International ExPat investors [topic in lieu of it's own board]

Financial discussion for any financial queries for Expats
DiamondEcho
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International ExPat investors [topic in lieu of it's own board]

Postby DiamondEcho » December 11th, 2016, 3:03 pm

Clariman suggested* in a post re: what boards from TMF have not been automatically recreated here, whether requested or not; that the old Expat Investing board be recreated here in the form of a topic, at least initially just to give such discussion a focused home.

That is the purpose of this post.

* viewtopic.php?f=21&t=234
'...International ExPat investors - Topic under Investment Strategy?...'

todthedog
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Re: International ExPat investors [topic in lieu of it's own board]

Postby todthedog » December 11th, 2016, 3:44 pm

A good idea .
Good to have a base. I think we might be a very small %.

DiamondEcho
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Re: International ExPat investors [topic in lieu of it's own board]

Postby DiamondEcho » December 11th, 2016, 4:10 pm

Well that's fine, we're just a topic for now. I have a couple of non-urgent questions to float in due course, so am glad there will be a venue for them waiting.

[General idea of them though is: Being an expat, opening up an 'expat stock-broking account'. BUT then being allowed to keep your 'expat account' back once later back in the UK, withOUT them switching you to their UK office, without trans-national tax reporting/witholding being enforced. Ie. where to off-shore a stock-trading account as an expat, that you can maintain later when back in the UK].

AJC5001
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Replies can have their own Subject

Postby AJC5001 » December 11th, 2016, 7:08 pm

DiamondEcho wrote:Clariman suggested* in a post re: what boards from TMF have not been automatically recreated here, whether requested or not; that the old Expat Investing board be recreated here in the form of a topic, at least initially just to give such discussion a focused home.

That is the purpose of this post.

* http://www.lemonfool.co.uk/viewtopic.php?f=21&t=234
'...International ExPat investors - Topic under Investment Strategy?...'


Don't forget that you can change the Subject when adding a new post to the topic, so individual posts can be separately identified.


Adrian

todthedog
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Re: International ExPat investors [topic in lieu of it's own board]

Postby todthedog » December 11th, 2016, 7:51 pm

I think where you are tax resident determines the declaration.
I believe if you are a UK tax resident not a lot of chance of legally keeping offshore accounts secret.

Lootman
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Re: International ExPat investors [topic in lieu of it's own board]

Postby Lootman » December 11th, 2016, 8:13 pm

todthedog wrote:I believe if you are a UK tax resident not a lot of chance of legally keeping offshore accounts secret.

I am not aware of any requirement for a UK resident to declare an offshore account. What you do have to do is declare any income that derives from that account. But if, say, it is a current account and pays no interest, then there is nothing to declare and it can be your "secret".

The same goes for foreign properties. No need to declare unless you derive income from it by renting it out.

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Re: International ExPat investors [topic in lieu of it's own board]

Postby TedSwippet » December 11th, 2016, 10:50 pm

Lootman wrote:I am not aware of any requirement for a UK resident to declare an offshore account.

I wasn't either. But I have just exited a one-month HMRC 'compliance check', really an investigation, covering my 2014/15 self assessment return, and one of the things that came up was my US 401k retirement plan.

I have neither withdrawn from it nor contributed to it since becoming UK resident nearly a decade ago. After some internal discussions HMRC recommended listing its existence and the date when it "matures and payments commence" -- they don't know how 401ks work! -- on my self assessment returns under 'other notes' or similar.

Now, I specifically rely on US/UK tax treaty rules to defer UK tax on gains made by my 401k's investments, so I can sort-of see the logic for including it in self-assessment. But HMRC's lack of up-front clarity on declarations here is unnerving. (That said, the ultra-paranoid IRS and its ridiculous FBAR/FinCEN form 114 nonsense makes HMRC look like a model of sanity.)

Lootman
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Re: International ExPat investors [topic in lieu of it's own board]

Postby Lootman » December 11th, 2016, 11:49 pm

TedSwippet wrote:one of the things that came up was my US 401k retirement plan.

