What is a double taxation treaty?

An agreement between two countries intended to relieve persons who would otherwise be subject to tax in both countries from being taxed twice in respect of the same transactions or events. By and large, most offshore jurisdictions have traditionally not had double taxation treaties, since they don't have much local taxation. Offshore jurisdictions which do have double tax treaties usually cannot use them to benefit investors receiving complete local tax exemption.

Why do people expatriate?

For various reasons. Some people expatriate purely for financial reasons, or because of displeasure with government policies, while others are obliged to leave their country of residence by the nature of their job, or the service that they provide.

The duration of the overseas stay, the destination(s) and surrounding
circumstances can differ greatly, but the uniting factor is that in the majority
of cases being an expat can be financially advantageous as well as
culturally enriching.

What are the banking/investment options open to me as an expatriate?

As an expatriate, you really have your pick of the investment arena.
A lot depends on the tax regime in your home country, but assuming that you are
going to be non-resident for the duration of your absence, then nationals of most
countries are in an ideal position, as expatriates, to take advantage of offshore financial services in a tax-efficient way.

In addition, many high tax countries offer attractive investment opportunities and tax breaks for non-resident individuals and entities. There are many different structures and services of especial interest to expatriates, so the determining factors need only be the size of your pocket and your inclinations!

What should I do about banking while I am overseas?

Whatever your financial circumstances, as an expat you would be advised to examine the possibility of opening an offshore bank account, in order to take advantage of the tax efficiency and relatively enhanced confidentiality that this provides. No tax is payable on interest arising from money held in an offshore bank account (unless the EU Savings Tax Directive applies), so even if you are just looking for somewhere to receive funds remitted from home, or have your salary paid into, this has to be a plus.

There are various types of account available to suit your means and needs. These include instant access accounts with credit/debit card facilities, fixed term deposit accounts with tiered rates of interest, and fixed and variable rate accounts.

In most cases it would also be useful to set up a bank account in your destination country (where you will be living or working most of the time), from the point of view of conducting day-to-day transactions more easily. You could arrange with your employer to have part of your salary or expenses paid into your offshore account, and part into the local account.

Offshore accounts can usually be in a range of hard currencies, but the local account may have to be in the local currency: having two accounts means that if the value of the local currency fluctuates greatly, or if you are taxed locally on money received, then you are protected to a certain extent.

Would offshore fund investment be suitable for me as an expatriate?

It would be ideal! Fund investment means that you can choose to invest in a particular class of assets without having to examine the characteristics of each asset individually, and if you choose to invest in an offshore mutual fund, the responsibility for the management, maintenance and administration is taken by the promoter, manager and custodian of the fund.

There are various options, ranging from the ultra safe to the very aggressive, but the two main categories that offshore funds can be divided into are private funds (longer term investment, usually requiring more capital, but hopefully generating greater returns) and public funds (usually open-ended, so more flexible, and requiring less capital).

Always depending on your original home tax regime, many expatriates will be able to receive dividends and capital returns from an offshore fund without paying tax while they remain non-resident.

I'm not interested in investing, I just want somewhere to keep my money safe.
What type of structure would suit me?

If you have substantial liquid net worth that you would like to protect during your expatriation, and afterwards, then an offshore trust may be the way to go, along with offshore bank accounts. This type of structure is more used for asset protection purposes than for tax efficiency during your lifetime, as many high tax countries (for example the US) now have legislation designed to make offshore trusts at best tax neutral.

However, the asset protection advantages, and the enhanced privacy afforded by an offshore trust are useful features. Trusts are still effective as a defence against inheritance tax.

An offshore trust basically works by transferring control of your assets away from you (the settlor) to a custodian or trustee, who will manage the trust in the best interests of the beneficiary/ies (This can also be you, or any other person, group of people, or entity that you specify). It is normal for trustees to operate the trust in accordance with the wishes of the settlor.

There are different types of trusts for different purposes, and you need
professional assistance in selecting the right type in the right jurisdiction.
If your home tax regime does not yet have anti-avoidance legislation, and
you hope to gain tax benefits from setting up a trust, then you will probably
use a discretionary trust, in which the trustees have full control over the
disposition of the trust income and assets.

You can still be named as a beneficiary, however, and the trustees will still follow your wishes.