A real way to think about taxes
Taxes are practically inevitable but doesn’t mean you can’t optimise for them. The most common question we get from our expat clients, particularly in liberal tax environments such as the UAE, is how taxes impact them while they’re overseas.
At swissglobal, we find it helpful to explain taxes simply. Think of taxes in two ways: taxes on the up, and taxes on the down.
Taxes on the up
These are the taxes that apply while you’re filling up your bucket. By that we mean earning a tax-free or low-tax salary as an expat, putting a savings plan in place and getting your financial security strategy sorted. This is when you’re putting money away and letting compound growth do its work to build you a stable nest egg.
Here, there a few taxes that concern you. When you’ve freshly moved, you’re still a legal resident back home, which means any earnings from back home is subject to tax. And any asset sales you make back home – selling an apartment, say – are open to capital gains tax. Even longer-term expats from the UK will still be considered domiciled there, which comes with its own tax obligations. You’ll be liable on earnings made back home - such as from rental income, dividend payments, savings interest or royalties.
Taxes on the down
These are the taxes that apply when you’re drawing from your carefully-filled bucket. It’s when you’re drawing down your savings, funds and portfolios. What many of our clients don’t realise before our consultation with them is that the taxman will ask to be paid when you access your money. This is true of the UK, but also applies to many of the sunnier destinations you might be heading to – unless you retire in the UAE, for instance.
Not all asset classes are equally taxed through, and jurisdictions have different tax rules. While this may complicate the picture, the good news is it gives you plenty of manoeuvring room as you tax optimise your portfolio. We can’t stress enough the importance of doing just that. No exaggeration – you can save thousands, if not hundreds of thousands, just by seeking expert help to get your portfolio structured the right way.
Before retirement is the time to shape your portfolio in tax favourable ways and lower your taxes on the down. If savings are taxed more than a real estate investment, your advisor can help by funnelling your money into an income-generating property – like a youth hotel or an apartment to let. This is just an example, but you get the gist of how portfolios can be restructured while still giving you the income you need.
Taxes on the down are very relevant to retire-preneurs. More and more people are choosing an active life after work – as we explained here [link to retire-preneur blog]- where they set up their own businesses and become involved in social initiatives. You’ll need to have a very clear idea of your tax liabilities, because unexpected tax losses can make the difference between success and failure for a new business.
So there you go. Keep taxes on the up and then on the down in mind, and you’ll have a clear idea of how to ask for expert help in minimising your tax burden.
swissglobal is an international financial services and solutions provider headquartered in Geneva, Switzerland with offices in Zurich, Basel and Dubai.
We’re a wealth management firm that believes in changing how business is done, and making exceptional standards the norm industry-wide.
We’re global – with a strong presence in Switzerland, United Arab Emirates and an eye on exciting markets throughout the Middle East, Europe and Far East Asia. We’re independent – which means that we give you objective advice.
We’re all about you – your goals, your story and your objectives. We bring you an extraordinary portfolio of financial expertise to manage your financial goals while you focus on making the most of life.
Who are we? We’re swissglobal. And we’re on your side.
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