Investment strategies if moving overseas

[spiderbill]

I'm in the process of looking at the tax and investment implications of moving overseas. I bought a house in Slovenia 6 years ago and have dreamed of retiring there for a lot longer. Because of Brexit and the loss of freedom of movement it looks as I need to move there permanently this year under the Withdrawl Agreement protection of rights or lose the chance of it being any more than a holiday home.

That means becoming tax resident there, which is likely to cost me some extra expense as their tax rates seem to be rather higher than the UK but I'm also due to retire in the coming year which raises a number of other questions about pensions and investments. I'm in the process of asking whether my various investments can still be held or if my accounts will be closed once I move (I'll probably retain property in the UK so will still have connections here), but I was wondering what strategy changes might be appropriate for my investments. I have around 150k in shares (mostly HYP-ish in ISAs, 135k in OEICs (half in ISA's) and some ITs and ETFs, plus a pension pot of around 180k and some cash.

My strategies up till now have been largely income-focused apart from the OEICs but since the Slovenian taxman won't be likely to recognise the ISA status there'll be a tax slice taken from those dividends.

What changes would any of you suggest in order to take this change of situation into account? While I don't want the tax tail to wag the investment dog I'm also concerned about what might happen as regards CGT if I don't switch some of my investments to cash. When would the CGT clock start on existing investments? If I move to living over there what happens to the status of my main UK house if I sell it later - does it become liable for UK CGT if I'm not using it as my main residence anymore? On a more general topic should I move more towards growth rather than income to avoid income tax?

I realise some of these questions will require detailed understanding of the Slovenian tax system but in general does anyone have any insights in such a "retire abroad" situation?

Thanks in anticipation

Spiderbill

[TheRIT]

I'm not familiar with UK to Slovenia but I did move from UK to Cyprus. Now back in the UK. Also I'm not an accountant or tax expert so this is just my understanding of what I thought I was walking into.

Regarding residency and who has the right to tax you I'd suggest starting with the double taxation convention between the 2 countries as that will answer a number of your questions - https://www.gov.uk/government/publicati ... x-treaties

I kept my UK SIPP's, having no problem changing postal addresses, but knew once put into drawdown age 55 they would have been taxed by Cyprus and I wouldn't have been entitled to the 25% TFLS which instead would have been taxed. Cyprus allows you to choose one of two taxation methods for this pension. Some UK public sector pensions were still taxed in the UK so do read the dtc.

I kept my UK ISA, again having no problem changing postal address, but in Cyprus it is not recognised as anything special so feels the full force of tax. Effectively it was just a trading account and you can't contribute to it as a non UK resident. Except Cyprus doesn't levy CGT on the investments I held in the ISA. Also the dividends weren't taxed for the first 17 years of residency because of a domicile law.

I kept my UK trading account, again having no problem changing address. Tax was per the ISA.

I also set-up a cost effective international money transfer account as the cost to do it through my bank was frankly laughable.

I'd also familiarise myself with the ramifications of coming back to the UK as it can be pretty difficult to escape the UK taxman from areas like IHT and capital gains tax even after you've left. It's one of the reasons why we didn't liquidate anything but the Cyprus side made this a very easy decision as there really was no downside to keeping everything in the UK.

Also read up on UK split year treatment. Not sure if Slovenia has something similar.

My suggestion is to find an accountant who knows the rules in each country and pay them for some written advice well before you move to give you time to implement the advice. It's a lot of wealth you have and you don't want to get it wrong.

Hope that helps.

[todthedog]

Be wary of advisors specialising in advice for a tax efficient moves abroad. The advice may be sound but the fees can be eye watering 5% entrance fees 2% pa. Offshore insurance bonds held in Luxembourg, Isle of Man or Malta are frequently offered, as low tax havens. A lot countries have their own low tax saving plans, some require the money being untouched for a set number of years. We used an 'Assurace vie' while living in France, tax efficient but had to pay old style fees 1.25% limited range of funds.

