SEARCH OUR BLOG

ARTICLES BY TOPIC

RECENT ARTICLES

RELATED ARTICLES

The Blog

December 28, 2016

Moving Out of the Country?

by Team Rowling

Whether you’re thinking about moving to another country once you retire or just trying something new, there’s a lot to know before you go.  As a financial advisor and CPA, I can provide some basics; however, if you want to solidify your plans, be sure to consult with a knowledgeable attorney and a CPA who specializes in ex-patriate taxation.

oung smiling african american woman with umbrella over london city street background

 

General Income Taxation:

United States citizens and permanent residents are taxed in the U.S. on their worldwide income no matter where they live. And, if you earn income in your new country of residence, you will owe tax there as well. Here is how it works:

US Person Living in Outside US Taxable in US Taxable in Other Country
Earnings from US Yes Yes, if resident of other country
Earnings from other country Yes Yes
Income from US property Yes Yes, if resident of other country
Income from other country property Yes Yes
Investment Income Yes Yes, if resident of other country

 

As can be seen from this chart, even if you are not considered a resident of the other country, earnings from sources in the other country (wages earned there or rental income from property located in the other country) will be taxed both in the US and in the other country. If you are a resident of the other country, all of your income is taxed in both countries! In other words, moving outside the US can subject your income to double tax. To avoid double tax, be sure to move to a treaty country. In general, this will allow you to get a US tax credit for taxes paid to the other country.

Examples of treaty countries include:

Australia Belgium Canada Denmark Finland France
Germany Israel Italy Jamaica Japan Mexico
Netherlands New Zealand Norway Philippines Portugal Spain
Sweden Switzerland Thailand United Kingdom  

 

No matter where you move, as long as you are a US citizen, you will pay taxes to the US. Living in a treaty country will minimize double-taxation. However, some countries (like Bermuda) impose little or no income taxes – meaning there’s no need to worry about a treaty to avoid double taxation.

Tax Residency:

Typically, a foreign country will determine residency based on the number of days per year a person is present in that country. In most cases, being present for 183 days or more in a year will create residency in another country. However, it is important to check with the actual country you’re considering. Switzerland considers anyone a resident if present for at least 90 consecutive days.

Are You Allowed to Move There?

For other than short vacations, most countries have rules for those wanting to stay for long periods of time. Typically, a visa is required for stays of longer than a couple of months. The type of visa depends on whether you plan to work there, go to school, or live off your savings. If living off your savings, you’ll have to prove that you can support yourself.
Be sure to look into the rules for your particular intended country of residence. For example, if you are Jewish, you are automatically eligible to live in Israel and become a citizen. Additionally, new immigrants pay no taxes on non-Israeli income for ten years. If you want to move to New Zealand, you can become a resident if you are willing to invest about $1 million there for four years. Lower minimum investments ($200,000 to $350,000) are required for countries such as Grenada or St. Kitts.

Other Factors:

When considering a move to a foreign country, be sure to think about whether you plan to live there for just a period of years or long-term. If you plan to go back and forth between your new country and the US, think about travel costs and time as well as residency impacts of how long you are physically in the other country. Finally, make certain that you have health insurance that will cover you in the other country.

 

You might also be interested in:

Are Your Investments Optimized For Capital Gains Tax?
Are Your Investments Optimized For Capital Gains Tax?

Investing in diversified assets is one of the most feasible options you have to improve your financial health and build wealth. As far as investment assets are concerned, you can allocate capital to a variety of assets, such as stocks, bonds, index funds, and more....

Does Your Wealth Management Firm Optimize For Taxes?
Does Your Wealth Management Firm Optimize For Taxes?

A wealth management firm generally works with high-net-worth individuals, providing them with tailored investment advice to generate more profits. In addition, these firms also typically help clients manage their assets and provide a variety of other services that...

Do Your New Year Resolutions Include Planning For Enjoyment?
Do Your New Year Resolutions Include Planning For Enjoyment?

Financial resolutions for more enjoyment this year? Yes, please! The new year has just begun, and for now, all of us are motivated to achieve our New Year’s resolutions. New Year’s resolutions often include living healthier, improving work-life balance, and (we hope)...

New Year’s Financial Resolutions
New Year’s Financial Resolutions

The new year is here, and with it comes new ambitions, goals, and resolutions. But 2024 is going to be a bit different. Know why? Inflation and economic uncertainty! Yes, you heard that right. 73% of respondents to a survey have named both these things as top...

Year-End Tax Planning: Roth Conversions
Year-End Tax Planning: Roth Conversions

As we head full speed into the end of the year, there’s a lot to think about. Between visits with family and friends, holiday shopping, and celebrations, it can be hard to make time for anything else. There is, however, one important year-end process we highly...

Are Your Investments Optimized For Capital Gains Tax?
Are Your Investments Optimized For Capital Gains Tax?

Investing in diversified assets is one of the most feasible options you have to improve your financial health and build wealth. As far as investment assets are concerned, you can allocate capital to a variety of assets, such as stocks, bonds, index funds, and more....

Does Your Wealth Management Firm Optimize For Taxes?
Does Your Wealth Management Firm Optimize For Taxes?

A wealth management firm generally works with high-net-worth individuals, providing them with tailored investment advice to generate more profits. In addition, these firms also typically help clients manage their assets and provide a variety of other services that...

Do Your New Year Resolutions Include Planning For Enjoyment?
Do Your New Year Resolutions Include Planning For Enjoyment?

Financial resolutions for more enjoyment this year? Yes, please! The new year has just begun, and for now, all of us are motivated to achieve our New Year’s resolutions. New Year’s resolutions often include living healthier, improving work-life balance, and (we hope)...

New Year’s Financial Resolutions
New Year’s Financial Resolutions

The new year is here, and with it comes new ambitions, goals, and resolutions. But 2024 is going to be a bit different. Know why? Inflation and economic uncertainty! Yes, you heard that right. 73% of respondents to a survey have named both these things as top...

SEARCH OUR BLOG
ARTICLES BY TOPIC

RECENT ARTICLES

RELATED ARTICLES

Let's Connect!

NEWSLETTER

VISIT US

1455 Frazee Road, Suite 700
San Diego, CA 92108

CALL US

P: (619) 295-0200
F: (619) 295-0210