One of the perks of being a high-ranking employee in a multinational company is you often get to travel and work in far locales. Many a C-suite executive has had stints in other parts of the world, but there's more to moving than sightseeing, house hunting and working with new staff. You may need to establish credit in your new nation, deal with complicated tax structures and re-organize your assets.
Those moving to Asia will likely be faced with more complexity around taxes and credit than they're used to, though it depends on where you're moving too, says Kenneth Mau, a Toronto-based vice-president and high net-worth planning specialist at RBC. Mainland China, he says, has the most complicated rules, while Hong Kong, Taiwan and some other locales take a more North American approach to banking and finance.
Paying the taxman
It's not Asian tax authorities that people need to worry about first. If you're moving for the long-term and plan to become a permanent resident of the country, then you may be hit with a departure or exit tax. Essentially, all of your assets, except your home, are subject to capital gains taxes that will need to be paid to your soon-to-be former government.
Some tax-advantaged strategies may include transferring assets to a lower-income spouse without triggering capital gains, depending on the country you're leaving, and assets in certain accounts may not be subject to this tax – but expect to pay something. “You'll have to pay taxes on gains accumulated, even though you haven't liquidated them," says Mau.
If you do take up residence in another country, then you'll have to start paying income tax on your pay checks. In Hong Kong the process can be fairly straight forward, says Mau. You receive a work permit for usually three to five years and then have to pay taxes on your earnings. “That's really it," says Mau.
Mainland China can be more complicated. Tax rates can depend on how long you're staying in the country, what state you're residing in, and whether you leave the country for more than 30 consecutive days. In some cases, the authorities will want to tax any money made outside of the country too.
Executives still operating companies in their home country will need to look into how that money will be treated. It could be subject to tax in the new jurisdiction. “This is a really important topic," says Mau. “You need to find out how the new country will view income originating from the previous country."
Dennis Pak, a Singapore-based director at RBC Wealth Management, says that any newcomer to the country should talk to a tax expert for advice first. "I say to go get external tax advice and then we can help them implement solutions," he says.
Opening an account
Once you make the move you'll likely want to set up a bank account. In some cases, that's easier said than done. The simplest option, says Mau, is to work with a bank that has operations in the country you're now calling home. Many multinational institutions do have operations in Asian countries and will allow you to set up an account at a local branch without much effort.
In Hong Kong, where there is a similar banking system to North America and the United Kingdom, this should be a straight-forward task. You will only need two pieces of photo identification and a proof of address, like a gas or phone bill.
However, things could be more complicated in other jurisdictions. In China, for example, banks will require a number of different documents, such as a work permit, a passport, proof of residence and other paperwork. “Don't take it for granted that opening a bank account will be an easy experience," says Mau.
If you can work with a bank that has international branches, then you may able to transfer your credit history to the new location, but in spots where you have to open a new account, that history likely won't get transferred. You may have to build up your credit history from scratch in the same manner you would have years ago — by paying bills and using credit cards.
Easy to bring money in, harder to get it out
Once you have an account in place, you can bring assets from your previous residence into your new locale. Most Asian countries are happy to accept money coming into a domestic bank account; however, transferring funds outside the country may become problematic, which could complicate matters if you have family to support back home. “There could be local restrictions on fund transfers," says Mau. “It's easier to move money into a country than out."
In some cases, like in China, you may need a special permit to wire money outside of the country. Additionally, moving money between different currencies could be subject to certain foreign exchange rules, adds Mau. Generally, those in Hong Kong may move money from one country to another without much fuss, but anyone moving should find out how their assets will be treated in their new place of work. “These are things people tend not to consider," he says.
Another issue to consider is how your new country addresses foreign ownership of property. Mau knows firsthand some of the trials and tribulations that can come with trying to own land in an Asian country. A few years ago, he wanted to buy a reasonably priced condo in China. He wasn't allowed to buy it. “Because I'm holding a Canadian passport, I'm considered a foreigner and can't own properties in China," he says.
Pak adds that Hong Kong and Singapore have a foreign buyers' tax, which means any one not from the country has to pay the government an additional 18% of the purchase price. It's only 3% for people from those countries and 8% for permanent residents. "These are things you'll want to know – the complications," he says.
Create a family office
One way that C-suite expats can organize their now more global affairs is to set up a family office that oversees multiple properties in different jurisdictions. "You might have a lot of different things, but can't manage them on your own," says Pak. "The family office can look after all your affairs."
One thing advisors can do is to help mitigate currency risk. Someone may be getting paid in Canadian or U.S. dollars but have to pay for goods in a different currency – or they may be getting paid in local dollars, but need to send money back home. Advisors within the family office or bank can create hedges to lessen the impact of currency ups and downs, says Pak.
Since every country is different, it helps to plan as far ahead as possible. Most issues have solutions, but the process may not be what you're used to. Working with professionals can ease the process. Large companies typically have experts who can help with relocation, but your bank can answer questions too. “You need to plan early," says Mau. “Once you know where you're moving to, then the planning can start. Every place has its own rules."
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