Good luck on your proposed move.

[fca2019]

The accounts will likely be kept open but you wont be able to transfer them to a new one in th uk, so make sure you have the accounts you want, the cash offers good rates, and you have online access to all of them. My understanding is *if* they'll let you keep open you can manage I.e. buy and sell through the investment platform.

[spiderbill]

Thanks for the responses so far guys - much appreciated

Regarding residency and who has the right to tax you I'd suggest starting with the double taxation convention between the 2 countries as that will answer a number of your questions - https://www.gov.uk/government/publicati ... x-treaties

Useful link - thanks.

I kept my UK SIPP's, having no problem changing postal addresses, but knew once put into drawdown age 55 they would have been taxed by Cyprus and I wouldn't have been entitled to the 25% TFLS which instead would have been taxed. Cyprus allows you to choose one of two taxation methods for this pension. Some UK public sector pensions were still taxed in the UK so do read the dtc.

Don't have any Sipps but the point about the TFLS a good one, and one I meant to mention in my original post. I'm assuming that I'm best to take that now to avoid the possibility of losing it, but will probably leave the rest in place for the moment as the larger one (with Scottish Widows) seems to be doing well. (Unless there's another tax reason not to of course.)

I kept my UK ISA, again having no problem changing postal address, but in Cyprus it is not recognised as anything special so feels the full force of tax. Effectively it was just a trading account and you can't contribute to it as a non UK resident. Except Cyprus doesn't levy CGT on the investments I held in the ISA. Also the dividends weren't taxed for the first 17 years of residency because of a domicile law.

That's reassuring on keeping the accounts - I recall a few years ago back on TMF that a few people seemed to have problems in that regard. I'll ask the Slovenian accountant about CGT and whether it's charged on the ISA's.

I also set-up a cost effective international money transfer account as the cost to do it through my bank was frankly laughable.

Already in place as I used them to pay for the house originally. Heaven knows what that would have cost via the banks!

I'd also familiarise myself with the ramifications of coming back to the UK as it can be pretty difficult to escape the UK taxman from areas like IHT and capital gains tax even after you've left. It's one of the reasons why we didn't liquidate anything but the Cyprus side made this a very easy decision as there really was no downside to keeping everything in the UK.

Unless Scotland become independent I can't see myself ever returning, but your point is well made that it's wise to keep up to date with implications should anything go wrong or if they keep an interest in my affairs.

Also read up on UK split year treatment. Not sure if Slovenia has something similar.

Good point; I'll do that.

My suggestion is to find an accountant who knows the rules in each country and pay them for some written advice well before you move to give you time to implement the advice. It's a lot of wealth you have and you don't want to get it wrong.

Finding such a beast has proven difficult so far but I'll be trying again. Yes a false move now would be a dreadful waste of a lot of work.

Many thanks

Spiderbill

[spiderbill]

Be wary of advisors specialising in advice for a tax efficient moves abroad. The advice may be sound but the fees can be eye watering 5% entrance fees 2% pa. Offshore insurance bonds held in Luxembourg, Isle of Man or Malta are frequently offered, as low tax havens. A lot countries have their own low tax saving plans, some require the money being untouched for a set number of years. We used an 'Assurace vie' while living in France, tax efficient but had to pay old style fees 1.25% limited range of funds.

Good luck on your proposed move.

Thanks, I'd heard some similar stories on the old ex-pats board on TMF a few years back and will certainly be very vary of such schemes.

Is there an issue of not being able to open new investments from another country? Would I perhaps have to wait until I got citizenship (a further 5 years) before being able to open investments from Slovenia?

much obliged
Spiderbill

[spiderbill]

The accounts will likely be kept open but you wont be able to transfer them to a new one in th uk, so make sure you have the accounts you want, the cash offers good rates, and you have online access to all of them. My understanding is *if* they'll let you keep open you can manage I.e. buy and sell through the investment platform.

