Tax is as certain as death; this little three-letter word often strikes fear in an investor’s heart. Not pay, pay, pay, but tax, tax, tax – although they are synonymous. 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 individual tax regulations.
Navigating the world of ex-pat taxation can be quite complex, but with the help of a qualified financial advisor or tax consultant, you can easily overcome tax obstacles. The goal is to reduce global taxation as much as possible. 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 information can be given by your financial advisor or your tax consultant 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? Check if there are double taxation treaties in place. Your combined global income might cause higher tax rates.
- Do you have businesses or properties back home or in other countries? – there could be national and international tax obligations. 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 earn over a certain salary bracket abroad? Your home country could impose tax according to higher tax rates.
- 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.
Inheritance tax – This is a tax that the receiver of revenue levies on any personal money or property that a people inherit. It will differ from country to country, e.g. the UK charges a standard 40% inheritance tax.
Income 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.
Double taxation – This is the process of charging income tax twice on the same source of income. This refers to income from a salary and 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 advisor can help with information on this.
Retirement Tax – Many tax jurisdictions allow a lump sum of the retirement money or pensions to be tax-free, e.g. 25% can be tax-free. If your retirement fund is valued at 1 000 000, 25% is 250 000 tax-free. For some countries like the UK, a lifetime tax allowance is also in play. Your financial advisor can also help create a tax-efficient retirement income.
Property Tax – This is a tax that must be paid on property or land that is owned. It is calculated by the local council or government and is usually an annual payment based on the property’s value.
Self-service online tax sites or e-file sites make simple tax filing more accessible, but ex-pats usually have more complex multi-jurisdictional tax situations that need bespoke tax services or advice.
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.