Why are people expatriating?
There are a number of reasons for people expatriating. Some people expatriate for financial reasons, or because of their dislike of their government's policies, while others leave their country of residence by the nature of their occupation. The duration of the stay overseas, the destination and surrounding circumstances differ greatly, but the uniting factor is that, in most cases being an expatriate is financially advantageous as well as culturally enriching.
What kind of banking/investment options open to an expatriate?
The expatriate has his pick of the investment arena. A lot of it is depends on the tax administration in his native land but, assuming that he is going to be non-resident for the length of his absence, then citizens of most countries are in an ideal position, because expatriates will take advantage of offshore financial services in a tax-efficient way. In addition to this, most high tax countries offer attractive investment opportunities and tax breaks for non-residents persons and entities. There are many different structures and services of especial interest to expatriates, so the determining factors need only be the size of the expatriate's wallet and his preferences.
What should an expatriate do about banking while overseas?
Whatever the expatriate's financial circumstances may be, he would be advised to examine opening an offshore bank account to take advantage of the tax efficiency and enhanced confidentiality provided. No tax is payable on interest that arises from money held in an offshore bank account, so if he is just looking for somewhere to receive funds remitted from home, or to have his salary paid into, this would be a plus.
There are a variety of accounts available to suit the expatriate's needs, including instant access accounts with credit/debit card facilities, fixed term deposit accounts with tiered rates of interest, and fixed and variable rate accounts. In most cases it would be useful to set up a bank account in the country where he will be living or working most of the time, from the viewpoint of conducting daily transactions more easily. The expatiate make arrangements with his employer to have a portion of his salary or expenses paid into his offshore account, and part into the local account.
Offshore accounts are usually in a range of hard currencies, but the local account may have to be in the local currency: having two accounts means that if the value of the local currency may fluctuate greatly, or if the expatriate is taxed locally on money received, then he is protected to a certain extent.
The businessman will receive a business number, which is known as a RUK, which is issued by the Ministry of Economy and Finance. The RUK is similar to the Federal Employers Tax ID used in the U.S.
Are offshore fund investments suitable for an expatriate?
Yes. Fund investment means the expatriate can choose to invest in a particular class of assets without the need to examine the characteristics of each asset individually, and should he choose to invest in an offshore mutual fund, the responsibility for the management, maintenance and administration is undertaken by the promoter, manager and custodian of the fund. There are an array of options, ranging from the safe to the aggressive, but the two main categories that offshore funds can be divided into are private funds and public funds. Always depending on their original home tax regime, many expatriates will be able to receive dividends and capital returns from an offshore fund without having to pay tax while they remain non-resident.
If an expatriate isn't interested in investing, but wants to keep his money safe, what type of structure would be best suited for him?
If the expatriate has a extensive liquid net worth that he would like to protect during his expatriation and afterwards, then an offshore trust would be the best for him, along with offshore bank accounts. This kind of structure is used more for asset protection purposes than for tax efficiency during the expatriate's lifetime, as many high tax countries have legislation designed to make offshore trusts tax neutral. However, the asset protection advantages, along with the enhanced privacy afforded by offshore trusts, are useful features.
An offshore trust works by transferring control of assets away from the settlor to a trustee, who then manages the trust in the best interests of the beneficiary or beneficiaries. It is usual for the trustees to operate the trust in accordance with the wishes of the settlor.
There are diverse types of trusts for different purposes, and professional assistance in needed for choosing right type in the right jurisdiction. If the expatriate's home tax regime does not have anti-avoidance legislation, and he wishes to gain tax benefits from setting up a trust, then he would probably use a discretionary trust, in which the trustees have full control over the disposition of the trust income and assets.
What is an offshore company, and would an expatriate need one?
If an expatriate is going to work in a country which wants to tax his world-wide income, or if he is to returning to his home country to a world-wide taxation regime, then an offshore company is worth considering. This is another complex area in sometimes distance a person from his income sufficiently to avoid taxation. In some countries there are rules preventing this; but not in all.
An offshore company takes many different forms, some of which are not of interest to the individual expatriate investor. However, if he has a large and diverse investment portfolio, or provides a professional service, then this type of structure may be of interest to him.
If the expatriate is occupied in providing a personal or professional service, he may be able to achieve substantial tax savings by setting up a "personal service company". He could contract to supply the service regardless of residence, and the fees he earns can accumulate offshore while he works for a lower salary in the country where he is being taxed. This will only work in some countries, however, and the expatriate may have to do something more complicated than just owning the company himself, if it is not to be 'looked through' by the taxman.
There are, of course, other types of offshore companies that can be formed to deal with the needs of large corporations, or for expatriates with very specific needs.
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