Countries offering retirement visas

[Alan]

UK SS is fully taxed by the US for a USC living in the UK.

I am wrong about this. I just got confirmation that UK SS is taxed only in the UK and does not even need to be listed on the US tax return. US SS is reported to the IRS on a SSA-1099 so on the US return it has to reported and then reversed in other income with the Tax Treaty referenced. (I start UK SS in February so was making inquiries)

When I was working in Baku, Vanguard wouldn't let me do something (sorry, I forgot what). I discovered that if I declared myself to be retired (but I wasn't) they allowed me. This was about 5 years ago.

I have only ever been retired while living overseas so can’t think of what the difference might be if you are working, but my son is living and working here and has his IRA and Roth IRA with Vanguard. He has been doing IRA to Roth conversions but not much else.

 

[tenant13]

In the context of this thread: expat visas etc., FATCA is of secondary interest but if anyone cares to know, US is the world largest tax haven for non-US citizens - kind of funny... but also another reason to consider renouncing the citizenship; you move abroad as non-citizen but leave your money in US and you're perfectly sheltered from anyone knowing anything about your finances.

"...while the Internal Revenue Service (IRS) receives information about U.S. persons’ financial accounts in foreign financial institutions (FFIs), U.S. financial institutions (U.S. FIs) report little or no information about foreigners holding financial accounts in the United States."

https://michiganlawreview.org/should-the-us-adopt-crs-2/

 

[UnrealizedPotential]

In the context of this thread: expat visas etc., FATCA is of secondary interest but if anyone cares to know, US is the world largest tax haven for non-US citizens - kind of funny... but also another reason to consider renouncing the citizenship; you move abroad as non-citizen but leave your money in US and you're perfectly sheltered from anyone knowing anything about your finances.

"...while the Internal Revenue Service (IRS) receives information about U.S. persons’ financial accounts in foreign financial institutions (FFIs), U.S. financial institutions (U.S. FIs) report little or no information about foreigners holding financial accounts in the United States."

https://michiganlawreview.org/should-the-us-adopt-crs-2/

There are a few issues to US citizens renouncing their citizenship , not that I would consider doing that. First one is that in most cases once you renounce your US citizenship it is irrevocable. Second issue is that would you be able to keep your US based investing accounts ? Already most US based banks and some private based firms are not happy to deal with expats . So I think one would have to think very carefully before renouncing US citizenship.

How are foreigners able to open US based accounts when I have heard it is so hard to do once you are an expat ? Yes, I know having a US based address helps in some cases for expats, but how can foreigners do it without SS number ? Maybe money talks based on the amount for those foreigners, not that I am suggesting anything.

 

[ragabnh]

In the context of this thread: expat visas etc., FATCA is of secondary interest but if anyone cares to know, US is the world largest tax haven for non-US citizens - kind of funny... but also another reason to consider renouncing the citizenship; you move abroad as non-citizen but leave your money in US and you're perfectly sheltered from anyone knowing anything about your finances.

"...while the Internal Revenue Service (IRS) receives information about U.S. persons’ financial accounts in foreign financial institutions (FFIs), U.S. financial institutions (U.S. FIs) report little or no information about foreigners holding financial accounts in the United States."

https://michiganlawreview.org/should-the-us-adopt-crs-2/

The article is dated 2019, any update since then or things are hold until Covid issues are sorted out.

 

[Free2030]

I am late to this thread and haven't read all the prior posts.

I've been researching Portugal since we are interested in potentially retiring there. What I have learned is the following:

1) they grant Non-Habitual Residence status to new expats for the first 10 years. The tax rate is 10% (changed last year). After that you pay like a local.

2) There's a US-portugal tax treaty which spells out the details. Essentially US govt pension (I think fed, state, and local pension) are not taxed in Portugal but are in the US. Other passive income (SS, company pensions, dividends, etc) is taxed in Portugal and then in the US (taxes already paid becomes a credit). Some say US first and Portugal second so it's still a bit confusing but the amount you pay would be the higher of the 2 anyway.

3) Portugal-based income (local employment) is subject to normal Portugal tax rates, which is up to 48% depending on the tax bracket.

4) Capital gains on real estate is only taxed where the real estate is located. So if you qualify for the capital gains exemption on your primary residence in the US, it will not be taxed in Portugal.

5) One big surprise is that there is no tax break fo Roth-IRA. They consider all withdrawal as income even though it's funded with after-tax money. There is no such thing in Portugal so there is nothing in the system to exempt it.

For me the lack of Roth exemption and the limit of 10 years for the NHR are pretty big issues. Maybe I will move there for 10 years and then move back. We'll have to see as time goes how things change.