I have neither withdrawn from it nor contributed to it since becoming UK resident nearly a decade ago. After some internal discussions HMRC recommended listing its existence and the date when it "matures and payments commence" -- they don't know how 401ks work! -- on my self assessment returns under 'other notes' or similar

I would have thought that any kind of overseas retirement plan would only lead to a tax liability when you start taking distributions from it and not before. I'm not saying that's the case legally but it would be very difficult to compute and declare the actual income generated internally within a plan on an annual basis - pension plans often do not report the transaction level details of the internal income and gains generated because it is all deferred. It's really just a black box with perhaps an annual valuation statement.

So if HMRC had ruled that you had to pay UK tax on a foreign retirement plan, it would be a nightmare to compute and, moreover, you'd have to keep records of all that potentially for decades since it would presumably offset the taxes you'd eventually have to pay when you finally did start receiving distributions. Not sure how HMRC could ever verify or refute your numbers either.

And the same goes for any UK pension plan that you have if you become resident for tax purposes elsewhere, although the tax rules about that in other countries could vary enormously.

I'd like to think that bilateral tax treaties ensure that all foreign pension plans are not taxable until you actually withdraw from them.

TedSwippet
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Re: International ExPat investors [topic in lieu of it's own board]

Postby TedSwippet » December 12th, 2016, 9:33 am

Lootman wrote:I'd like to think that bilateral tax treaties ensure that all foreign pension plans are not taxable until you actually withdraw from them.

Not so, unfortunately. The US/UK treaty is now one of the better ones for handling pensions, but even here only since 2003. Before that, income and gains realised inside a US pension itself were fully UK taxable to UK residents. From the horse's own orifice:

https://www.gov.uk/hmrc-internal-manuals/double-taxation-relief/dt19876a
IRAs: Years up to 2002/03
...
Withdrawals from an IRA do not of themselves give rise to a charge to Income Tax or Capital Gains Tax, but they will often be preceded by the disposal of IRA investments (including the conversion of dollars to sterling) giving rise to a chargeable gain or an allowable loss.

IRAs: Year 2003/04 et seq.

This will not be the position for years 2003/04 onwards. The new Agreement takes precedence and this will mean that no liability will arise until it would have done so under US tax law. Under US law, this will be when distributions are made. ... The important point to note is that income will no longer be assessable in the UK on the basis of income arising within the IRA.

DiamondEcho
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Re: Offshore banking for expats

Postby DiamondEcho » December 12th, 2016, 11:55 am

Lootman wrote:
todthedog wrote:I believe if you are a UK tax resident not a lot of chance of legally keeping offshore accounts secret.

I am not aware of any requirement for a UK resident to declare an offshore account. What you do have to do is declare any income that derives from that account. But if, say, it is a current account and pays no interest, then there is nothing to declare and it can be your "secret".

The same goes for foreign properties. No need to declare unless you derive income from it by renting it out.


@TTD. But I'm not talking about 'keeping it secret', I'm describing a situation where your income derived abroad is simply not liable to UK income tax. Either at all/ever, or not [?] until the point you start to repatriate funds back home [>UK]. AFAIR only two countries have a tax on global income, the USA and Eritrea.

@Lootman. Curious, why would you have to report foreign source income if it's not liable to UK tax?

Lootman
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Re: Offshore banking for expats

Postby Lootman » December 12th, 2016, 1:29 pm

TedSwippet wrote:Not so, unfortunately. The US/UK treaty is now one of the better ones for handling pensions, but even here only since 2003. Before that, income and gains realised inside a US pension itself were fully UK taxable to UK residents

OK, something like an IRA or a 401K is more like an ordinary individual investment account with a pension/tax wrapper around it. So there is at least the possibility that you can determine the interest, dividends and gains within it, adjust for the difference in the tax year start and end dates, and be able to declare accordingly. Still a lot of work though, as there is no equivalent of a consolidated tax statement for the year, or 1099 form issued.

