How planning your taxes can help you save money

Knowing principles governing your taxes as expats helps, be it in your resident or home country

Tax planning is the process of analysing a financial plan or a situation involving your finances from a tax perspective. The objective of tax planning is to make sure there is tax efficiency.

Tax planning is a significant component of a financial plan. Reducing tax liability and increasing the ability to make contributions towards retirement plans are critical to saving money.

Tax planning comprises various considerations such as size of income, the timing of said income, timing of purchases, and planning such taxes are associated with other kinds of expenditures.

Also, the chosen investments and the various retirement plans should go hand-in-hand with the tax filing status as well as the deductions in order to create the best possible outcome.

Tax is always an issue of concern for expats and what they pay depends on the country deemed their main residence. The main point to remember is that tax is not a one-size fits all option for expats.

Every country has a different approach to taxing income and gains. Expats with cash, investments and property in more than one country should ideally have a local adviser in each one to make sure they are keeping up with the latest changes.

Key aspects of tax are residence and domicile

The two important aspects of tax are residence and domicile. Domicile is a complicated concept that is determined at birth. The main factors are where someone’s parents were domiciled. Domicile is unlikely

to change, even when an expat makes a new home in another country.

How do taxes apply to an expat’s income?

Expats pay income and capital gains tax in the countries where they are resident, unless that country does not levy the tax.

But an expat cannot choose where to be tax resident to benefit from lower tax rates, it’s considered a matter of fact by the courts depending on several factors such as: Where their main home is located, where they spend most of their time, where they bank and pay bills, like utilities and council taxes, where they have family and other social ties.