Continental Shift

In organising your move overseas, there are a lot of practicalities you need to sort. We’ve been discussing these over the last few weeks, and this week, we’re looking at how to sort out your taxes.

Your tax responsibilities and rights will change the moment you take up residence in the new country and will vary depending on things like your income source, length of residence overseas plus length of visits home, and even location of bank accounts and so on.

The more you have to do with your home country, the more complex your taxes will be. You may find yourself having to put in a tax return for both your home country and your host country – this is almost certainly going to be the case for the first year at least, when you will have spent some time in both countries – unless you specifically plan to leave on the exact last day of home country’s tax year having sold off every asset you have and cut all financial ties.

Be aware too, that the tax year is not necessarily the same in every country. In Australia, for example, it goes from 1 July of one year to 30 June of the next; in the UK, the tax year goes from 6 April to 5 April of the following year, and in the US, you can choose between a calendar year tax return or a fiscal year tax return.

I’m not going to pretend to be an expert on taxes, not even my own – especially not my own. You will be able to find some information on various official tax sites. For Australians, there is international tax information on the ATO site here.

For Americans, you will of course see the IRS website (www.irs.gov); apparently IRS Publications 593 and 594 on the website are aimed specifically at US residents who are living overseas. UK citizens can check their revenue department at http://www.hmrc.gov.uk/.

Websites are one thing; seeing a professional is another. I strongly advise that you consult a professional in your own country, one with expatriate experience. You should also consult a professional in the new country, one who is used to working with foreign residents. If you get conflicting advice, contact the tax departments of each country for clarification, but for the most part, you can trust your accountant (see below for tips on how to choose an accountant you can trust).

If you are organised and well-informed in advance, as in well before the move, and have a trusted professional expert ready to go, you will have more options for arranging your financial affairs than if you try to start arranging it come tax time in either country.

Consulting a professional in the early stages of the move may enable you to do the tax return on your own if that is something you prefer. It could even give you second thoughts about the country you have chosen if the tax implications are, for whatever reason, prohibitively expensive – another reason to consult someone very early in the planned move.

If you already have an accountant, and they can handle expatriate tax returns, lucky you! If not, ask around your friends and other expatriates for a recommendation; failing that, ask whichever accountancy firm you are vetting for references from current and past clients.

Some tips for choosing an accountant include:

• Do they have experience with expatriate tax matters?
• Do they have facilities (electronic submission, email or phone consultancy, etc) to help you with a long-distance tax return?
• Are they fully qualified (i.e. as a certified or chartered accountant) and registered with the appropriate professional body?
• What are their fees; if on a sliding or hourly scale rather than fixed, how and when do the fees apply?
• Can you build a good relationship with them? You don’t have to be best buddies with your accountant, but you do need to be able to ask questions, discuss issues openly, and trust them.
• How large are they? Too large and busy to treat you individually? Too small to have the range of experience and resources you will need?

If you do choose to go it alone, just make sure you do your research thoroughly and using official and up-to-date resources. This may be a useful exercise for you anyway, so that you have some familiarity with how your taxes should be approached by your accountant and can possibly catch any errors they happen to make.

CASE STUDY
My partner’s company provided an expatriate-experienced accountancy firm to give advice before we left and to help us lodge our taxes in Australia after we had left. We were given the choice of using them or our own choice of accountant; our existing accountant regretfully declined his services due to lack of experience with expatriate tax rules (there’s how you know you can trust your accountant). Therefore, we used the company-provided accountant. The company took care of tax requirements in Libya, so only the Australian side of things needed to be dealt with.

When we moved overseas, we kept our home to rent out, had some Australia-based investments paying dividends, and Australian income coming in from my freelance writing work. This complicated our tax submission (for example, the ownership of shares raised issues of ‘deemed sales’ and so on) and had GST implications.

We ensured we followed our accountant’s advice so we weren’t paying more or less tax than we were supposed to. We were able to lodge out return with the accountancy firm electronically, and could make use of phone consultations if needed.

Other expats chose to make use of their own accountants from before their move. In many ways, they had a better experience than us, evidence of the importance of a good relationship with your tax professional.

ACTIVITY
Find an appropriate tax professional – you may find yourself looking into several possibilities before you make your final choice – and book the appointment. Do this early.

That’s it for this week. See past topics and what’s coming up next at the table of contents. Subscribe or check back for more content soon.

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