Expatriation and its Financial Pitfalls – What Must You be Careful About?

Most people hoping to become expatriates will usually find that a lot of things are sorted with relative ease.
Freight services are making it easier and cheaper to move things abroad; the ability to learn a foreign language is being galvanised with the advent of support software that makes it both quick and fun to understand another tongue; and cheaper travel costs mean that going backwards and forwards from your homeland is a lot less burdensome than ever before.
Still, with the financial state of the world being as intimidating enough as it is, there are still a lot of things that people must consider if they are going to live without money worries in their destination of choice. This is particularly the case with the property market, which proved itself as particularly volatile in the latest Knight Frank Global Trends Index.
To be certain that you’re getting the biggest bang for your buck with local prices, you must first ensure you use a dedicated currency exchange to move money across to the country of choice. Foreign exchange services such as TorFX are perfect for when you buy property abroad, as these companies can freeze and guarantee a rate for you up to a year in advance so you know exactly how much it will cost you from the very start. This at least means you can breathe a sigh of relief as you carry out some dedicated searching for a property, safe in the knowledge that exchange rates are as much as five per cent better than at high street banks.
Of course, savings are one thing to transfer to another country that comes with pitfalls – pensions are another. Many people have found themselves opting for Qualifying Recognised Overseas Pension Schemes (QROPS), which are certainly attractive to those who are moving from the UK on a permanent basis. This is because they provide tax breaks, allowing people to miss out on the prospect of paying UK tax on their income – up to 50 per cent, if they were a top earner.
However, the Daily Telegraph recently pointed out that expats are “increasingly being blinded by tax sweeteners”, rather than picking the best scheme for their retirement aspirations. As such, if people go this route, it is imperative that they “address any regulatory implications and not be swayed simply by an attractive tax inducement” – it could be a very poor move indeed.
Yet another financial pressure that clouds the skies of personal finance is inflation. The UK, for example, hit the heights of five per cent in the closing months of 2011; however, other countries could leave you much better off (or far worse off). These rates will move up and down, and it may simply be worth keeping more of your money in your usual domestic currency if the rate of inflation you’re walking into is high. Sometimes, patience really is the best virtue if you want to be in a better financial position.
Finally, local taxes are one of the biggest things you will come up against, and they’re certainly something that you can’t outright ignore. What’s more, many countries will tax foreigners on any property they own in that country. These often apply rental income too, often being double what locals would pay – nations such as Vietnam implement this law proudly to protect the interests of its citizens. On top of this, every country has a wildly different tax regime, with many being incompatible with UK laws – this could see you having to pay more due to a lack of tax breaks that you would qualify for back in Britain.
Ultimately, there are a lot of things you must research in detail. By networking with expats in your country of choice, or speaking to legal representatives and services such as Citizens Advice, you too could be in a much stronger position and understand exactly what you’re entitled to. Be safe and patient with your cash and you will be more comfortable in the future – much like you deserve!