Taxes. Often claimed to be the "other" thing one can’t avoid, apart from death. As an integral part of any economy, taxes are unfortunately necessary and usually heavily enforced, whether the residents like it or not. We have all seen the stories of the rich and famous moving from their homeland to foreign shores to claim offshore status in a bid to reduce their tax liabilities, it happens all over the world. Usually the higher the rate of tax in a country, the larger the number of people moving their affairs.
What about those that live and work abroad though? The expatriate is often seen in different lights. Some as the international jet set with oodles of cash flying about all over the place, others being hard workers like commercial divers, oil riggers or construction specialists that work abroad for long periods at a time, and of course, not forgetting retirees seeking warmer climes.
Regulation changes constantly concerning taxation on income gained outside ones country of residence, so much so it is incredibly difficult to keep up with and monitor all possible scenarios and situations.
It is possible to reduce ones tax liabilities using offshore facilities, although it is heavily frowned upon by almost all governments around the world, purely because it costs them income. If you live and work outside your tax domicile though, as an expat, then investments can be made more profitable by taking advantage of ones status.
Whilst here at IPIN
we are not qualified tax advisors, let alone offshore tax planners, it would appear there are some basic suggestions to follow if you reside outside your tax domicile and wish to reduce your liabilities.
- Ensure you are seen by your domicile government as an expat. This means everything needs to be paid up (Debts and so on). Consult a tax advisor in your country to see that you comply with the local regulation. Some countries have documentation that will declare you as a non resident.
- Investment in your home domicile needs careful structure. If you retain a property in your tax domicile that you rent or lease out, make sure you have a proper contract in place. Stocks and shares held in the domicile that produce a yield are often subject to taxation, this isn’t to say that you cannot purchase UK based stock if you are a UK national, there are just alternative ways to go about it to reduce ones liability.
- Check the time allocation that you are allowed to spend in your home country, this varies depending where you are, and can be aggregated over a period of years. If you exceed it, most countries will require the back tax payable during the year you are technically declared resident. (Very scary if you happen to have made a lot of money in that time period!)
- Pensions. If you have a company pension, transfer it out of your tax domicile, again an offshore specialist will be able to assist with this.
In general, if you live and work outside your home country, you need to convince your home government that you are no longer resident, or able to be resident even if you chose to. Whilst these are not hard and fast rules by any means to reducing tax liabilities, the number of cases lately across many jurisdictions around the world concerning offshore funds, banking and investment has risen significantly, mainly due to many governments doing everything they can to haul in cash to recover from the recession.
Working abroad has never been illegal and neither has tax reduction. Tax evasion on the other hand is a serious no no and the line between the two can be very vague at the best of times. If you are already offshore or an expat in any form, make sure you keep up to date with the international treaties and regulations regarding taxation and consult regularly with tax advisors in the respective regions where you hold assets or investments. Remember, every jurisdiction and nationality combination will have different tax implications.
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- Wednesday 07 April 2010