Managing expat wealth across borders is complex, with tax and currency risks making proactive planning essential
-- Understanding global asset footprints can be complex for expats, who often accumulate properties, pensions, savings, and investments over different life stages and locations. Many may not have a clear strategy for how and where to access and manage their wealth.
The difficulties with cross-border wealth management relate to several factors, including multi-location taxation, the potential ambiguities over tax residency, and the impacts of double tax treaties and currency fluctuations on expats’ net worth.
Chase Buchanan Private Wealth Management, a long-established specialist in global expat financial advisory and wealth management, examines how foreign nationals living overseas can manage their wealth and why professional support is often essential.
An Insight Into the Practicalities of Managing Wealth Between Countries
While the right way forward will depend on the types of assets owned and your personal circumstances and objectives, the issues many expats face relate to tax residency. This determines how assets and income are taxed based on where the individual or household is classified as tax-resident.
Briefly, tax residency may depend on where a taxpayer spends the majority of the year, where they have a primary residence, and any familial or economic ties, which can mean an expat is a tax resident in a different country than their place of citizenship or domicile.
In most cases, a tax resident will be subject to local taxes on their worldwide assets and income. However, this isn’t always straightforward, as owning physical assets, such as real estate, in another country can create ongoing tax exposure, in addition to tax liabilities in the person’s country of residence.
Double tax treaties exist between almost all major economies and dictate the way in which specific types of assets, such as pension funds or investments, are taxed and by whom. They ensure individuals aren’t subject to duplicate taxation on the same asset or event, but expats must ensure treaties are applied correctly, as many are not automatic.
Additionally, expats who have lived overseas for several years may no longer be in the same financial or life circumstances as when they originally relocated. Periodic reviews of assets, tax implications, and exposure following moves, retirement, family expansions, or repatriation are vital to ensure portfolios remain tax efficient.
How Expats Avoid Tax Overpayments Due to Cross-Border Holdings
Offshore investments and assets can carry tax advantages, but expats must have a firm grasp of the risks and opportunities to be able to make decisions that create a tax-efficient, stable portfolio that isn’t exposed to excessive tax.
They may, for example, need to review how the location and value of their assets will influence the tax treatment of gains for capital gains tax, the withholding rates applied to pensions, interest, and dividends, and how certain tax-friendly products may become less favourable following a relocation.
ISAs are an example, because although they permit tax-free growth for UK tax residents, expats who relocate can no longer make contributions. They will also be subject to full taxation on earnings made if they are tax resident in any country other than the UK.
Professional advisers will therefore stress the importance of being actively aware of taxation, how changes in circumstances or wealth translate into tax obligations, and why regular portfolio reviews are crucial, rather than relying on outdated wealth management plans that may no longer be relevant.
Contrasts in Jurisdictional Taxation to Be Conscious Of
Many expats make the mistake of assuming that the taxes they are familiar with will be consistent between countries, but this is incorrect. Overseas locations may levy wealth taxation, additional property taxes, municipal income taxes in addition to federal rates, and imputed income tax against rental properties.
In contrast, other countries have no inheritance or succession taxes, generous income tax allowances and exemptions, no capital gains tax, and considerably different sales tax rates.
Therefore, cross-border wealth management should consider the tax treatment and rates applied to each element of an expat’s wealth portfolio, identify where exemptions or exclusions apply, and determine how this aligns with the individual’s residency plans.
Considering Portfolio Diversification and Currency Exchange Rates in Multi-Country Expat Wealth Management
Foreign exchange (FX) risks are prevalent in expat wealth management but are largely misunderstood. Currency volatility can significantly affect returns, particularly when foreign nationals remit or transfer capital or income between locations.
Timing risks are relevant because larger transactions can be worth substantially more or less when made at an optimal or inopportune time. There is also the need to be aware of natural hedges against FX fluctuations and to actively manage exposure in each respective currency.
Long-term FX planning is a building block of successful portfolio and tax management. In some cases, short-term currency movements can also be influential when cash flow timing is important, or during the early phases of a relocation, when larger transactions, such as property acquisitions, occur.
The general advice is to view FX risk management as an integral part of a wealth strategy, rather than an unavoidable uncertainty, and to have professional advisers consider the base currency of the residency location and how it compares with the currencies of the locations of assets.
Diversification then comes into play, ensuring assets held for retirement or future expenditures are held in the appropriate denominations, portfolios are not overconcentrated in any one currency, and asset classes and sectors are well diversified.
Key Features of a Stable Expat Multi-Country Wealth Management Plan
There is no way to underestimate the impacts that pension access rules, taxation legislation, and currency fluctuations can have. Expats who are resident overseas with cross-border assets, or who intend to change their place of residency in the future, should maintain ongoing oversight of how those assets are structured and taxed.
Whether you intend to retire in a country different from where your primary wealth is held, are unsure how estate planning across jurisdictions works, or want the flexibility to manage your assets during potential future residency changes, ongoing management is key.
The right knowledge and tax advice can make a notable impact on your net wealth and income streams, and it remains essential to emphasise proactivity, rather than problem-solving once large tax liabilities have been incurred, putting you in a good position to navigate the complexity of long-term global wealth accumulation.
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About the company: Chase Buchanan is a highly regulated wealth management company that specialises in providing global finance solutions for those with a global lifestyle. We are global financial advisers, supporting expatriates around the world from our regulated European headquarters, and local offices across Belgium, Canada, Canary Islands, Cyprus, France, Malta, Portugal, Spain, the UK and the USA. Chase Buchanan Ltd is authorised and regulated by the Cyprus Securities and Exchange Commission with CIF Licence 287/15 and offers its services in the EU on a cross-border basis as per the provisions of MiFID. Chase Buchanan Insurance Services, Agents & Advisors is authorised and regulated by the Cyprus Insurance Companies Control Service with License No 6883 and offers services in the EU on a cross-border basis as per the provisions of the Insurance Distribution Directive (IDD). Investing in financial instruments involves risk and may not be suitable for all investors. The value of investments may go up as well as down and past performance is not a reliable indicator of future results. You may lose part or all of your invested capital.
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