How Expatriates are Saving Tax Offshore

Published on 09 June 2007
Category: » Offshore Banking, Offshore Investment & Savings » Expatriate Tax Saving

“Dear ShelterOfshore, I understand the theory that it is potentially possible for an expatriate to save tax by ‘going offshore’ – i.e., by banking, saving or investing in a jurisdiction other than the one in which they are resident or domiciled - but how exactly do I, as an expat go about saving tax – do I pay less tax, or do I pay no tax? Do I even have to report the actions I’ve taken by going offshore?”

These are the types of question that we get emailed to us all the time – so to answer them once and for all, in this article I’ll detail in layman’s terms how expatriates are saving tax offshore and if you’re an expat you can hopefully see whether any of the methods are applicable to you and whether it is then worth you exploring the range of offshore banking, saving and investing options that you have.

If you were born, bred and raised in the United Kingdom (for the sake of this example) and you begin working and paying tax in the UK you are considered domiciled in Britain, you are deemed resident for taxation purposes and you have an absolute obligation to mention all of your financial affairs that result in income being earned, interest being paid or gains being achieved for example to HMRC (Her Majesty’s Revenue and Customs – a.k.a., the taxman).

If you decide to move abroad and leave your working days in the UK far behind you, you can extract yourself from the British taxation system by following a series of steps and remaining resident outside the UK for a set number of days in any one tax year. I.e., to put it simply, if you move abroad and intend to remain overseas for at least the foreseeable future you can contact the British taxation authorities and officially inform them that you are no longer resident in the UK for taxation purposes. (Full information about how to go about this process and the P85 form you need to fill in as well as the criteria you need to meet is available on the HMRC website.)

Now, if you de-register for tax in one country you have to theoretically register for tax in another - (I say theoretically because if you are constantly changing the country in which you reside on a month by month basis this makes you a perpetual traveller and a form of tax exile – a subject about which this article is not about!).

Depending on the country you are now living in and in which you register for tax, as an expatriate you may be able to save tax on all your offshore activities.

Certain nations in the world have lower rates of taxation on income, interest and gains than the UK meaning you will pay less on that which you derive than if you’d remained resident for taxation purposes in the UK. Some nations allow you to earn more than the UK does before you fall into a particular tax category which may mean you pay less or even no tax on your offshore financial activities, some nations only tax you on that which you remit into their country and so if your money stays offshore it stays tax free…and some nations don’t tax such profits, gains and income at all and this is how the vast majority of expatriates are saving tax offshore.

There’s nothing complicated about it – you just have to reside in a nation with a more friendly taxation regime that the one in which you currently reside! You cannot get around the disclosure fact however, because the vast majority of countries in the world insist that you declare income and assets that you have offshore – and don’t forget, if you move back to your country of domicile or on to another nation with different taxation policies, your tax situation could change.

So, if you’re moving abroad or are already an expatriate, why not find out more about your taxation obligations in your new country of tax residence and see whether you too could be saving tax by saving, investing and banking offshore?

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