But for other types of foreign retirement plan, like an employer group plan, there would be no way for an individual to make those determinations.

DiamondEcho wrote:@Lootman. Curious, why would you have to report foreign source income if it's not liable to UK tax?

I think we are talking at cross purposes. I was describing the situation of a UK resident who would be taxed in the UK on his worldwide income. As such he would have to declare all his worldwide income (*) but he would not have to declare any foreign account or asset that did not create any income, like a current account that paid no interest or a foreign property that yielded no rent.

I did not intend my comment to cover someone non-resident in the UK, who may not have any UK tax liability.

(*) I'm not clear what kind of foreign income that would be tax-free in the UK, if that is what you are suggesting.

DiamondEcho
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Re: Offshore banking for expats

Postby DiamondEcho » December 12th, 2016, 2:33 pm

DiamondEcho wrote: @Lootman. Curious, why would you have to report foreign source income if it's not liable to UK tax?

I think we are talking at cross purposes. I was describing the situation of a UK resident who would be taxed in the UK on his worldwide income. As such he would have to declare all his worldwide income (*) but he would not have to declare any foreign account or asset that did not create any income, like a current account that paid no interest or a foreign property that yielded no rent.
I did not intend my comment to cover someone non-resident in the UK, who may not have any UK tax liability.
(*) I'm not clear what kind of foreign income that would be tax-free in the UK, if that is what you are suggesting.[/quote]

Thanks Loot.
I think the disconnect might be because I've been ex-UK for 8 years [and counting] and I suspect that the UK tax laws on this matter might have changed during that time. Also during that time I've lived in three very different jurisdictions, tax-wise, hence it's entirely possible my understanding of UK tax law is both out of date and rather muddled by the rules in other countries.

Perhaps I should re-frame the question. My income is UK share dividend income. When I return to the UK in 2018 I'll have been expatted for 10 years. When back in the UK are there any account types/structures available to me, either in the UK or abroad, that I could use to legally reduce the amount of income tax I am liable for?

Lootman
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Re: Offshore banking for expats

Postby Lootman » December 12th, 2016, 4:13 pm

DiamondEcho wrote:Perhaps I should re-frame the question. My income is UK share dividend income. When I return to the UK in 2018 I'll have been expatted for 10 years. When back in the UK are there any account types/structures available to me, either in the UK or abroad, that I could use to legally reduce the amount of income tax I am liable for?

If you have been UK non-resident for tax purposes for ten years then you are not currently liable for UK capital gains tax. If your UK share positions have large unrealised gains then I believe that returning ex-pats are usually advised to sell them before returning rather than face a potential UK CGT bill later.

Those funds can then gradually be used to fund an annual ISA which will shelter 20K a year's worth of shares from any UK tax, starting April 2017. For the excess funds that would be reinvested in UK shares within a taxable account, the tax on dividends is 0% for the first 5K a year and 7.5% up to the higher-rate tax bands, so not onerous.

If you are UK resident then I do not believe that holding the shares in an offshore account will change your UK tax liability, although there may be benefits to that if you later leave the UK again.

That's all I can think of right now.

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Re: International ExPat investors [topic in lieu of it's own board]

Postby stevensfo » December 12th, 2016, 7:21 pm

What you do have to do is declare any income that derives from that account. But if, say, it is a current account and pays no interest, then there is nothing to declare and it can be your "secret".

The same goes for foreign properties. No need to declare unless you derive income from it by renting it out.


What happens with somebody with an ssISA who then lives abroad? I understand about straightforward current and savings accounts, but ISAs are supposedly ringfenced against taxes and the proceeds only taxable when moved and used outside the ISA.

Any idea what happens to income generated within an ISA but is not touched?

Steve

PS Here in Italy, Berlusconi was very vocal in his fight against people hiding money. He got all Swiss banks to agree to a 4 euro/month charge on all non-resident accounts. The result is that everybody who had an account for a bit of fun closed their accounts pretty damned quickly. Everybody with more than approx 10,000 euros hidden just shrugged and laughed. "He's one of us, boys." Business as usual!

