UHY Ross Brooke Chartered Accountants

Global mobility – retiring overseas

retiring abroad tax planning

We are starting to see an increase in those globally mobile workers reaching their maturing years. A combination of age, the COVID pandemic and Brexit appears to be causing those individuals to re-evaluate their position.

Blog by by Tom Annat

It is certainly clear from recent events that we live in a truly globalised world, and we cannot ignore our interconnectedness with respect to health, culture, population, and economic factors.

The increased globalisation over recent decades has meant that huge numbers of people have relocated for reasons of work, lifestyle, and family. The mobility of workers has, of course, been significantly disrupted recently and it will be interesting to see how businesses react in the longer term.

Some may choose to retire sooner than anticipated or are perhaps thinking of moving to a country they had not previously considered. The complication here is that many of these individuals will have built up significant assets overseas. These could be physical assets but also investments, pension schemes, stock options, shares and so on.

Having assets in multiple countries can present a challenge from a taxation point of view. Decisions will need to be made on whether physical assets will be sold before or after departure. The timing may be critical for taxation in both the home and destination country. If assets are to be retained, what impact does that have on future tax exposure and tax compliance?

The drawdown or transfer of pensions across borders may create a particular headache. Several double tax treaties the UK has in place will permit the drawdown of pensions free of UK tax for non-UK residents. However, the transfer of an entire pension fund out of the UK is a complex procedure indeed. A significant tax charge can be imposed if the receiving scheme is not an approved Overseas Pension Scheme.

Some countries have flexible retirement schemes available which can present a problem. For example, in Ireland, an Approved Retirement Fund (ARF) allows for a flexible investment strategy and drawdown. Previously the income was considered pension income and was payable tax free to a non-Irish resident under the terms of Irelands double taxation agreements. That is no longer the case and Ireland will tax the underlying income and gains. This can result in increased taxation and possible double taxation for a non-Irish resident. A similar scenario exists in the UK with Canadian pension plans. Some of their flexible pension plans do not sit happily within the context of the UK-Canada double tax treaty.

Brexit and the COVID pandemic may bring about a jostling for position as different states attempt to protect their tax base, which could further complicate matters. We have already seen an example of this in recent years. In 2018, Finland terminated their tax treaty with Portugal. This was in response to Portugal’s Non-Habitual Residence regime.

Further considerations will be that of wealth taxes and what the tax status will be of an individual who has been absence from their home country for many years. Will that country have a claim on capital assets on death? What about the country of residence and the proposed country for retirement? Do they have wealth taxes? Are their double tax treaties in place between the countries concerned?

The next step

Given the complexities involved, it is important that individuals looking to retire and relocate should undertake timely tax planning. Such planning is likely to require tax professionals and advisors across different tax jurisdictions. UHY has offices across 100 countries and is well placed to assist with these matters. Please contact Tom Annat on t.annat@uhy-rossbrooke.com or your usual UHY Ross Brooke adviser if you would like to discuss your position.

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