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Moving abroad: mistakes to avoid
More than 750,000 Swiss people live abroad, so moving country is a challenge that many of us will face. In the European Union, over two million people change their country of residence every year. Beyond the personal and logistical aspects of relocating abroad, it’s essential that you take stock of your financial and tax situation beforehand to avoid any unpleasant surprises.
In terms of planning, getting good advice before you relocate gives you a considerable advantage from a financial, legal and tax perspective. We may sometimes think we know the answers, but there are many preconceived ideas as well as pitfalls to avoid. If you are planning to move, make sure you sit down with your banker and identify the personal, wealth, legal and tax issues that may arise so that you make the right decisions before you leave.
Once you decide to relocate, your wealth should be structured to take account of the prevailing rules and laws in both your current and future jurisdictions. While each person’s situation is unique, we have identified some key points to take into account:
Take careful stock of your investments beforehand
Before making any plans to move abroad, it is essential that you assess how this will impact your investments. The tax rules for your investments will vary from one country to another, and it is imperative that you review them. Holdings of direct investments in US, French, UK or Japanese assets, as examples, are regulated very differently from country to country. Your banker will need to take this into account in order to give you the best possible advice. This also applies to real estate and asset holding structures (funds, life insurance, trusts, etc.), which are recognised in different ways in different countries.
Anticipate the impact of foreign currency
Foreign currency has a very tangible impact on your wealth and your daily life. Changes in exchange rates can have a major impact on whether the value of your estate is preserved or eroded. You only have to look at how the euro has moved against the Swiss franc over just 10 or 15 years to see this. About 15 years ago the rate was over 1.6, but we were almost at parity in 2015. Rates can fluctuate widely, even in major currencies. If you don't have certain forms of protection in place, or if your asset allocation is out of kilter with your needs, place of residence or reference currency, your wealth can diminish over the longer term.
Question your initial plans
What if moving abroad is not the best solution for you? Beyond personal life choices like moving closer to family, people wishing to move abroad may look like they've made up their mind but often have some doubts. To answer the question "Is this country right for me?” it is essential that you get comprehensive and unbiased advice. Some professions and companies can exhibit bias in the sense that they are naturally inclined towards a particular country or region. With the support of a banking partner with a global reach, you can challenge all available options, weighing up your life choices against the impact of each scenario on your wealth.
Factor in future generations
Before you move home, factor in trans-generational issues so that your family's wealth is transferred and preserved in the best way possible. Ownership structures are not necessarily efficient in other countries, nor is cross-border philanthropy. Trusts, for example, are used widely in the English-speaking world to pass on wealth to future generations, but may cause difficulties in other countries. So it is important that you understand the impact in advance and adapt existing structures where necessary. Lastly, remember that if a child moves to or lives in a different country from their parents, it is important to analyse the legal and tax impact in the country of residence of both the child and the parents, as well as the country where the assets concerned are located.
Beware of the 180-day rule and residency requirements
Time spent in a country is not necessarily the only determinant of tax residency. You can be resident in a country even if you spend less than 180 days there. In the UK, for example, tax residency may also take "connecting factors" into account, such as family, business or property ties. And buying a property in a country and obtaining permanent residency does not settle the question of tax residency either. Immigration rules are different from tax rules. A residency permit may entitle you to live in a country, but does not necessarily mean you are a tax resident there.
Always analyse double taxation mechanisms
Taxation does not always stop at borders. You may have the preconceived idea that if you become a resident of Monaco, your estate will not be subject to inheritance tax. This may hold true in Monaco, but your estate can be taxed by other countries: the country of your nationality, your country of domicile in common law jurisdictions, the country in which your assets are located, and the country of residence of the beneficiaries of your estate.
In short, to ensure that when you or a member of your family is moving abroad–, the process goes as smoothly as possible, it is vital that you take the time at an early stage to assess the legal, tax and organisational consequences of your wealth. Backed by our global reach, our teams of bankers and wealth planners help our clients realise their relocation projects while preserving their interests and estates.
To find out more about our expertise, visit our dedicated page on our Swiss offering or contact us using the form below.
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Important information
This document is issued by Bank Lombard Odier & Co Ltd or an entity of the Group (hereinafter “Lombard Odier”). It is not intended for distribution, publication, or use in any jurisdiction where such distribution, publication, or use would be unlawful, nor is it aimed at any person or entity to whom it would be unlawful to address such a document. This document was not prepared by the Financial Research Department of Lombard Odier.
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