This includes areas such as gratuities, pensions and savings, as well as knowing what the tax and financial jurisdiction rules are in their next country of residence.
Darren Jones, Technical Director at Guardian Wealth Management, explains:
“For every one person moving to the UAE this summer there are 11 people leaving. Therefore, knowing exactly what steps need to be put in place is hugely relevant for expats.
“People often plan extensively when they relocate but perhaps do not put the same consideration into wrapping up the things they have built over the years. Most importantly, expats leaving are essentially moving from a non-taxable environment to a taxable one, making it essential to know what implications this means on earnings and assets.”
First, it is important for workers to know that it is unlikely they will be taxed on earnings accrued as an expat even if they choose to relocate in the middle of their new country’s tax year – this is due to the split year rule. However, the story is slightly different when it comes to liquid investments and assets.
Almost all expats will receive an end-of-service gratuity when exiting employment in the region and it is important for them to look up exactly what the amount is they are owed and ensure this is worked out with the employer prior to last payment.
Gratuities should be seen as a replacement for pension payments in this region, therefore advice should be sought about placing these into a more formal pensions structure. However, it is essential that this is done before expats leave the country as once in the new country of residence they are fair game to the local tax authorities.
In addition to gratuities, expats have a number of offshore pensions savings options available while living abroad. For those that have taken advantage of these, it is important to review the plan to see if it is the right option in the new territory of repatriation. In some cases, it may be better to put it into a home savings account and receive some tax relief benefits.
With investments such as stocks, shares and mutual funds made while living abroad, Guardian Wealth Management advise that investors realise the gains made on the investments prior to leaving and ideally in the tax year before going to certain countries.
“In many countries, you can be taxed on the profits made on investments if you realise them after leaving the UAE – for instance if you have made AED100,000 dirhams growth on a bond during your time here, in countries such as the UK you will be taxed on this. Therefore, it is integral you seek advice prior to departure as possible options would be to sell or restructure the fund,”
Another area of consideration for expats is property ownership in the region. Ultimately, the question will arise whether to sell the property or rent it out. If a property is sold before leaving the UAE then there will be no tax due in the proceeding country. However, if the property is sold after moving to the new country then there is likely there will be some capital tax on the profits, such as Capital Gains Tax in the UK.
If owned properties are being kept and rented out then home owners should consider that they are liable for income tax on rental in the country of residence.
“In summary, expatriates should seek advice before leaving the UAE if they have any concerns over tax implications in their next country of residence. Each jurisdiction has their own tax rules and the advisors at Guardian Wealth Management are experts in legalities in countries such as the US, UK, Australia, South Africa, South America and most of continental Europe,”