get sorted out when becoming an expat. Not only do you need to review all aspects of your big financial picture, which can be overwhelming, but you can’t just do this by simply following a checklist you’ve found online. What you need to do to protect your family’s financial future will depend heavily on your exact circumstances, so you need qualified advice as a priority. 

Get in touch with Holborn before you go to get your expat finances right from the beginning.

Key expat priority – tax!

Managing your tax situation is the key priority for new expats. Maybe the very reason you are leaving your home country is to take advantage of lower income tax in your new country of residence. Great! But there’s far more to tax than income tax if you are planning to move abroad. You’re going to have a complex web of cross-border tax obligations – and opportunities! 

IFAs working in expat markets excel at getting your international tax situation straight across your pensions, investments (including property), mortgages and estate planning:

Income tax

Whatever your country of origin, you will need to notify your tax authorities that you are leaving. Otherwise, you might end up paying tax on income and/or investments twice – once in your home country, and once in your new country of residence. Tax rules differ from country to country. Find out whether your home country has a Double Taxation Agreement (DTA) with your new country of residence. 

Taking in your new cross-border status, you need to know for certain what tax rules apply, how they work together, and how you can make the best of them. A local IFA in your new country of residence can offer reliable support in this key area.

Pensions

Tax is a key consideration in the area of pensions. If you have a state pension (as UK citizens do, for example), you will need to clarify how that works for expats. 

But what about your work pension? Expertsforexpats.com point out that, “As an Expat, depending on your plans, you may have unique opportunities available to you and an adviser will be able to discuss each of the options enabling you to make a decision.”  As a UK citizen, you can move your pension pot from a workplace Defined Benefit pension into a variety of overseas arrangements and unlock great tax benefits. In the UK as in other countries, managing exposure to inheritance tax can be tackled by prudent reframing of your pension (into a SIPP, for example). 

Moving pension schemes is a huge step requiring professional advice, and not one that is not often recommended (that’s certainly what Holborn IFA statistics point to). Transferring your pension might work for your financial situation, or it might not. The only way to find out is to ask an IFA or other pension specialist.

Investments

Any lump sum investments you have will need to be checked for their tax efficiency, as well any property you retain in your country of origin or elsewhere. As an expat, your investment taxation will become more complicated. But you will also enjoy access to opportunities that non-expats do not have. Offshore banking and investment often makes sense for expats; there is an old rule of thumb that says “If your Country of Origin is A, and your new Country of Residence is B, then you should keep your money in Country C.”

Mortgages

Often expats rent when they first arrive in their new country of origin, and take a while to check out the property market. But you can get going sooner if you like. You can arrange a mortgage in your new country of residence remotely via a local mortgage broker. Holborn, for example, offers an experienced mortgage desk at our Dubai HQ that has been successfully arranging mortgages in the complex UAE market for getting on 20 years. Local knowledge counts – so use it as soon as you arrive, or even before leaving!

Estate Planning

Are you planning to retire in your new country of residence? Or like many UK expats, for example, retire back home? You need to decide now what your endgame plan is, and work towards it. Whatever your plan, be sure to get a new Last Will and Testament drafted in your new country of residence. In the UAE, for example, expats can get wills drawn up in international common law with the DIFC Wills & Probate Registry.