Moving Abroad for Tax Savings: Complete Relocation Guide

Introduction

Relocating to a lower-tax jurisdiction can dramatically increase your after-tax income. But doing it wrong can result in double taxation, penalties, or worse. This guide covers how to make the move properly.

Before You Move: Key Considerations

Exit Taxes

Some countries tax unrealized gains when you leave:

• US: Covered expatriate rules for citizens renouncing
• Canada: Deemed disposition of assets on departure
• Germany: Exit tax on shares over 500,000 EUR
• UK: No general exit tax, but 5-year rule for CGT

Tax Treaty Implications

Tax treaties between your origin and destination countries affect pension taxation, investment income, and tie-breaker rules for residency disputes.

Establishing New Tax Residency

Common Requirements

• Physical presence: Usually 183+ days per year
• Primary home: Where your permanent residence is
• Economic ties: Where you work, bank, have investments
• Family location: Where spouse/dependents live

Breaking Old Residency

Equally important is properly exiting your previous tax residency:

• File departure tax returns
• Close local bank accounts (or minimize)
• Update driver license and registration
• Cancel local club memberships
• Document everything

Popular Low-Tax Destinations

For US Citizens (Still Subject to US Tax)

Due to US citizenship-based taxation, Americans cannot escape US tax by moving. However, the Foreign Earned Income Exclusion ($126,500 in 2025) and Foreign Tax Credit can reduce the burden significantly.

For Non-US Citizens

• UAE: 0% income tax, modern infrastructure
• Singapore: Low taxes, business-friendly, English-speaking
• Portugal: NHR regime offers 20% flat rate
• Switzerland: Moderate taxes, high quality of life

Common Mistakes to Avoid

1. Not actually moving: Tax authorities look at substance, not just paperwork
2. Maintaining too many ties: Keeping a home, business, or family in origin country creates issues
3. Ignoring state/provincial taxes: US state taxes and similar can follow you
4. Poor documentation: Keep records of your location and residency steps

Conclusion

Moving for tax savings can be legitimate and beneficial, but requires careful planning. Work with tax professionals in both your origin and destination countries to ensure you do it right.