Guide to Tax Efficient Planning
Introduction An increasing number of professionals of all nationalities have been moving and working abroad in the last decade. Whether you are a young executive or a high net worth individual with a diversified portfolio of global assets, you will have specific financial requirements and objectives. Offshore financial products and services can help you achieve financial security and provide you with the quality of life you require as an expatriate or international investor. Investing in international accounts is no longer the premise of the rich and famous; all expatriates living abroad may now enjoy flexibility and some degree of tax efficiency by investing their money overseas. The offshore financial industry has become more popular as financial institutions from around the world have entered the offshore market as a result of the high demand. Over the years, deVere has developed strong partnerships with some of the world’s leading investment houses and insurance companies, all of which offer some of the most competitive products in the marketplace and a high level of protection for the investor. Income or gains may only be taxable if they are remitted to (or brought into) the country in which you are now living. It may therefore be possible to remit only the basic minimum for living costs and save on income and capital gains in your new country of residence. One of the greatest advantages of placing money in offshore banks or investments is the potential tax efficiency offered by the international jurisdictions holding your money. Depending where you live, income on an offshore bank account or investment may not be subject to tax in your country of residence. In this guide we will explain some of the ways that your money can become more tax efficient when living overseas.
Choose a tax efficient jurisdiction Jurisdictions such as the Isle of Man and Jersey, Channel Islands have no inheritance, capital gains taxes or death duties. Jurisdictions such as Guernsey allow you to take all your accumulated benefits free of tax unless you live on the island. There are no restrictions as to how and when you take your benefits. The offshore centres based in the Channel Islands and the Isle of Man are well regulated and structured international financial jurisdictions which are world renowned for their stability and premier financial services industry.
Guide to Tax Efficient Planning
A local financial consultant with international knowledge and a comprehensive overview and understanding of all ‘offshore’ options available is your most valuable contact when it comes to planning how to invest your excess income. As an expatriate, you are possibly in a privileged position to maximise your wealth and secure your financial future whilst living overseas. You may be able to save in three to five years what an average investor may save throughout his entire working life simply by considering some of the options available to you such as:
• Taking advantage of your offshore earnings and invest over the short, medium or
long term
• Taking advantage of the many offshore tax friendly possibilities
• Using your time overseas wisely
Furthermore, you are legally entitled to take advantage of any tax savings offered in your country of residence.
Tax efficient investing There are a number of ways to invest in a tax efficient manner. Portfolio bonds are the most obvious example. A portfolio bond is a simple holding structure for a wide range of investment vehicles such as stocks, shares, bonds and funds. It provides a flexible solution for your investments and usually offers greater tax efficiency. Key features include:
• Convenience of holding all assets in one portfolio
• Significant initial discounts from fund management groups
• Opportunity for greater tax efficiency
• Ability to transfer to existing quoted share holdings
• Greater investment freedom
• Flexibility to change your investment portfolio at any time
• Easy access to capital
• Regular income facility
A portfolio bond gives you access to a full range of investment vehicles and enables you to have all assets handled by professional asset managers. In certain jurisdictions, portfolio bonds are 100% free of local taxes. There are also numerous other ways to gain tax efficiency when investing your money. For example when investing in stocks, it would be wise to adopt the buy and hold strategy as the longer you hold on to a stock, the less tax your profits will be subjected to. If you hold the stock short term, usually less than a year, you will be taxed at the highest rate. However, if you hold on to your stock long term, you will only be taxed at the lowest rate of capital gains tax which is 18%.
Inheritance Tax (IHT) Inheritance Tax is paid on somebody’s estate when they die and is also on the gifts and trusts made during that person’s lifetime. Typically, it is the executor or personal representative’s responsibility to pay inheritance tax using funds from the deceased’s estate.
Guide to Tax Efficient Planning
Usually inheritance tax is only due if the deceased’s estate is worth £325,000 or more, or £650,000 for married couples or those in civil partnerships. The estate includes houses, possessions, money and investments. Sometimes, even if the state exceeds the threshold, assets are still eligible to be passed on without having to pay inheritance tax. These exemptions include:
• Your estate will not be due Inheritance Tax on anything you leave to a spouse or civil
partner who has their permanent home in the UK or on any gifts you make to them, even
if the amount is over the threshold.
• Any gifts you make to a UK registered charity will be exempt from Inheritance Tax.
• If you survive for seven years after making a gift to someone, the gift is exempt from
Inheritance Tax, no matter what the value. • You can give up to £3,000 away each year, either as a single gift or as several gifts adding
up to that amount. • You can make small gifts of up to £250 to as many individuals as you like tax free.
Tax efficient pensions If you transfer your UK pension into a QROPS scheme based in another jurisdiction and plan to retire abroad permanently, then the benefits open to you will help you live your retirement years in luxury. The major advantages of transferring your pension into a QROPS include:
• Your pension income will become more tax efficient or even become free of tax.
• You will be entitled to a tax free lump sum of up to 30%.
• You will have a much greater investment freedom with the flexibility of investing in a
much wider range of funds and investments. • All unused pension funds can be left to your beneficiaries upon your death.
For your pension payments to become more tax efficient, or free of tax, it is more beneficial to transfer your pension into a QROPS scheme in a neutral location, for example Guernsey. If you choose to transfer your pension into a QROPS fund in another country then you will have to weigh up all the political and currency risks that will affect the value of your pension in the future. Further information can be found in our QROPS guide.
Finding your tax efficient solution Making your money work harder for you and remaining tax efficient, can be a complicated process to enter in to. At the deVere Group, our consultants work with some of the leading investment houses and insurance providers. All our employees have been trained to provide the best advice and are familiar with the local knowledge and requirements of the region you live in/may relocate to. We can advise on the different options that may help you maximise your wealth in order for you to look forward to a more secure financial future. If you would like to speak to a financial consultant about tax efficient investments while living abroad, please contact us at info@devere-group.com. The advice we provide is free and without obligation.
Guide to Tax Efficient Planning
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The companies below are part of the deVere Group: deVere and Partners (UK) Ltd is authorised and regulated by the Financial Services Authority (469151). deVere Recruitment Ltd (503055) are an appointed representative of deVere and Partners (UK) Ltd. deVere and Partners Investment Services (Pty) Ltd is an Authorised Financial Services Provider in South Africa. deVere and Partners (Belgium) BVBA is authorised by the Banking Finance and Insurance Commission (CBFA) in Belgium and registered on the intermediaries register under number 61476, category insurance brokers. The following group of companies operates under the same license in Belgium: - deVere and Partners (Cyprus) - deVere and Partners (Belgium) Limited BVBA, succursale Luxembourg S.a.r.l. - deVere and Partners Spain, S.L.
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