Modern economics and technology have simplified the process for global citizens to work and own assets practically anywhere in the world. But unfortunately, international taxation has not evolved to this level yet.
We hear about inheritance tax, income tax, property tax, tax residency and tax rates, to name but a few. It is challenging for an ex-pat to work, earn, and own assets in several countries, as each country has a different tax regulation, tax compliance and tax pillar system.
Navigating the world of cross-border, multi-jurisdictional taxation can be quite complex. Still, with the help of a qualified tax consultant, you can easily overcome tax obstacles and mitigate global tax risk. To do this, you need to consider several things.
Questions to ask about your tax situation
- Does the country you are living in have a double taxation treaty with your home country? If not, then you might have to pay income tax to revenue services in both countries.
- Where is your tax residency, according to government regulation? This could determine your tax liability in your home country. Making use of tax services is the best way to determine this. This question can be answered by your tax advisor for more complex tax challenges.
- If you are a UK citizen, find out if you are UK-domiciled or UK resident – this determines your tax liability.
- Are you employed and earn salaries from several countries? Your combined global income might cause higher tax rates.
- Do you own companies, a business, or properties back home or in other countries? – there could be national and international tax jurisdictions. The people employed by you might have simpler tax obligations, but corporate income tax is much more complex, especially if it extends internationally over several tax jurisdictions.
- Are you still receiving an income from back home? – what are your tax obligations?
- Do you frequently travel for work? Find out the exact number of days the government allows in your home country without being considered a tax resident again. The time spent in various countries will determine your tax obligations back home.
- Are you planning on returning to your home country eventually or planning on retiring elsewhere? More and more people choose to retire abroad after spending their working life as a global professional. This could affect the taxation rate on your pension back home.
What kinds of taxes are there?
Taxes and revenue differ from council to council, region to region, person to person and country to country. Taxes charged may include or exclude some of the taxes mentioned below, but many other foreign taxes could be applicable.
- This is a tax that the receiver of revenue levies on any personal money or property a person inherits. It will differ from country to country, e.g., the UK charges a standard 40% inheritance tax.
- This is probably the most common globally recognised tax levied on income. The tax rate will differ from country to country. Some charge very high rates, while others charge very little or none.
- This is the process of charging income tax twice on the same source of income. This refers to income from a salary, shares, stocks, profits, or dividends acquired. Double taxation is usually set by two countries, the one you reside in and the one from which you receive your income.
- Most countries have double taxation treaties in place to avoid double taxation, meaning you are only taxed in the country from which your income is derived. You need to check the taxation treaties between the countries you reside and work in. This could have a significant impact on your income. Your tax advisor can help with information on this.
- Some tax jurisdictions allow a lump sum of the retirement money or pensions to be tax-free, e.g., in the UK, 25% can be tax-free. If your retirement fund is valued at 1 000 000, 25% is 250 000 tax-free. A lifetime tax allowance is also in play for some countries like the UK. Your financial advisor can also help create a tax-efficient retirement income.
- This is a tax that must be paid on property or land that is owned. The local council or government usually calculates an annual payment based on the property’s value.
Global Tax Services
Most ex-pats usually have complex multi-jurisdictional tax situations that need bespoke tax services or advice. At deVere, we can help create a more tax-efficient financial portfolio and refer you to our partner tax consultancy team for more complex global tax analysis and issues.
Please note the above is for educational purposes only and does not constitute advice. You should always contact your deVere advisor for a personal consultation.
* No liability can be accepted for any actions taken or refrained from being taken as a result of reading the above.