Many of our clients are living or planning to live an internationally mobile lifestyle in retirement. Indeed, this can be an incredibly rewarding way to live. You could travel the world and live out your dreams with the people closest to you.

However, we’re asked one question again and again: “How can I structure a tax-efficient income in retirement?”.

Certainly, planning your finances as a “tax nomad” can be complicated. You’ll need a solid grasp of the tax rules in your country of residence, and those you hold assets in, before you can strategically plan your lifestyle – and your finances.

Fortunately, we have a wealth of expertise in tax planning for retirees. Read on to find out how to create a tax-efficient retirement income and protect your assets while enjoying the freedom of travelling the world.

Optimise your tax residence

Carefully researching and planning where you’ll establish a tax residence could help you maintain a tax-efficient retirement income.

Imagine you choose to make the UK your primary residence. Assuming you meet the criteria for UK residence status – for example, by staying for 183 days or more, you’ll normally pay UK tax on all of your income, whether it’s from the UK or abroad.

In contrast, Hong Kong operates a territorial basis of taxation, which means that your tax residency status does not usually affect your tax liability. So, you’ll usually only be taxed on income you generate in Hong Kong.

What’s more, unlike in the UK, there’s no Inheritance Tax (IHT) or Capital Gains Tax in Hong Kong. While you may be subject to Profits Tax if you make gains when disposing of specific assets in the Hong Kong, the tax rules are more favourable than in the UK.

Alternatively, you might choose to retire to the United Arab Emirates (U.A.E.) where there is no personal taxation at all.

However, it’s crucial to understand how the tax rules in different countries might apply to you both during the time you spend there and when you return to your original country of residence. This could help you plan where to spend your time and how long to stay in each location.

At BMP Wealth, we have years of experience working with internationally mobile clients, so we can help you effectively optimise your tax residence.

Protect your assets and be aware of the respective laws

Asset protection planning is an important part of building a tax-efficient nomadic lifestyle.

By understanding the financial risks and knowing the limitations of available protections in different countries, you could avoid paying unnecessary taxes on your wealth and manage legal protection.

For example, you might want to set up a limited company to draw a clear dividing line between your business and your personal assets.

Additionally, you could set up an offshore asset protection trust, which typically offers robust protection for your assets by making it extremely difficult for creditors or litigators to seize them. Plus, once you’ve set up a trust, you could also open an offshore bank account and enjoy the benefits of both at the same time.

The jurisdiction or jurisdictions you choose to use for these structures are very important, as legal systems vary in terms of levels of protection and flexibility. We can help you identify the most suitable option for your preferred lifestyle.

Spend your time and money strategically

So, you’ve carefully planned your tax residency and put systems in place to ensure that your assets are protected.

The next important step is to consider how you’ll spend your time and money during your retirement.

An internationally mobile lifestyle offers an incredible opportunity to see the world, experience different cultures and embrace a sense of adventure. You could also enjoy the benefits of holding multiple citizenships and passports, allowing additional freedom of travel and wider access to advanced healthcare.

Each country defines its rules for granting citizenship. Some offer citizenship-by-investment programmes that could allow you to speed up the process. However, it’s worth noting that some countries may restrict the number of citizenships you are allowed to hold.

Finally, after diligently optimising your tax residency and protecting your assets to shield your wealth from unnecessary tax, don’t forget to spend strategically.

For example, if you have your heart set on a new yacht or sports car, you may be wise to avoid making your purchase in the UK, where you could be charged 20% in Value Added Tax (VAT).

Likewise, when it comes to passing on your wealth, it’s worth considering the IHT laws in different countries. We can help you create a succession plan that allows you to pass on your wealth in the most tax-efficient way possible.

Read more: Inheritance Tax: How does where you live affect your estate’s final tax bill?

Get in touch

If you want to find out more about planning a tax-efficient, nomadic retirement lifestyle, we can help.

Please email info@bmpwealth.com or call +852 3975 2878.