Expatriates in High Tax Countries Can Reduce Their Tax Burden
Published on 10 April 2007
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We often focus on information provision for expatriates living in low or no taxation nations and how expats in general can save tax through the use of qualifying offshore investments and savings policies for example – but what about all those expatriates living and working overseas in nations where taxation is high…is there anything that they can legitimately do to mitigate their taxation burden?
In a word – yes – expatriates in high tax countries can reduce their tax burden with effective taxation and financial planning and through the use of structures such as offshore companies for example. In this article we lay out the basics of how taxation can be reduced and detail the next steps that can be taken if such a plan potentially suits your needs.
When it comes to expatriate tax saving, one very effective plan that expatriates living in high tax countries are using to reduce their tax burden involves the incorporation of at least one offshore company structure.
Basically, in the majority of jurisdictions in the world a company is deemed to be a ‘legal entity’ – one which can be taxed, sued, invoiced, employed etc., - and if an individual incorporates a company in a low or no tax jurisdiction and arranges for any profits they derive through employment or investment for example to be attributed to their company, they can offset their own personal high levels of taxation – theoretically at least.
Naturally enough if it was quite as simple as that everyone in the world would be doing it and no tax would ever be paid – but the description illustrates the basic framework which can be applied to creating a structure to offset or mitigate an individual’s taxation burden.
Now, unfortunately governments around the world aren’t too keen on the concept of anyone legitimately being able to avoid taxation and so strict anti-avoidance legislation exists which reduces the attraction and appeal of simple offshore company incorporations.
But don’t lose hope!
Through the use of concepts such as offshore hybrid companies, offshore trusts and offshore companies in multiple jurisdictions as well as the employment of nominee directors for example, an effective and legal structure can be created to help expatriates living and working in high tax countries to reduce their tax burden.
It is imperative to take expert advice before proceeding however…because if you get it wrong you could actually increase your exposure to taxation by being resident in a high tax country and exposing your income to high tax in another country – and just imagine if there was no double taxation agreement between the two! While that’s bad enough and the thought of paying two lots of taxation probably leaves you feeling a bit light headed…what about if you inadvertently broke the law with your offshore structure? So you see, not only do you need to take advice to determine whether you can personally benefit from a taxation and financial planning strategy to reduce your taxation burden, but you need expert assistance with the creation of a structure if you do decide to go ahead and work your situation.
If you want to speak to a company who can advise you in the first instance and then assist you if you do decide to proceed, please complete our offshore advice service form and we will put you directly in touch with the most applicable company depending on the outline of your requirements and your country of tax residence.
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