Following the last two U.S. presidential elections, some Americans have idly claimed that they would move abroad if their candidate didn’t win.
Americans do move out of the U.S. for jobs or other reasons, but the decision to become an expatriate isn’t one that should be taken lightly, say people familiar with the process.
Nuri Katz, president of APEX Capital Partners, based in Antigua and Montreal, says it’s one thing to talk about picking up and moving, it’s entirely another to do it.
“Very few people are independently wealthy enough that they can just pick up and move around the world to the Caribbean or Canada or wherever and just hang out,” he says.
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People are entertaining the idea, says Severin Guiton, business development manager at Mauritius-based Expat.com. Guiton cited a 2015 study by U.K. peer-to-peer lender Transferwise that showed 35 percent of Americans were ready to move abroad. But only 1 to 3 percent successfully emigrate, and only for a short time, he says.
“This reaction can be seen in every country: grass is always greener elsewhere,” he says. “But while interest is strong, we know by experience that only a few individuals or families will make this project a reality: leaving our friends and family, leaving our zone of comfort and our own financial issues are the main obstacles to an expatriation.”
For people who are thinking of living abroad, experts say Americans need to keep a few factors in mind.
Research countries and realize it may take time. Katz says it can take years to legally emigrate to another country. Just like the U.S., other countries have criteria and quotas.
“You can’t just pick up and move to Canada because Canada won’t let you do that,” he says.
Having a job in advance is usually a requirement. Unless a company is moving a person, it can be difficult to get a job in another country in advance of moving there, he says. People who own U.S. companies with a business that isn’t dependent on a physical location may have an easier time relocating.
“We have clients who own real estate in U.S. and rent it out,” Katz says. “They’re making enough money so they can manage it from afar. It depends on the makeup of your affairs.”
For the high-net worth person or the independently wealthy, purchasing citizenship in another country is an option, he says.
Cyprus, St. Kitts, Antigua, Dominica, Grenada and St. Lucia are some of the countries where people can pay the government for citizenship. Cyprus requires a 2 million euro (about $2.15 million) investment, while the Caribbean countries start at $100,000, he says.
In some of the Caribbean nations, people can also buy real estate for a certain amount to get citizenship. Some European countries allow residency permits. In the United Kingdom, people can receive resident permits by purchasing 2 million pounds worth (about $2.5 million) of government bonds and holding them for five years, Katz says. The Portuguese and Spanish governments grant residency permits for real estate purchases, too.
But he adds residency permits only go so far.
“You’re allowed to live there and spend time there, but it doesn’t lead to citizenship, so you can’t do everything you want to do. You can’t work,” he says.
The IRS wants its cut. Living in another country doesn’t mean people can skip paying Uncle Sam.
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ReKeithen Miller, certified financial planner and portfolio manager with Palisades Hudson Financial Group in Atlanta, says Americans still need to pay U.S. taxes. And it gets more complicated when the filer is overseas.
“You’re still going to have to pay taxes on your worldwide income,” he says. “If you’re moving abroad because you think taxes are going to go up, then you’re not going to change the situation because you still have to file the U.S. income tax return.”
Only by giving up U.S. citizenship can a person not pay U.S. taxes, but Miller says, there are other consequences. High-income earners who have made $161,000 or more for the last five years or those with a net worth of $2 million will have to pay an additional mark-to-market tax on unrealized gains for their property, even if they are not selling anything on their way out of the country.
U.S. citizens who live abroad are likely to have foreign bank accounts for everyday reasons, and those need to be listed if the accounts have balances above $10,000, even if the person is not earning any income.
“They want to see if people are hiding assets overseas,” Miller says.
Penalties can start at $10,000, even if the lack of disclosure is an oversight, and for willful non-disclosure, penalties quickly escalate.
“They’re not kidding,” he says. “They’re really not.”
That also goes for other foreign financial assets, which come with filing rules and penalties for non-compliance, he says.
Other factors to consider. Miller says health insurance is an issue as Medicare doesn’t work for expatriates. Jobs are difficult to get, too, Katz says.
Then there’s the cultural differences between living in the U.S. and abroad, Guiton says.
“Once you have identified the country where you want to go, start finding information on its culture, its people, its values, its cost of living,” he says. “And, of course, the entry conditions.”
And be realistic about the reason to move to avoid the “grass is always greener” disappointments.
“We strongly recommend you to dissipate your illusions as soon as possible. To do so, try to find field information from locals or expats: join expat communities, read blogs of expats,” Guiton says.
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“Try to connect to the local U.S. embassies and consulate as well as American Chambers of Commerce, which will provide you with valuable information,” he says. “Finally, visit the country several times before making a final decision. Try to live like a local during your stay and speak with your neighbors as often as possible.”
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5 Things to Know Before Moving Abroad originally appeared on usnews.com
