Tax efficiencies

Tax is never far from the minds of most expats, making it an essential part of money management. Along with a sunny climate and an easy, good quality of life, the benefit of paying less tax on earnings (or even no tax, in the case of majority Asian cities, Middle East, Russia and Kazakhstan) can be a key reason for choosing a new country.

Tax can be a significant driver in many people's decisions about where to settle, but it is vital that expats understand the taxes they are likely to be subjected to before making any decisions – getting it wrong could prove to be very costly.

Types and rates of tax can vary dramatically between countries but as an expat you will, of course, be subject to the domestic tax laws of the country in which you are living and can typically expect to pay income, capital gains, sales and regional taxes. In addition, some countries require residents to pay a compulsory social security contribution towards the cost of medical care and other public services.

Regular savings accounts are ideal if you want to save for your future regularly but flexibly. They provide the potential to build up cash for substantial future expenditures, such as school or university fees, or supplementing income on retirement. Income accounts are for those who can afford locking their monthly surplus for 5 or 10 years and commit to this term, allowing to build a healthy, slightly more aggressive return. 

Banking offshore mitigates many potential liabilities

By banking offshore you will be able to manage your savings and investments to take advantage of any potential tax efficiencies. Depending on where you live, income from savings and investments may not be subject to tax in your country of residence, if that money is not remitted into your country of residence. And, depending on your jurisdiction, you may not be subject to inheritance and capital gains taxes or death duties.

Usually, interest earned on offshore savings and investment is paid without the deduction of tax, particularly if you're living outside the European Union (EU). Those living within the EU will be affected by the European Union Savings Tax Directive (ESTD) which is designed to ensure that European citizens who reside in one country in the EU, but earn interest from savings and investments in another, pay the right amount of tax.

At its heart, holding your savings and investments offshore through one of our platforms, allows us to manage the repatriation of your wealth tax efficiently on your return to your home country. By holding cash offshore, ideally in an offshore bond or smaller savings plans, you will be able to shelter income growth from tax. If you decide to return to your home country and bring back the money held offshore you may have an income tax liability on the gain, though it can be carefully managed by us using tools like time apportionment relief to reduce or eliminate the amount of tax payable.

Clients often ask us whether the salary they earn in, for example, Southeast Asia or Eastern Europe, can be brought back tax free? For example, if someone living in Atyrau saves £500,000 from their tax-free salary, these savings shouldn't be taxed when the worker returns to their home country. However, if the same expat puts the £100,000 in a five-year bond while in Kazakhstan but cashes in the bond all at once when home, it will be subject to tax.

Managing your interests from start to finish

So, this is when you need us to manage your assets all the way, through your current employment until your return home, to make sure that you are not rolling up future tax problems and finding legitimate ways to save on taxation where possible.

Expats often find that when they move abroad their tax situation can become more complicated, so it's important to seek expert financial advice on exactly what your tax obligations are and how managing your savings and investments offshore could help you benefit from potential tax efficiencies.