That's hopeful, and the parts about setting up relevent accounts now is a good point. I have accounts with three different banks and two investment platforms so hopefully at least one of each will allow continued usage.

Thanks
Spiderbill

[PinkDalek]

Briefly as I don't think anyone has commented on this aspect:

(I'll probably retain property in the UK so will still have connections here) ... If I move to living over there what happens to the status of my main UK house if I sell it later - does it become liable for UK CGT if I'm not using it as my main residence anymore?

Study this re:

HS283 Private Residence Relief (2017)
Updated 6 April 2019 See further below as there may be changes already enacted or soon to be enacted.
https://www.gov.uk/government/publications/private-residence-relief-hs283-self-assessment-helpsheet/hs283-private-residence-relief-2017--2

In particular 3. Capital Gains Tax for non-residents on UK residential property and 4. Definition of terms (inc Period of ownership).

Do bear in mind the Final Period Exemption was set to be reduced from 18 to 9 months wef 6 April 2020. I started a Topic on that subject back in 2019 at Taxes, as below, but I'm not up to date. Feel free to ask further over there on that thread, which'll cause one of us to come back to you. Most of your questions appear to be tax related anyway.

viewtopic.php?f=49&t=16560

There's more to study, when you find the time, such as:

Tell HMRC about Capital Gains Tax on UK property or land if you’re non-resident
https://www.gov.uk/guidance/capital-gains-tax-for-non-residents-uk-residential-property

Guidance note for residence, domicile and the remittance basis: RDR1
Updated 19 July 2018 long and complicated and may be subject to change.
https://www.gov.uk/government/publications/residence-domicile-and-remittance-basis-rules-uk-tax-liability/guidance-note-for-residence-domicile-and-the-remittance-basis-rdr1

I'll ask the Slovenian accountant about CGT and whether it's charged on the ISA's.

That point by TheRIT relates to Cypriot Residence laws generally. ISA income and capital gains would not be disregarded by Foreign jurisdictions per se as only tax exempt for UK tax purposes.

Edit: Keep a close eye on the forthcoming UK Budget and the more detailed ancillary papers.

[TUK020]

what's the deal for healthcare?

[spiderbill]

Briefly as I don't think anyone has commented on this aspect:

Thanks for that and those links PinkDalek - very useful and I'll study them in detail.

much obliged
Spiderbill

[spiderbill]

what's the deal for healthcare?

I'll have to pay into the Slovenian system or take out private insurance - probably the former. Their healthcare standards are very good by all accounts.

[todthedog]

Not sure for Slovenia, but some counties want you to out private Healthcare (so you will not be a financial burden on the State if ill) and have a certain number of years residence proved by tax returns before allowing you access to the state system. That of course applies to EU members!!!
We, via the EU Commission took Sweden to court over the non compliance of access to state Healthcare.
Private Healthcare can be expensive. Don't confuse Private Healthcare with worldwide health insurance they are not the same thing.

I have a wonky knee and this was excluded from any PH cover.

Really check it out before you go.

[TahiPanasDua]

I worked overseas for decades and spent the first 7 years of retirement in Hong Kong where I was not taxed.

After ensuring compliance with HMRC rules on non-residence, the most important tax and investment considerations I worked to were:

1.All income arising in the UK from whatever source: rents, dividends, pensions are subject to UK tax.
2.You are not subject to capital gains tax on say shares sold when abroad.
3.Usefully, dividends from UK quoted ETFs are mostly Irish even though quoted on the London exchange and are not strictly UK income so not subject to UK tax. I held mine with an offshore broker and never declared them.
4. Keep everything 50/50 with a spouse, if any, to double all allowances and tax bands. It also makes inheritance automatic.
5. Don't cancel UK bank accounts.
6. You can't continue to contribute to ISAs but you can keep them while overseas.

My understanding may not be correct but I am not writing this in Pentonville.

TP2.