Moving abroad sounds like the start of a great adventure. New culture, new job, maybe even a new language to fumble through. However, as people start packing boxes and begin to establish a bank account, most forget one thing that can cause some real headaches: taxes.
If you are living or working outside your home country, you can't afford not to know what your tax liabilities are. It's one of those things that you just can't get wrong. It's precisely for this reason that expat tax advice is important and why a lot of people find it must be obtained only after getting a baffling letter from a tax authority.
Many expats believe that once they have left their home country, they are no longer cared about by their home country. This is not always the case.
The United States is the most widely known case of taxation on the worldwide income of citizens, regardless of where they reside. Other countries have residency provisions that may inadvertently make you a tax resident in two countries. It can be easy to overlook a filing deadline or to get the filing wrong if you're not alerted to the actual country that claims the right of taxation.
This is where it can get confusing. A non-submitted form is not just a piece of paper. It can result in fines, interest, or double taxation of income that has already been taxed.
Even careful, organized people slip up when tax rules from two or more countries overlap. Here are a few mistakes that come up again and again:
None of these mistakes come from carelessness. They come from a lack of clear, personalized information. That's the gap that good expat tax advice is meant to fill.
Your tax advisor in your host country will be familiar with the rules in that country, but is unlikely to be knowledgeable about how the rules in your host country relate to those in your home country. It is a definite drawback that people don't find out until it is too late.
Hence, having a global tax expert makes sense for those with income earned overseas. A global tax expert sees the bigger picture – your citizenship, your residency status, your income streams and the tax treaties that may be relevant between the countries involved.
International tax experts such as Mukesh Thakur are familiar with the interdependent systems. It's an experience that counts; cross-border tax planning is not a subject you want to learn the hard way.
Solid expat tax advice usually includes more than just filing a return. It typically covers:
Working out where you're considered a tax resident, and whether you need to file in one country, two, or more.
Identifying whether a tax treaty exists between your home and host countries, and how it can reduce or eliminate double taxation.
Making sure foreign bank accounts, investments, and property are reported correctly, since disclosure rules vary widely by country.
Understanding how pensions, retirement accounts, and investments are taxed when you're living outside the country where they were set up.
A few habits can save a lot of stress down the line:
This will depend on the rules of your home country. Residential or citizenship-based taxation varies by country. It is one of the first things any good tax advice for the expatriate should explain.
This is known as dual residency and could result in double taxation if there is no tax treaty in place. A global tax advisor will be able to assess which treaty provisions apply to your situation.
Things can be quite simple, but for most expats, income, accounts, or assets are divided across borders, making professional guidance truly valuable.
Often yes. Many countries require disclosure of foreign accounts even if no tax is owed, and the penalties for failing to report can be much greater than the taxes themselves.
It depends on your citizenship, country of residence, and the nature of your income. This is seldom simple to determine on your own, so it's best to consult someone experienced with cross-border tax treaties.