Already in 2019, we’ve seen a government shutdown in the U.S. and a Brexit debate that rages on in the United Kingdom. While moving internationally always has been a complex subject to navigate, it’s clear that global mobility, both in the U.S. and abroad, has become more uncertain than in past years. In 2019 though, three of the greatest challenges for U.S. citizens to overcome when relocating are immigration policies, tax codes, and global events leading to instability.
When it comes to doing business, three of the top destinations for expats are Singapore, Switzerland and the Netherlands, according to a recent Forbes article. And while the ability to move globally – to the previously mentioned destinations or elsewhere – has become easier and more prevalent than in the past few decades, acquiring the proper documentation (visas and residence permits) before the move is critical to a seamless transition.
Relocating to Singapore
Situated just south of Malaysia, Singapore is a destination not just for tourists, but also for entrepreneurs and business people seeking new opportunities. Singapore is flexible for people visiting the country for less than 90 days. Although, professionals staying indefinitely need to obtain either an Employment Pass or EntrePass before starting the position.
The application for the Employment Pass must be submitted on behalf of the candidate by his or her employer. The application process typically takes no more than three weeks and the pass is valid for up to two years for first-time candidates.
For those looking to start a new business there, Singapore offers the EntrePass. The application is submitted by the individuals and the process can take up to eight weeks. If approved, the EntrePass is valid for up to one year with renewal options.
Relocating to Switzerland
Switzerland is one of the pickiest countries when it comes to foreign-born workers entering their country. Just 8,500 long-term and short-term permits are issued each year and are typically only given to highly skilled workers. Start the application process early, as it can take up to three months to obtain one of these coveted work permits.
Immigrating to The Netherlands
Citizens of the European Union, Iceland, Lichtenstein and Norway do not need to worry about obtaining a work or residence permit before making the move to the Netherlands – everyone else does though. A U.S. expat will need to obtain both a residence and work permit before making the move to the Netherlands.
Taxes Codes for Citizens Abroad
As is the case with citizens living in the U.S., the Internal Revenue Service (IRS) is quite particular about what it expects from its citizens living and working abroad. If the expat retains U.S. citizenship, there’s a strong chance that come April, tax documents and disclosures will need to be filed. While there are dozens of international tax codes and requirements for individuals and businesses to consider, there are two fundamental tax topics every successful U.S. expat needs to remember.
Report of Foreign Bank and Financial Accounts (FBAR)
Opening a bank account in your new country of residence will likely be one of the first things you do upon arrival. In fact, it’s not a bad idea to start the process before making the move. This will ensure access to funds and the ability to get paid by your new employer are both taken care of ahead of time. With the newly opened foreign bank account also comes a new responsibility.
The United States is one of the few countries to operate on a citizen-based tax system (most countries operate on a residence-based tax system), which is why once your foreign bank account is opened, you’ll likely be required to let the U.S. government know about it. According to the IRS, U.S. expats who have a financial interest that has exceeded $10,000 in the last calendar year must file an FBAR disclosure. These documents are due on April 15, but filers can typically request up to a six-month extension.
U.S. expats must file an FBAR if both of the following are true:
- The United States person had a financial interest in or signature authority over at least one financial account located outside of the United States; and
- The aggregate value of all foreign financial accounts exceeded $10,000 at any time during the calendar year reported.
Don’t dismiss an account with $10,001, as part of the Foreign Account Tax Compliance Act, foreign financial institutions are to relay specific information about U.S. account holders to the IRS.
The Foreign Earned Income Exclusion (FEIE)
After spending more than a year working outside of the U.S., expats can expect a reprieve from paying U.S. taxes on their foreign earned income. According to the IRS, there are two different ways to be approved for the FEIE, and if approved, the eligible U.S. taxpayers can exclude up to $105,900 of foreign earned income on their 2019 returns.
- The Bona Fide Residence Test – a U.S. citizen living abroad meets the bona fide residence test if they are a resident of a foreign country or countries for an uninterrupted period that includes the entire U.S. tax year.
- The Physical Presence Test – is achieved if an expat has lived in a foreign country or countries for at least 330 days out of 365. Now this might similar to the bona fide residence test, but it’s actually more lenient because it can occur during any consecutive 12-month period, not the entire tax year.
Political decisions, such as Brexit, will continue to impact expats, both now and in the future. Sometimes though, there are events that unfold quickly and require swift response by expats considering moving to those areas. Recently, the unrest in Venezuela led to travel advisories for U.S. citizens, recommending both temporary and long-term U.S. residents to leave the country. While these events are not the norm, they should be a reminder that instability can arise at any time and is something every expat needs to be prepared for such an incident.
Before making the transition to another country, it’s a good idea to sign up for U.S. State Department’s travel alerts. The State Department website is easy to navigate and allows users to search and sign up for alerts based on location. Additionally, it’s always a good idea to know your surroundings – early in your stay abroad be sure to familiarize yourself with the location of the U.S. embassy, just in case.
Final Thoughts on Moving Abroad
Although moving abroad is a massive undertaking, it’s one that is achievable – and more often than not, is an immensely enriching experience. With the proper research and planning, the transition to another country can be a smooth one.
Before making the move, make sure to acquire the proper documentation (both residence and work permits), report foreign earned income and accounts to the U.S., and be mindful that there’s always the chance for instability that could impact your stay. And while you should be prepared for any eventuality, moving to another country can offer exciting opportunities, both personally and professionally.