 

[Alan]

I am late to this thread and haven't read all the prior posts.

I've been researching Portugal since we are interested in potentially retiring there. What I have learned is the following:

1) they grant Non-Habitual Residence status to new expats for the first 10 years. The tax rate is 10% (changed last year). After that you pay like a local.

2) There's a US-portugal tax treaty which spells out the details. Essentially US govt pension (I think fed, state, and local pension) are not taxed in Portugal but are in the US. Other passive income (SS, company pensions, dividends, etc) is taxed in Portugal and then in the US (taxes already paid becomes a credit). Some say US first and Portugal second so it's still a bit confusing but the amount you pay would be the higher of the 2 anyway.

3) Portugal-based income (local employment) is subject to normal Portugal tax rates, which is up to 48% depending on the tax bracket.

4) Capital gains on real estate is only taxed where the real estate is located. So if you qualify for the capital gains exemption on your primary residence in the US, it will not be taxed in Portugal.

5) One big surprise is that there is no tax break fo Roth-IRA. They consider all withdrawal as income even though it's funded with after-tax money. There is no such thing in Portugal so there is nothing in the system to exempt it.

For me the lack of Roth exemption and the limit of 10 years for the NHR are pretty big issues. Maybe I will move there for 10 years and then move back. We'll have to see as time goes how things change.

That is a bummer about the Roth. In the UK-US tax treaty, in the section on pensions, it states that if withdrawals from a pension plan are tax free in the US then they will be tax free in the UK.

 

[Kroeran]

Nomad Capitalist

Anyone else addicted to Nomad Capitalist Youtubes?

 

[Kroeran]

Any Canadians move tax residency to Turks and Caicos?

 

[truenorth418]

Anyone else addicted to Nomad Capitalist Youtubes?

I watch everyday. Plus the podcasts. [emoji3]

 

[explanade]

New article on top places in Europe for retirement.

Doesn't really delve too much into details.

https://www.travelandleisure.com/trip-ideas/senior-travel/best-places-to-retire-in-europe

Mentions taxes but not in any depth. Would be useful to have some links, including the supposed cheap private health insurance.

Portugal exempts you for 10 years from local taxes? What is to keep you from living up to 10 years and then moving on?

 

[braumeister]

That's actually much better than most similar articles I've seen.

Fortunately, we have members here at E-R.org who live in several of those places, so questions can usually be answered here, and the search function also works quite well.

 

[Free2030]

Portugal exempts you for 10 years from local taxes? What is to keep you from living up to 10 years and then moving on?

Portugal caps taxes on foreign sourced income (American Social Security fo example) to 10% for the first 10 years thru the NHR program. It used to be completely tax exempt but they changed it in 2020. Certain US government pensions (not SS) is not subject to taxation in Portugal but you'll pay US taxes on it similar to 10% anyway. If you work locally, then it's taxed at the normal local rate.

After 10 years there's nothing preventing you from moving away. Since portugal doesn't tax worldwide income, when Portuguese people are earning money overseas, they also don't pay taxes to Portugal.

 

[explanade]

What about people who don’t move their assets to Portugal? They’d be earning dividends on their Us accounts, even have SOcial Security directly deposited to Us bank accounts, never opening up local bank accounts.

Maybe get one or two local credit cards for conveniences throughout Europe.

 

[Alan]

From the Portugal-US tax treaty, article 20, it looks like SS will only be taxed in the USA if the person is a resident of Portugal. This is the exact opposite of the US-UK treaty.

https://www.irs.gov/businesses/international-businesses/portugal-tax-treaty-documents

It also looks like US based investments paying dividends are taxable in Portugal if the US recipient lives in Portugal. (Section 10).

Before moving to any country plenty of research should be done around taxation.

As a US citizen you are always taxed on worldwide income no matter where you live and if a treaty says a stream of US income is taxable in the other country then you still have to pay tax on it and then claim FTCs to reduce the US taxes.

 

[explanade]

When would the tax liability be triggered?

As soon as you apply for and get any visa that lets you stay beyond 90 consecutive days?

Or if you obtain a retirement visa, which sounds like it’s in a different category?

Or after you get a number of 1-year visas?

I heard in some countries you have to renew 1 year visas a couple of times before being eligible to apply for 5-year and longer visas and eventually citizenship if you want it.

Or do retirement visas avoid this laddering scheme?

 

[Alan]

When would the tax liability be triggered?

As soon as you apply for and get any visa that lets you stay beyond 90 consecutive days?

