When changing your residency to retire or live somewhere new, you may be surprised about what you can and cannot do with your money. So what’s there to think about?
When you move country there are many, many decisions to make. Whilst your head is filled with new experiences, new sights and new sounds, and often a new way of doing things, knowing how to manage your money in the new environment won’t be something that comes easily to you, or that is familiar to you.
You may receive conflicting opinions about how to manage your money, in a different environment, like Italy.
It’s one thing to open a bank account or arrange for salary or pension income into the right bank account, and another thing entirely however, to consider how to practically manage your wealth including your retirement funds effectively and tax-efficiently, when you move your residence to a new country.
You may believe that since banks and pension companies and investment companies are multinational, you can just continue on managing your investments and your money like before, and perhaps that you just need to pay attention to exchange rates, and knowing where you can access some cash and the money you require to live.
What you will discover (sooner or later) is that despite globalisation, the evolution of fintech, digitalisation, open banking and hundreds of money-managing apps, there will still be taxation impacts and new legally-required reporting obligations when you change your country of residence.
What are these impacts?
In essence, each country taxes the investments and retirement funds (and incomes) of their residents differently. You will need to know those differences in order to anticipate them and be prepared for the financial impact of taxes and the financial laws of your new country, on your money.
The globalisation trend hasn’t translated into a world where every nation agrees to treat their citizens for taxing purposes the same as other nations, or in alignment or in some kind of fair agreement with the country which you left behind.
In many respects, most countries financial and tax systems ignore aspects of your past, about your saved money, aspects that you think are important. For example, one such aspect is the tax treatment of contributions you have already made to your retirement in the past, over many years.
When it comes to planning your retirement and your investments in your retirement country, investment companies and advisors may take different approaches to this dilemma.
Your challenge is to figure out, which approach are they proposing to take ?
Two approaches to financial planning and advice when changing country of residence
The first approach is to ignore the tax differences. The investment company you clicked on in that social media app probably won’t mention the tax impacts, and especially for clients like yourself with a nationality different to the country where you now live.
They may suggest or advise you to refer to your own tax advisor.
They are more likely to focus on their past performance, and possibly lower costs. Certainly automated, robo-investment styles of investing won’t be considering your tax situation.
The second approach is when an advisor recognises the significant potential impact of taxes and takes them into account when designing your investment or pension solution.
In this second approach, the advisor takes the time to explain the investment structure. The structure, or legal and administrative method through which you invest, is especially relevant when you change your country of residence, and engage in a new financial system.
How to plan for managing your money when you move to a new country like Italy
The structure is critical in order to allow you to plan for the tax differences between nations, and to prevent double taxes and to minimise the tax drain from your investments – either as they grow, or when you withdraw any money. Advisors using this approach are conscious of any ‘unfair tax impacts’ that you perhaps don’t know about, they are conscious of your complete financial result (after taxes), rather than a gross return on investment.
They are conscious of treating your wealth in a holistic manner.
Financial planning and looking after your wealth in retirement is about alot more than return on investment and headline fees.
Contact me for more information.