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Re: International ExPat investors [topic in lieu of it's own board]

Postby PinkDalek » December 12th, 2016, 7:54 pm

stevensfo wrote:What happens with somebody with an ssISA who then lives abroad? I understand about straightforward current and savings accounts, but ISAs are supposedly ringfenced against taxes and the proceeds only taxable when moved and used outside the ISA.

Any idea what happens to income generated within an ISA but is not touched?


The non resident can't subscribe to the ISA, as you probably know, but shouldn't be subjected to any UK tax on the income/gains on disposal.

However, the income and gains may well be taxable in the (new) country of residence.

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Re: International ExPat investors [topic in lieu of it's own board]

Postby swill453 » December 12th, 2016, 8:19 pm

DiamondEcho wrote:Clariman suggested* in a post re: what boards from TMF have not been automatically recreated here, whether requested or not; that the old Expat Investing board be recreated here in the form of a topic, at least initially just to give such discussion a focused home.

If this is going to be a longstanding topic, and probably bubbling regularly to the top of the board, would it be possible to fix the error in the title?

(it's)

Scott.

Lootman
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Re: International ExPat investors [topic in lieu of it's own board]

Postby Lootman » December 12th, 2016, 8:57 pm

PinkDalek wrote:The non-resident can't subscribe to the ISA, as you probably know

I don't know if this has changed with the newer rules on tax residency because I haven't looked closely at them. But at least under the old rules, formally claiming to be non-resident in the UK for tax purposes was a choice. The status was not determined solely by your circumstances but also by whether you made an election to be non-resident.

Particularly if you were working in a country (Italy?) with higher tax rates than the UK, then there may have been no benefit to being a UK non-resident, since the provisions of the relevant bi-lateral tax treaty would ensure you'd pay no extra UK tax on those foreign earnings anyway.

In that case, you could actually be non-resident but not claim non-resident status, and still subscribe to an ISA.

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Re: International ExPat investors [topic in lieu of it's own board]

Postby stevensfo » December 13th, 2016, 8:01 am

Particularly if you were working in a country (Italy?) with higher tax rates than the UK, then there may have been no benefit to being a UK non-resident, since the provisions of the relevant bi-lateral tax treaty would ensure you'd pay no extra UK tax on those foreign earnings anyway.

In that case, you could actually be non-resident but not claim non-resident status, and still subscribe to an ISA.


According to my official letters, I'm 'domiciled in the UK for tax purposes'. I assume that this is the same as resident. I've never really understood the difference and have the impression that neither do HMRC.

Steve

PinkDalek
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Re: International ExPat investors [topic in lieu of it's own board]

Postby PinkDalek » December 13th, 2016, 1:35 pm

stevensfo wrote:According to my official letters, I'm 'domiciled in the UK for tax purposes'. I assume that this is the same as resident. I've never really understood the difference and have the impression that neither do HMRC.


No, being UK Domiciled is not the same as being resident in the UK.

There's plenty to study here https://www.gov.uk/government/uploads/s ... ttance.pdf (published June 2016 and 90 or so pages long).

In what connection did they write to you about your UK Domicile (as distinct from Residence)? Here's a brief summary as to why not being non-domiciled may be relevant for you. It refers to non-domiciled but UK resident individuals etc https://www.gov.uk/tax-foreign-income/n ... -residents

Domicile is also of relevance for UK Inheritance Tax purposes.

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Re: International ExPat investors [topic in lieu of it's own board]

Postby stevensfo » December 13th, 2016, 2:41 pm

There's plenty to study here


Wow, thanks! They explain the differences much better than the last time I looked! Much clearer!
My situation's a bit complex, but it's also due to differences in how Italian and English words like 'residency' and 'domiciled' are understood, translated and accepted! You ask three people here and each will tell you something quite different!

Steve


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