Expatriate Taxation And Financial Planning

Summary: The definition of 'expatriate' in the transient sense is to withdraw from residence in or allegiance to one's native country. By changing residence you change your taxation status in your native country and it is at this stage that an expatriate's world can become very interesting financially speaking!

The definition of ‘expatriate’ in the transient sense is to withdraw from residence in or allegiance to one’s native country.  By changing residence you change your taxation status in your native country and it is at this stage that an expatriate’s world can become very interesting financially speaking!

The country where you are deemed resident can tax you on your income and gains; by changing country you are eligible to take advantage of any tax breaks or taxation advantages offered by your new country.  Depending on where you expatriate from and to you could legitimately and significantly reduce your taxation liability.

Obviously in some cases one does not have the choice to expatriate to a particular country simply for the tax breaks one could potentially benefit from in that country.  It may be that you are ‘forced’ to move to a particular country for employment purposes and that country has an even less favourable taxation regime to your own...for example, a move to Germany from Switzerland would be highly unlikely to advantage the expatriate from a taxation point of view!

At the same time, many employers recognise the need to establish regional and international headquarters in countries that not only encourage business and development and offer companies financial incentives and tax breaks, but a country that will afford their employees certain financial advantages and benefits as well.

A company looking to establish itself in the United Arab Emirates may very well be drawn to Dubai.  Dubai offers the company significant financial advantages, it also offers the company’s employees the same benefits added to which they can live in an incredible city with a wealth of history, culture, lifestyle and entertainment possibilities.

If you can choose where in the world to expatriate to and one of your key country selection criteria is ‘tax friendly’ then there are a whole host of jurisdictions out there which could well suit your needs.

If you’re looking for a favourable retirement location, Belize offers ‘The Retired Person’s Incentive Program’ where a qualifying individual can retire to the country and become totally tax exempt.  Alternatively, if you need to relocate and establish a company structure and benefit from low to no taxation...consider Dubai.  If you would like to become a PT - a perpetual traveller - then you can just keep packing your bags every few months and moving on thus never becoming resident in a country long enough to have to pay any taxation at all!

When it comes to changing residence for taxation purposes, simply moving to another country is not enough.  Taking a UK resident as our example, for the UK resident individual to expatriate and lose his UK residence for the tax year in question he will have to have spent less than 183 days in the UK that year; alternatively he will have had to have spent less than an average of 90 days a year in the UK during the last four years.

Expatriates have another significant advantage over their peers back home...over and above any taxation changes they can legitimately benefit from in their new country.  By expatriating you are generally at liberty to take advantage and benefit from all the offshore world has to offer.  By investing, saving, banking or doing business offshore you can benefit from tax free asset growth, greater privacy, diversity and opportunity.

If you’re lucky enough to have more disposable wealth as a result of expatriating - either because you are paying less taxation, earning more, have lower costs of living or have been rewarded by an employer for relocating for example - then you have yet another advantage over your pees back home.  You can use any extra money to intensively invest offshore for the short, medium or long term and turn your short term gains into a long term wealth building advantage.

Expatriate taxation and financial planning are specialist and exciting areas of expertise.  As an expatriate you have so many potential advantages that it takes an expert eye to spot all the opportunities available to you based on your own unique set of circumstances, and to help you structure your entire financial roadmap to fulfil all the potentials you have for long term financial security and success.

Don’t over look your financial well being in the excitement and stresses that go hand in hand with a move abroad.  Sure, your immediate priorities will be establishing a comfortable life for yourself - from finding accommodation and employment to making yourself familiar with your new surroundings.  But in the very short term you should turn your attentions to how well you can benefit from your new circumstances financially speaking.  It’s a case of sooner being far better than later as the sooner you begin to understand the opportunities the sooner you can realise them and the sooner you can reap the financial rewards you so rightly deserve.

To take the expatriate and offshore advantages you need to take the first steps towards understanding your overall financial situation.  At this point you would be well advised to speak to an asset management company or financial adviser with a particular understanding of how expatriates have unique potential, and an understanding of all the offshore world has to offer.

To that end, if you would like us to put you in touch with such an expert, please visit our offshore solutions centre and complete the form for assistance and advice and we will assist you.

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