Or if you obtain a retirement visa, which sounds like it’s in a different category?

Or after you get a number of 1-year visas?

I heard in some countries you have to renew 1 year visas a couple of times before being eligible to apply for 5-year and longer visas and eventually citizenship if you want it.

Or do retirement visas avoid this laddering scheme?

Tax liability will vary depending on the country. For example the UK has a “statutory residence test” that determines when a person is liable to UK taxes.

 

[Lagniappe]

Tax liability will vary depending on the country. For example the UK has a “statutory residence test” that determines when a person is liable to UK taxes.

And in Portugal, you are considered a tax resident if you spend more than 183 days per year in the country (there are other criteria, but this is the clearest).

 

[ncbill]

Tax treaties are what matters.

Met a non-U.S. expat down in Mexico some years ago...IIRC, he faced only a maximum 15% tax on any income from his home country, including withdrawals from tax-deferred retirement accounts...I'm still jealous of his sweet deal.

 

[Focus]

Before moving to any country plenty of research should be done around taxation.

As a US citizen you are always taxed on worldwide income no matter where you live and if a treaty says a stream of US income is taxable in the other country then you still have to pay tax on it and then claim FTCs to reduce the US taxes.

Right you are. I had my heart set on moving to Spain, a country I know well. At first, it seemed like a no-brainer: higher quality of life and lower cost of living. However, the deeper I looked, the riskier it seemed financially. A tax attorney there confirmed the worst, adding that many expats move to Spain oblivious of what will hit them.

To mention just a few issues: Spain's tax rates are essentially double the U.S.'s. The country taxes Roth 401k/IRA withdrawals. It forces you to file an "information only" annual form detailing all of your worldwide assets, and it imposes a significant wealth tax on those assets (although Madrid currently gives you a pass). It is the very opposite of retirement friendly, unlike neighboring Portugal.

 

[Alan]

Right you are. I had my heart set on moving to Spain, a country I know well. At first, it seemed like a no-brainer: higher quality of life and lower cost of living. However, the deeper I looked, the riskier it seemed financially. A tax attorney there confirmed the worst, adding that many expats move to Spain oblivious of what will hit them.

To mention just a few issues: Spain's tax rates are essentially double the U.S.'s. The country taxes Roth 401k/IRA withdrawals. It forces you to file an "information only" annual form detailing all of your worldwide assets, and it imposes a significant wealth tax on those assets (although Madrid currently gives you a pass). It is the very opposite of retirement friendly, unlike neighboring Portugal.

Wow, the taxation of Roth distributions is nasty. At least with the US-UK treaty then that is not an issue. Lump sum Roth conversions are also only taxable in the US but IRA withdrawals are taxable in the UK which is why we seriously ramped up our Roth conversions. I’m all Roth now and we are working on DW’s Roth conversions. She is in a much lower marginal tax bracket than I am in the UK (20%) so not quite so urgent.

 

[Focus]

Wow, the taxation of Roth distributions is nasty. At least with the US-UK treaty then that is not an issue. Lump sum Roth conversions are also only taxable in the US but IRA withdrawals are taxable in the UK which is why we seriously ramped up our Roth conversions. I’m all Roth now and we are working on DW’s Roth conversions. She is in a much lower marginal tax bracket than I am in the UK (20%) so not quite so urgent.

What some people do is withdraw all their Roth funds before moving to Spain and reinvest the money in a taxable account. Of course, that's less than ideal.

 

[Alan]

What some people do is withdraw all their Roth funds before moving to Spain and reinvest the money in a taxable account. Of course, that's less than ideal.

The point you are also making is to do your research thoroughly before moving to another country. I am a member of a couple of UK-US expat sites and whether it is a Brit returning home or a USC moving with a UK spouse, so many fail to do the research ahead of time and find themselves in a tax pickle. Often they don’t convert their MFs to ETFs that report into HMRC and find themselves with funds that are foreign investments to HMRC and lose all the good tax advantages of equity dividends and capital gains. From the UK a USC can’t even create a SS online account or open a US bank or brokerage account to roll over their 401k to a company familiar with, and accepting of, overseas customers. This all needs to be done before the move

 

[explanade]

6-month visas sound good if the cutoff for hitting the tax liability threshold is 180 days.

 

[Alan]

6-month visas sound good if the cutoff for hitting the tax liability threshold is 180 days.

We did this for Australia in 2014, actually only stayed 5 months.

 

[explanade]

It’s a minimum 1 year visa right?

So stay 5-6 months in one country and then move on to another country, try to get a 1 year visa there or just maximize the 90 day Schengen limit?