What to consider before becoming an expat: written by an expat

Expat is a term well known amongst the diplomatic crowd. It refers someone who is living in a country in which they were not born. An expat may be living in this country either temporarily or permanently, for work or for pleasure or perhaps to improve their lifestyle.

Having been born and raised in western Canada, I was very familiar with the “Snowbirds”, people who fly away south at the first snow in order to enjoy more warmth and perhaps continue their summertime pursuits in two countries. Golf fanatics in particular fit into this crowd. However, these folks are not expats as they remain attached to their home country.

An expat cuts ties to their home country, and in many countries this allows them to really cut back on the taxes they would otherwise pay. Americans who must file their tax returns every year can really cut down on the taxes they pay as they can earn up to $80,000 annually in this new country and not pay any tax on this. They are required to pay taxes in their new country according to the local laws.

What does an expat consider when thinking about leaving their home country?

Taxes

What taxes can you save? How much are you going to save? This is often a very important question and one many expats ask themselves. There is no one answer but, for a Canadian once you meet the “non-residency” requirements, you no longer need to pay taxes in Canada except on money you earn in Canada.

So if I were to set up a bed and breakfast in my favorite warm climate, all the money I would earn from it will be free of Canadian taxes. However, if I leave a large savings account in Canada, I do have to declare the interest I earn on it annually.

So taxes saved can be a big consideration.

Safety

Both your personal safety and the safety of your assets are very important factors to consider.

Personal Safety

I can tell you that at this time I would be really reluctant to live in Mexico and of course there are the Middle East countries and African countries where they are currently experiencing unrest and total upset of the political systems. At this moment I would say such countries are unfit for expats. But then, there are some personal choices.

Clearly no one wants to lose their life and no one wants to lose the assets they may have worked a lifetime to acquire. So knowing things like:

• whether the banking is safe and if banks ever freeze assets for no reason, or because the country has run out of money or changed dictators will have a big impact on the choice of country;
• knowing if the country has a history of respecting real estate registration and if can you get real estate registered in your name are important questions as well.

I can tell you there are a number of countries I would consider living where I would not use their banking system, so I would leave my money elsewhere and I would not own property, but I would rent. Countries like Ecuador and the Philippines come to mind.

Sometimes you can find foreign banks in these countries where you can establish an account and use it for day to day purposes but never bring more than 1 month’s living expenses in. Costa Rica has been like that for years, and yet others think nothing of using their banking system, usually using a foreign owned bank.