One of the key points coming out over the recent weeks about COVID-19 is the unintended impact it has had on the movement of global expats.
While many global expats are naturally focused on the potential health effect of the virus on themselves and their families – other more costly negative impacts are lying in wait to cause major issues.
Please read on and be careful COVID-19 does not hit you in ways you don’t expect.
Rushing to become an expat
Our evidence is that many companies and businesses are speeding up the deployment of expat executives to beat border shutdowns which are anticipated to come into effect.
While this is understandable from an employer perspective – making an employee move sooner than they plan – can negatively impact them in the areas of:-
- tax management,
- insurance planning for both life and property,
- investment and pension management,
and more generally across the spectrum of their lives.
People need ‘time to plan’ in the above areas to make sure they get it right.
Leaving your home country sooner than you intend can trigger a tax disposal of your worldwide assets for tax purposes in some countries like Australia and Canada. Thus, being sure of the market value of some assets and being clear about what assets you are ‘taking’ into the new host country is important.
If you are speeding up your departure – things will slip through the cracks.
These mistakes can be challenging to recover from.
For example, you may arrive in your new country – uninsured medically (you or your family) and then suffer a health incident – COVID-19 or non COVID-19.
Wittingly or unwittingly there can be serious problems caused by failing to plan.
A recent case of a client moving to the US is illustrative.
The client left their home country and their family home empty as they planned to rent it.
This dragged on for a couple of months and they failed to notify their insurer of their move overseas or that the house was empty.
Following a storm and some rain damage – quite normal – the insurer denied the claim for water damage on the basis that the home roof leak would have been noticed earlier in the ordinary course of events (if they were living there as per their insurance coverage) and the excess water damage was greatly exacerbated by them being absent from the home.
Simple issues like this can be avoided by planning and working through our Expatland checklist.
Beware of hurrying home
Likewise – expats scurrying home can leave a host of other issues unresolved.
Many employees have stock options or other share plans. Not considering the consequence of arriving home with these share plans means – no time to plan and tax liabilities being triggered when they might otherwise have been managed.
Coming home earlier than you plan might mean that the cost base of assets you bring into a country, like shares, happens when the share price is much lower than what you bought the shares for.
Australia, for example, would give a deemed cost to a returning Australian expat based on the market value of the shares at the date they resumed Australian tax residency.
As global stock markets have been in ‘free fall’ many expats will be return home with their international share portfolios – in loss territory.
A year or two from now these shares may be back up to what they originally cost.
However, that is a ‘capital gain’ in the eyes of the Australian Tax Office.
Selling the shares ‘at cost’ would yield a capital gain.
Apart from tax, a returning expat has to deal with cancelling leases or leaving behind financial obligations in their host country. This might be a long-term saving plan contract – which requires you to make a monthly payment – which is no longer something you want to do when you leave the country and return home.
There may be penalties if you stop making contributions to some savings plans.
Hurrying up to get home – can be just as fraught with financial risk management issues as leaving for Expatland.
Our advice is for you to think carefully through any move and to realise that the Expatland Global Network is here to help you.
Our E-Teams are full of experienced professionals who know what to do in most situations. They can very quickly provide you with the advice and guidance you need to ensure you are fully aware of the consequences of your move. Once you know understand the risks, you can make more informed decisions.
For more info on how to cope with these and other issues please contact us and we’ll be happy to connect you with an E-Team member that can assist.
Enjoy the journey and keep safe!