Expats and taxes are one of the subjects that international lawyers and financial planners are approached about the most often. Meyer International most often hears: “What am I responsible for?” “Who do I report to?” and “How do I avoid doing something that’s going to cause a tax mess for me when I go home?” as the most common tax questions heard from the expat employees, company founders, retirees and investors that make up their client base. Maybe you’ve even asked some of these questions yourself.
A large number of expats can’t answer these questions with certainty. If you don’t know the answers, don’t worry, you’re not alone. Res on for some advice from Meyer International’s managaing director, Richard Cayne:
The answer to these questions is that there is no one-size-fits-all advice since tax laws differ from country to country. You need to take into account not just the laws of your home country, but also those of the country where you are residing.
One rule of thumb to keep in mind is this: Regardless of your nationality, most countries will give tax right-of-way to the country where you are currently residing. So, in most countries you’ll be abiding by the tax laws where you are living. That’s pretty easy, isn’t it?
Working abroad offers untold exciting opportunities and new experiences. Everything from business etiquette to workflow will be different when you take your work overseas. Another thing that will change is who you pay your income taxes to. In most cases, you’ll pay income tax in the country where you are working and be exempt from income tax in your home country for the years in which you live and work abroad.
Some countries simply offer exemptions and not a full pass from paying taxes. The US, for example, says that expat workers are exempt from paying taxes on income up to $90k per year. If they make more than that, they must pay income tax in the US in addition to the taxes expected of them in their host country. If you aren’t sure which laws apply to your unique situation, make an appointment with a team member at Meyer International
To provide another example, expat workers in Thailand will have Thai income tax taken out of their pay automatically. That tax equals up to 36% of their gross pay.
Though far fewer people take advantage of it, Investing abroad can place you on sounder financial footing than simply working abroad. It all depends on where you’re living.
Many countries have laws in place that tax locals and expats on financial gains that come from investing. This makes investing from or within those countries very similar to investing from your home country. Other countries have laws that leave income from investments free from taxes, which can be great for expats living and working in those locales.
If you are living as an expat in a country that does not tax profits made from international investments, you have a great opportunity to invest and grow your money more quickly than if you were living in your home country. Countries with these laws include Thailand, Singapore, Hong Kong, Switzerland, Cayman Islands and other offshore jurisdictions.
If you are living in one of these locations, are you taking full advantage of the investment opportunities offered there?
Have more questions about taxes for expats? We can answer them all. Get in touch with Richard Cayne and the Meyer International Team today to make an appointment!