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What taxes do expats pay?

When someone moves abroad, what taxes do expats have to pay?

What taxes do expats pay?

Expats will have to pay taxes based on three key facts: where they were born, where their income/money comes from and where they are a tax resident.

Expats are likely to change their tax residency status when they move abroad, if not immediately, normally within the next tax year. Their tax residency status will be determined by the rules of each country they visit and will normally come down to three basic criteria:

  • The amount of time you spend in a country
  • The amount of work you conduct in a country
  • How many ties (eg. close family, homes) you have in a country

Once an expat is determined as a tax resident in a particular jurisdiction, they will be subject to the tax rules there. This could be at a country level (e.g. the US) and at a more local level (eg. the State within which they leave).

It is likely that the expat will have to pay tax on most, if not all, income, capital gains, money brought into the country, inheritance, interest from assets and investments as well as any other source of money. Sometimes in some countries, the tax rates on income is set at zero, however it is still important to seek advice from a professional tax consultant that can evaluate your situation and determine how much tax you should be paying locally.

However, just because an expat is a tax resident in a particular country, it does not mean that they do not owe tax in different jurisdictions. For example, a US citizen is going to be subject to US tax rules wherever they live in the world.

For expats of other nationalities, they are likely to pay tax where the income and/or gains arise. For example, if you rent out a property in the UK, you will be subject to UK tax rules on that property in addition to any tax you may have to pay in your country of residence.

Similarly, if you have financial assets offshore, any gains or income generated from them will be subject to tax rules in that jurisdiction, however this may be minimal, depending on the jurisdiction.

If/when you die abroad, the inheritance tax owed will depend on your country of domicile (normally the country you were born), the country you spent a significant amount of your life and/or your country of residence.

The Common Reporting Standard defines laws which are agreed between a number of different countries that ensure Government authorities (eg. HMRC or IRS) are automatically provided the details of financial accounts of anybody that holds accounts in multiple countries. This standard has been created to help reduce and ultimately minimise international tax evasion.

In all cases of understanding taxes for expats, it is essential that you seek expert advice about the tax situation both in your country of residence and from tax consultants that have an understanding of expat tax affairs.

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Last updated: 8 November 2018

Request a free tax consultation

If you are concerned about where you should be paying tax, submit your details using the form and we will select the most suitable consultant from our network who will contact you to arrange your free introductory consultation