Managing Cross-Border Tax Exposure: How Expat Tax Services Can Assist

Cross-border tax obligations can be complex for expatriates worldwide. They must manage the contrasts between different tax regimes, allowances, exemptions, rates, and schemes while ensuring they remain compliant and avoid paying unnecessarily high taxes in any location.

This becomes more intricate when dealing with investments, pensions and international funds, where expats need to consider the right ways to structure their wealth and assets, especially during key periods such as during a move or when making adjustments to their portfolios.

Let’s look at what expat tax services are, why they matter, and how in-depth expertise can make a large difference to your ongoing tax liabilities.

The Importance of Independent Taxation Guidance for Expatriates

Tax planning is about far more than calculating your tax bill and making the appropriate payments. For expats, tax planning includes regular reviews of various elements, such as:

• The tax rules of their country of residence and place of citizenship and how these vary.
• Which taxes they could be liable for in each.
• Interactions and duplications of taxes in each respective jurisdiction.
• Timings of major transactions such as asset sales and property purchases.
• Changes to their residency status and the effects on their tax position.

One of the most common misconceptions is that an expat who lives elsewhere is automatically no longer subject to UK taxes—this is often incorrect, and it is possible that you will be exposed to British taxes even after many years living overseas.

Tax specialists have two main priorities: avoiding any inadvertent errors, mis-filings or incorrect declarations and ensuring you take advantage of tax efficiencies available.

Our role is to ensure that each expat client pays no more tax than they should, submits accurate and timely returns and declarations, understands their tax obligations in each country, and is confident that they know how to structure their finances, now and in the future, in the most efficient way possible.

Crucial Aspects of Cross-Border Tax Planning

Part of the reason tax expertise is so important for expats is that everybody’s financial circumstances, plans, aspirations, wealth and expectations may differ.

For example, a couple moving overseas to retire in a warm, comfy climate will require very different advice from a young family or a professional who is anticipating living abroad long-term and potentially launching a business or starting a family.

Tax advisers must have a comprehensive knowledge of the tax systems in every relevant country and how these systems interact, such as identifying where double tax agreements will apply or knowing which tax-efficient products or structures in the UK will be far less beneficial elsewhere.

Importantly, tax specialists must also remain completely up to date, with reforms, announcements, and economic environments fluctuating in most countries. This ensures that when we offer advice or conduct a periodic portfolio review, we can quickly determine where changes would be advantageous.

Some of the many areas of tax advice services we offer include:

• Income tax reviews, ensuring you know the rates and brackets applicable, claim all available allowances and exemptions, take advantage of extra marital and child allowances and maximise the income you receive from employment, businesses, rental properties, pension funds and other investments.
• Capital gains tax analysis, advising on the tax you will be subject to when selling or transferring an asset such as a home, equity shares or antiques, and can time that transaction optimally while recognising scenarios where a taxable event could arise in two countries.
• Wealth tax exposure, providing input around the wealth tax systems which exist in many countries, particularly within the EU, and helping you decide on the right ways to handle your tax residency status and the location of your portfolio assets accordingly.
• Inheritance planning, offering clients bespoke guidance on their exposure to UK inheritance tax and international succession taxes, factoring in forced heirship rules where these apply, and protecting the future finances of their beneficiaries.

Tax advice can also be influential when managing other areas of your finances, such as planning and budgeting for educational costs, ensuring you have sufficient insurance coverage, navigating the complexities of pension transfers, and making strategic investment decisions.

Retirement and inheritance planning are good examples of the relevance of tax services owing to recent far-reaching reforms.

The abolition of the UK Lifetime Allowance, the introduction of varied replacement allowance thresholds, the removal of exemptions on Overseas Transfer Tax for some cross-border pension transfers, and the new inclusion of pension benefits into inheritance taxes could all have a considerable impact on your financing planning and ongoing tax exposure.

Knowing what those impacts will be, reviewing options to restructure assets or products to reduce your obligations, or updating your planning to reflect your current tax position is always beneficial.

The Complications of Tax Residency, Citizenship and Domiciliary Status

Many expats recognise that tax management is heavily influenced by their status as a taxpayer in their chosen country of residence, because the cross-border taxes they need to budget for will be affected by how they are categorised.

As a quick summary:

• Tax residency is not always the same as your residency status in terms of a visa or permit you may hold. Expats tend to be considered tax residents when they spend most of their time and have most of their financial interests in one country – this normally means their worldwide incomes and assets are subject to the applicable tax charges and rules in that jurisdiction.
• Non-residents are not excused from tax obligations but are temporarily or partially resident in a country, and therefore, the scope of the tax regulations that apply is generally limited to incomes arising in the country. Other earnings are typically taxed in their country of origin or the place they live most of the year.
• Citizenship and permanent residency are different. You are a citizen of a country when you hold a passport. In most locations, permanent residents have the same rights and entitlements as citizens.
• Domiciliary status differs again, but in most cases, you remain domiciled in the country where you were born, regardless of whether you have dual citizenship or permanent residency elsewhere or have lived outside the UK for a significant period.

Chase Buchanan’s cross-border tax advisers factor in all of these aspects when reviewing your finances, portfolio and wealth, making recommendations about the best ways forward, and advising on the tax obligations you should be prepared for.

If you’d like more information about specialist tax advice or the broad range of services we offer, you are welcome to get in touch with our nearest Chase Buchanan offices throughout our worldwide network.

*Information correct as at November 2024