How your home country government can impact your financial life as an expat

When you embark on the journey of working and living outside your home country, one of the changes is that you may view the political and economic events at home somewhat differently. Perhaps with some distance and detachment, feeling that it may be interesting but that it won’t impact you because you are no longer living there.

However, decisions made in your home country, in the form of budgets, regulatory changes, election manifestos, and positional changes, can impact you when you are away. In fact, you may find yourself subject to these changes, as well as the changes in your current country of residence.

We will look at some recent examples across the EU, Australia, the US, and the UK, including the 2024 Spring Budget announced this week.

An example of how your adopted country of residence can impact you is the recent Dutch election and the announcements that the 30% ruling program, a scheme to attract professional highly skilled workers to the Netherlands is being cut back, with some pushing for it to be scrapped altogether. Some of you will have direct experience of it being wound back over several years already.

If you are a tax resident in a country, it makes sense that government and policy changes can affect you, but don’t forget about your country of origin, or any other country where you have a tax and reporting obligation.

One of the most profound changes in recent years, the ramifications of which are still being felt, is Brexit. This fundamental shift to how Britain positions itself relative to the European Union, and indirectly, in the world, has led to changes of plans for British internationals living in Europe, their families, and EU citizens with aspirations of living in, or returning to, the UK. One quick example is the erosion of benefits of the partial resident tax status for British citizens living in Spain post Brexit, as they are now considered non-EU citizens.

We saw a marked change in the tax treatment of expats by the Australian government with their announcement back in 2020. It used to be that an Australian could move overseas and they would have a 6-year exemption from capital gains tax on their home, meaning their property would continue to be considered their primary residence, and therefore capital gains tax exempt, for up to 6 years. This all changed in 2020, and was abolished, meaning that for the time an Australian is out of the country and not living in their Australian primary residence, it is subject to capital gains tax when they eventually sell the property.

Of course, the big news this week is the UK Spring Budget. A number of clients have asked us about the impact of changes on their lives. As we always say, when it comes to tax issues, we are not tax advisers, and we recommend you speak with a qualified tax adviser in the relevant jurisdiction.

One of the most substantial changes announced this week was the plan to scrap what is called the ‘non-dom status’. This stands for non-domiciled and means someone who, for tax purposes, is considered to live (be domiciled) outside the UK. It might not reflect where they actually live, or even their citizenship, it just means that even though they may have assets or connections with the UK, or be physically present there for part of the year, they are not considered to be UK tax residents. The benefit of being a non-dom is that they only have to pay tax in the UK on earnings derived in the UK; money, income, gains earned in the rest of the world are not taxed in the UK. They will typically have a country with a low tax regime as their official tax residency.

The big change is that, from 2025, this status is being phased out. People who move to the UK from April 2025 will have a four-year period before they pay tax on worldwide income and assets in the UK. Existing non-doms in the UK, will have a 2-year transition period. If this is you, it could lead to profound changes in how and where you manage your financial life.

Some would argue that the most profoundly impacting example of all is FATCA. This was not so much a new tax, as an act that consolidated several different items of US tax legislation and made it more efficient for the United States. It has required since its inception in 2010, that all US citizens and anyone that is deemed to be US connected, must report all earnings and assets to the US tax office (the IRS) every year, even when they are living outside the US, for example in the EU. There are additional layers of complexity and restrictions, including the manner in which US persons and ‘accidental Americans’ can manage their money. We work extensively with the US community in Europe and provide US compliant specific investment and financial planning advice that can help keep you on track with your goals, and you and your investments in the good books with the IRS.

If you would like to better understand your situation, the impact of any changes on you, and to ensure you are best positioning your financial life to align to your objectives and what is most important to you, speak with us. You can reach us directly at info@blackswancapital.eu or visit our website www.blackswancapital.eu.