If you’re a regular reader of Degtev you’ll often see us mention the so-called ‘expatriate advantage.’ This is a benefit available to many expats when they emigrate away from the UK, lose their UK tax residency status, and are living abroad and in a position to save and invest more of their disposable income.
As part of this ‘expat advantage’ there are often tax saving benefits implied, as well as the potential benefit of being able to save and invest offshore, and expose savings to all of the perceived advantages that that can bring. However, should all expats save and invest offshore? Not necessarily!
If you’re living abroad or are soon to relocate, this article will be of use to you. In it we discuss what ‘going offshore’ effectively means for an expatriate, and when it may be the right decision and when it can in fact be the wrong one.
The term ‘offshore’ can relate to any jurisdiction, nation or financial centre outside the nation in which you’re currently residing – however, typically the term offshore relates to low or no tax jurisdictions where there are specific regulatory, taxation or financial benefits for an individual to encourage them to bank or invest therein.
Once you expatriate – i.e., once you leave your home shores behind and move abroad to live, work or retire – there are taxation implications involved in your relocation, and what’s more, there are often significant advantages for you if you ‘offshore’ your money. I.e., if you save, invest or bank your money in a jurisdiction other than the one in which you’re now resident.
Benefits will always depend on your own personal circumstances of course, but can include security for example, i.e., if you’re working in a country with an unstable banking environment, by offshoring your income and housing it in a stable, well regulated environment, you’re protecting it from any negative fluctuations or situations that may occur in the country in which you’re living and working. Other advantages may include improved accessibility to your cash, advantageous tax breaks or improved investment options for example.
The decisions you make relating to which offshore jurisdictions best suit you and your financial circumstances and requirements will depend on your nation of origin, which is often referred to as your country of domicile, and your new nation of residence now that you have expatriated. For example, if you’re a Briton living and working in Germany, you will not necessarily be best served by the same offshore jurisdictions as a Briton living and working in South America. This is largely due to the fact that within the European Union and specific designated ‘third countries,’ there is legislation in place that restricts a European expatriate’s choices.
With over sixty offshore jurisdictions or international financial centres to choose from, you certainly have your work cut out when it comes to selecting the right environment for your money. What’s more, making the right decision is critical and key to securing and advancing your wealth, maximising your expatriate advantages and staying on the right side of often changing laws. At the bottom line you will need to ensure that the jurisdiction you favour has a high standard of regulation, and that there is supervision, protection and ultimately a compensation scheme in place for anyone who places their money with an institution governed by the jurisdiction’s authorities. It may well be that the country in which you are now living has the best regulatory environment and range of investments and savings policies to match your requirements and risk profile.
Therefore, ultimately it is up to you to work with a qualified financial adviser who understands your unique status as an expat, and who can then guide and assist you to discover whether you can save tax by going offshore for example, or whether you are happier and ultimately therefore better off, investing your money in either your new nation or your old home nation. Because becoming an expatriate changes almost everything about your financial situation – apart perhaps from your ultimate goals – you really do need to seek qualified financial advice once you move abroad.