Relocating abroad also means thinking about tax matters. To avoid risky investments and unpleasant surprises, it's best to rely on professionals while keeping a close eye on your bank accounts. This is a practical guide to the most common tax mistakes you should avoid when moving abroad, so you can plan your new life abroad with confidence.
Overlooking the tax implications of living abroad
At first, it may seem unnecessary to inform your bank about your move abroad, especially if you already know which accounts you'll keep or close. Yet, relocating involves far more than simply deciding which bank accounts to keep active. Before leaving, it's essential to review your overall financial situation so you can anticipate how it will evolve in your new country. This step is particularly important if you have clear objectives鈥攍aunching a business, purchasing rental property, or building long-term assets for retirement. Even without a defined plan, you should never overlook the tax consequences of relocating overseas.
Tip:
Notify your bank about your move as early as possible. Most large traditional banks have an 鈥渋nternational mobility鈥� service. If yours doesn't, request a meeting with a specialist or contact an expatriation advisor. They can provide tailored advice depending on your profile.
Forgetting to declare foreign bank accounts
Many expatriates still don't realize they must declare their foreign bank accounts to their home country's authorities. If you've moved to Brazil, Poland, or the UAE and opened bank accounts there, the tax office needs to know. Failure to declare can be subject to a fine per undeclared account in countries with a tax treaty against fraud with your home country. In countries without such a treaty, the fine can be much higher.
However, there can be exceptions if your foreign account is directly linked to your account in your home country and is used only for online purchases or small sales payments.
Tip:
Inform your home country's tax office as soon as you open an account abroad. This applies not only to banks but also to other financial institutions, like money transfer agencies. Even accounts closed during the year must be declared, as well as any account used at least once during the year.
Closing accounts that could have remained open
While you are required to declare your foreign accounts, you are not necessarily required to close your home current account when you move abroad鈥攗nless you're certain you'll never need it again. In fact, it's often advisable to keep it, especially if it's still active (receiving income, processing payments, or refunds).
Certain savings accounts can also be maintained, such as housing savings plans, life insurance policies, and, under certain conditions, a stock savings plan. However, if you are considered a non-resident for tax purposes, you'll need to close other accounts tied to residency, such as youth savings accounts.
Tip:
To save on account management fees, review the details of your current account with your bank鈥攁nother reason to notify them of your move. Cancel any unnecessary options.
Failing to declare a change in tax residency
Some expatriates don't declare their change of tax residency because they believe they remain tied to their home country or because they assume that living abroad automatically exempts them. They often refer to the 鈥�183-day rule鈥� as if it were the sole determinant of tax residency.
In reality, this rule is only one factor. Tax administrations usually consider several criteria: your household, your primary place of stay (this is where the 183 days come in), your job, and your main economic interests. Most countries follow similar criteria.
Tip:
Check the rules for tax residency. For instance, if you're temporarily abroad but your family remains in your home country, the tax office may still consider you a tax resident. Your household is one of the first things they look at when determining residency. Review your situation carefully before leaving.
Investing like a local
Settling in Canada, India, Finland, or Thailand often comes with adopting local customs, which is a great way to integrate. But when it comes to taxation, 鈥渋nvesting like a local鈥� can be risky. The key is clarifying your long-term plan: do you intend to stay permanently? The risks of particular investments often emerge when you return home, move to another country, or deal with inheritance.
It's not just about chasing high-yield investments. You need a strategy tailored to your situation as a foreigner, your investor profile, and your relocation goals.
Tip:
Consult both your bank in your home country and in your host country. Seek advice from relocation specialists. International products, such as life insurance or real estate, can be excellent opportunities, but only if you understand the rules.
Relying entirely on your banker
You shouldn't handle international tax planning alone if you have little knowledge. But you also shouldn't rely mindlessly on your banker, friends, or even a tax advisor. That's a sure way to make mistakes. Of course, many competent professionals will help you manage your finances abroad, but you still need to educate yourself.
Tip:
Do your research before moving. You don't need to take courses (unless highly motivated), but you should learn the basics of taxation in both your home and host countries. Build strategies that align with your profile.
Misunderstanding your home country's tax rules
Even if you become a non-resident for tax purposes, you may still be subject to your home country's taxes. This applies if you own property, continue receiving income, have family there, plan to return, or have inheritance matters. This is why learning the basics of your home country's taxation remains essential.
Tip:
Review your sources of income before leaving. What will you do with your home? Your car? Will you rent them out? Will you continue to earn income in your home country?
Failing to research the host country's tax system
Recent reforms in Thailand and the UK are reminders that taxation is closely linked to politics. A new law, political unrest, or economic changes can directly impact your long-term plans.
Research your future host country: is it politically stable? Are institutions solid? What's the socio-economic climate? How stable is the local currency? To reduce risks, diversify your investments鈥攃ombine safe and riskier options, depending on your profile. If you're risk-averse, avoid stock market products promising quick, high returns.
Tip:
You can't predict everything, but understanding the local context will help you manage setbacks. A solid tax strategy should provide flexibility when things get tough.
Neglecting estate planning
Inheritance rules vary widely between countries, and the costs can add up. Italy offers more favorable terms than many European countries, with a 鈧�1 million exemption for children and spouses, and a 4% tax beyond that. In the U.S., the exemption is even higher at $5.6 million, with rates up to 40% beyond that. In France, the exemption for children is capped at 鈧�100,000. In Austria, Sweden, and Norway, there are no inheritance taxes at all.
Your new life abroad must account for all your assets, both in your home country and abroad: homes, land, cars, jewelry, art, financial investments, and more.
Tip:
Succession laws are complex. Check whether your home and host countries have a tax treaty. Plan for potential returns or changes in your relocation project, and seek expert advice. Keep in mind that rules can change鈥攁s shown by the UK abolishing the 鈥渘on-dom鈥� status.
Letting your savings sit idle
Money never sleeps, and recent inflation spikes have eroded savings worldwide. 海角乱伦riates are no exception. The first mistake is putting all your eggs in one basket: if rates fall or inflation rises, you could lose out. The second mistake is letting your money sit idle in an account without generating returns. The third is keeping everything in cash鈥攕omething that became common amid banking fears and economic crises. But idle money loses value over time.
Tip:
Instead of hoarding cash, diversify: life insurance, stocks, housing savings plans, precious metals, and more. Learn the pros and cons of each investment for expatriates. Avoid 鈥済et rich quick鈥� schemes and be particularly cautious with high-risk products like cryptocurrencies. Seek professional advice when in doubt.
