Expat Series: Moving For Taxes

Have you ever thought about buying a one-way ticket and moving somewhere new and exciting?

I've done that - six times by now.

This second part of my “Expat Journey” series is about taxes!

Who wouldn’t want to keep collecting a solid income while cutting taxes by 20%?

Tempting huh? There’s a catch, though. Low taxes might cost you more than you think. It’s often not the great idea that it first sounded like.

Don’t let that greed cloud your thoughts.

Why do I know?

I lived in two low-tax countries, Singapore and Cyprus.

(tax rates per country from PWC)

I can’t deny that giving away less of what I earned sounded super tempting, but that shouldn’t be all that drives you.

Low taxes exist for a reason: If Cyprus had high taxes, far fewer people would want to live there.

It’s stinking hot in summer, we Westerners had issues with the low-trust culture, and it’s a tiny island full of tourists. The influx of all the tax savers seems to also make the locals quite pissed.

This experience made me reconsider how heavily taxes should factor into choosing a place to live.

What do Taxes get you?

In addition, one has to consider what taxes get you.

I’m not advocating for higher taxes, but many high-tax countries with high immigration must offer something else in return.

Maybe a great quality of life?

How is that quality of life created? Parks and beaches might be clean. It’s safe. There is good infrastructure and healthcare. Dealing with the government is relatively easy.

That’s all the stuff that taxes pay for.

Almost everything was possible online when I arrived in Singapore, with few bureaucratic processes. In Cyprus, for comparison, creating a company or lodging tax returns is an absolute nightmare, and it generally requires a third-party advisory firm.

Make sure to double-check this for your preferred country.

The spectrum of saving

If your move only saves you 10K and you need to use that to deal with advisory firms, company setups, tax statements in multiple countries, etc., then it quickly won’t be worth it. Consider first calculating your actual runway and expenses with ExpenseSorted ↗.

The wealthier you are, the stronger the incentive to move becomes.

What also changes is the ability to compensate for inconveniences.

You could move to a guarded and managed complex in cheap Thailand to avoid the hectic everyday city life or hire an army of lawyers, accountants, and immigration consultants to handle the terrible bureaucratic processes.

For normal earners, these trade-offs might not balance out as nicely.

Where do you sit on the spectrum, and what will that get you where you’re moving?

Most Beginners think reducing taxes is easy

If it were easy, then everyone would do it. Think again.

I’ve been exploring this topic on Reddit and got some very interesting replies.

(source)

The thread above highlights the hoops people jump through to lower taxes, and this particular individual might be missing things, too.

Only time will tell.

Here is a common myth:

Myth: “You can easily secure tax residency by staying just a few days.”

Reality: Countries like Australia, Canada, the US, and the UK have complex rules to prevent this.

A common misconception, for example, is that you can get tax residency in a low-tax country and only spend a couple of days there to tick the box.

Say you don’t like the low-tax country much; you’d prefer to live somewhere nice.

You found the perfect deal:

(Rules for Cyprus: source)

But, what does your home country think about this?

I’m talking about the country you hold your passport in.

People don’t consider that that country might not be happy with you just deciding to pay your taxes elsewhere. So unless you plan never to return or renounce your citizenship, this adds to the complexity of your evaluation.

Take Australia and Cyprus.

As an Australian, I need to rent a place in Cyprus and spend at least 60 days in the Country to get tax residency in Cyprus.

I also need to stop being an Australian tax resident by paying an exit tax, moving everything out of the country, and making that other country my permanent place of abode abroad.

It seems tricky to only spend 60 days somewhere and argue it’s your permanent place of residence…

That isn’t enough, though. If I stay for just a year and then decide to travel and return to Australia, they will likely claim that I have never left the tax residency.

Australia isn’t the only country with such complexity. The USA, Canada, New Zealand, Germany, and the UK seem to have similar rules in place.

Wealthy people might have their ways around, but it’s often not as simple as people think.

What to look out for?

If you think moving for taxes is easy, here are a few more goodies that might change your mind:

The 180-day Rule: Spending less than half the year in a country may affect your residency and complicate your taxes.

Travelling Around: Frequent travel might disrupt your tax residency. Countries want you to settle somewhere else to escape their tax net.

Residency in Your Home Country: Your home country may not simply let you go—many have strict rules on what constitutes a genuine “move.”

Complex Setup Requirements: Establishing residency involves paperwork, costly agents, and ongoing bureaucracy.

Targeted Tax Savings: Which taxes are you aiming to reduce—income tax, capital gains, or corporate taxes? Each requires different strategies.

Tax Treaties: Know with treaties exist between countries or risk double taxation and legal complications.

Foreign Income: Just because you started a company in Singapore doesn’t mean your home country won’t tax the income.