Expatriate tax: 5 questions to ask before you leave

Globalisation has made expatriate tax increasingly complex as expats today move from and into a wider range of countries. As an individual, it can be difficult to know where to begin, particularly if you are not always clear on your tax obligations in your home country. To add to the challenge, tax law varies significantly by home and host country. 

Although the answers will vary, there are some questions you should ask before taking up a position abroad, so you understand what is required of you before you leave, while you are away and when you return. 

There are several options when it comes to seeking advice on paying tax while abroad:
 

• Human Resources Department: if your company regularly sends expats to work in offices abroad, they may have all the information you need for tax purposes. If your company provides pre-departure training it may cover tax compliance.
• Independent Tax Advisor: if you have complex needs, you may wish to consult an independent tax advisor in both your home and destination countries.
• Colleagues: although you need to be careful and verify any advice received, it may be worth informally consulting with colleagues if they have also worked in your planned destination, they may have contacts you can use or advice to offer. 

Ultimately when it comes to your expat tax affairs try to ensure:
 

• you don’t suffer undue financial burden by working abroad
• you comply with all tax legislation while on international assignment
• your tax affairs are easy to administer and understand

These are just some of the questions you should research or ask an expert before you move abroad if you want to keep your tax affairs in order:

Preparing your finances in advance for living as an expat will make everything easier. Depending on the rules and regulations in your home country this may mean:
 

• splitting the tax you pay in your home country so you are only taxed until the day you leave
• claiming relief in your country of residence for any tax you may pay at home i.e. on rent from an investment property
• paying tax in your home country on money earned abroad. South Africa is introducing an expat tax in March 2020 whereby South African expats have to pay tax in South Africa on income earned abroad above a certain threshold

Ask this question to understand how your time abroad will impact tax credits, the income tax you pay, contribution to a state pension (if there is one) and anything else you may be entitled to in your home country. Don’t forget to ask about the long-term impact, what might happen if you still retire at a planned age or if were to be made redundant in five- or ten-years’ time. Often it is not until these events occur that we realise there is a problem.

There are likely to be steps to take when you arrive in your new country of residence to get your tax affairs in order; this may involve:
 

• registering for a social security number or similar
• finding out if you need to file a tax return
• filling out paperwork for both your home and destination country

This is an important question to ask. For many countries the answer will be no, you don’t have to file taxes while you are abroad, but this is not always the case. It is vital that you seek advice and know your tax obligations in your home country.

Returning from an assignment abroad is not always plain sailing from a tax perspective. Depending on the country you are returning to, you may be taxed on your worldwide income, with credits for any foreign tax paid. In other countries there are ‘foreign workers exemptions’ which you may qualify for. No matter what country you are moving to, there are likely to be some tax implications if you plan to bring monies earned while abroad with you, ensure you ask this question so you can be prepared for them. 

While you are planning your finances, don’t forget your health and wellbeing - private health insurance from your home country is unlikely to cover you while you work abroad. You need specialist international health insurance to access the best medical care in your destination country.