Know Your Tax Game Before Moving Abroad
The boon of the 21st century is such that trotting around countries and settling abroad has become a cake walk. Geographic boundaries no longer seem to be an impediment and the world has visibly condensed as a result of globalisation. Human beings thus have become smarter and aware. However, the one thing that still plagues humanity is the issue of finances. Taking your pick to study abroad or settling in one of your favourite nations with a job that pays you handsomely sounds pretty. However, all of that happiness can turn to ashes in your mouth in a moment if you do not know how to handle finances. Not being aware of how the financial institutions of a country work, and how the taxes are levied would be equivalent to treading on dangerously rough waters. Therefore, this article shall discuss certain crucial aspects that you need to know about taxes before you consider settling in another country.
What Are Taxes?
Every country needs funding to maintain its basic infrastructure and to serve its people with better conditions of living. The citizens of the country fund a significant portion of that money in the form of taxes. The roads that you walk on, the meals that you ingest and a hoard of other facilities that you enjoy need to be paid for because there is no such thing as a free lunch. Therefore, taxes form an integral and imperative part of a nation’s economy. There are several types of taxes, like the income tax, property tax, sales tax, tariffs, and the list goes on. However, the system of taxation is more intricate and complex than what appears to the eye. Since this article does not deal with explaining the entire system of tax, we shall keep that discussion for Marketreview, and move on to the topic at hand.
Though the basic concept of taxes might be the same, yet countries differ from one another on specific grounds. It is thus, essential that you know about how the country that you are moving to functions when it comes to taxes.
Know Your Income Tax:
Most people who fly over to another country with the aim of living there permanently or for a considerable period of time, have a job at hand. This, therefore, begs the question of paying income taxes. The way income tax works in a foreign country can be a bit tricky, and you need to be aware of the details. While figuring out your salary and expenses, you need to learn about the income tax rate of the foreign country.
There are high chances that your home country and the country you are flying to have different rates of income tax. Therefore, before you move out, dig around a little and calculate if income tax can be levied on your salary in the foreign country. There is yet another aspect that you need to keep in mind while doing your research on income taxes. Certain countries do not levy income tax on expats who live and work in the country only for bare minimum days. In such cases, the expat is expected to pay the income tax in their home country. There are countries which do not levy any income tax on expats, while there are some others that levy a humongous amount. Also, while keeping tabs on the tax rules of your new country, see into the rubrics of your organisation as well. Some organisations take the responsibility of filling in the taxes for their employees. Last but not least, learn whether you are required to file an annual tax return in your home country even if you are exempted from paying income tax in the foreign country. Income tax thus, has a lot of grey area that needs to be worked out extensively before moving in or out of a country.
Tax Breaks For Expats:
Expat tax break is a concept that you need to get the hang of before moving to another country. The idea of the concept is exactly what the name suggests- exemption from having to pay taxes. Some countries levy no tax on the expats, while there are some others that charge a very minimal amount. For instance, several countries in the Middle East have a lucrative system of taxation for the expats. Thus, it is of no surprise that people tend to flock to these countries in a bid to enjoy a high standard of living. They take home most of their salary while paying nothing or a meagre amount as tax. Some countries in Europe too, have a convenient taxation system for the expats. France, for example, levies less on families that have more kids. An interesting concept, indeed! Do your research on the tax rates of the country that you indeed to move to before taking the plunge. If serendipity has it, you might just be making money hands over fists, without having to worry about blowing a hole in your pockets.
There are several other elements of taxes that you need to figure out before moving to a new country, like the inheritance tax laws, capital gains tax laws and others. These nebulous details can be worked out gradually, but the knowledge of what cannot go amiss is that of income taxes. More than half of the planet’s population shift their bases and start afresh in a completely new country owing to better prospects and standards of living. Everything boils down to being able to earn more, save more and live a wholesome life. Therefore, getting your hands on the details of income taxes and other forms of taxes is a mandate. Once you have gained a holistic knowledge of the system of taxation of your new country, you can plan your accounts accordingly. Also, being ignorant is no charm and can often land you in hot waters of legal complications. The thought of moving to a new country is much more exciting than the process since it involves not just being uprooted from your known environment, but also imbibing in your life new cultural, legal and financial knowledge. Thus, plan your move carefully, or even better get an advisor to enlighten you on matters of finance and laws. This could ease up the process and make the shift comfortable!