According to a recent survey by United Nations Department of Economic and Social Affairs, there has been a significant increase in India’s diaspora population from 6.7 million in 1990 to 16 million in the year 2015 making it the largest in the world. The reason for this change may be more advantageous business opportunities or employment, better education opportunities for self or children or a superior lifestyle abroad.
This change might be the best change in the life of the individual wanting to move abroad, but before taking this big step the person should take certain significant aspects into consideration.
A person is treated as an NRI based on the duration and purpose for which the Visa is applied. Kinds of a visa that could result in a person becoming NRI include Business Visa, Employment Visa and Visa issued for Education or research purposes, but do not include Visa issued for a limited purpose or for a shorter span such as Tourist Visa, project visa, etc.
With the change in residency , the person needs to convert the sum of money held by him into the local currency of the new country so as to facilitate the transfer of money between the countries. For this purpose, the person has to conform to the Foreign Exchange regulations provided in the Foreign Exchange Management Act, which provides per annum limits which the non-resident individual will have to comply with to remit funds abroad. This limit is currently 1 mn USD per non-resident per financial year. If someone with a large estate plans to shift and reside abroad, the transfer of money is something one will have to plan well in advance for easy availability of funds in the new country.
While not the make or break point, but tax is something which everyone must consider before taking a final call on where to migrate. Depending on one’s choice of the country you are emigrating to, you may mitigate your overall taxes or end up increasing your Income Tax bill significantly. For example, a resident of UAE or Canada will have a lower income tax rate compared to most other countries, a US citizen needs to pay income tax on his global income, irrespective of where it is earned.
Unless you are moving abroad with just a few bags, you need to check the prevalent inheritance and estate tax laws before you make that decision. Known as inheritance taxes in one country, but as estate or death taxes in others, these taxes essentially mean that post your lifetime, a significant portion of your estate may go into the coffers of the government of the country where you have just set up your base.
While in several countries, the basis of Estate/inheritance taxes is the domicile and often it may be territorial, i.e. limited to the estate you have acquired in that country, that may not always be the case. For instance, in Canada, a deceased’s estate located in Canada is liable to pay deemed capital gains tax upon his demise, whereas in USA one’s global assets above a certain threshold are subjected to Estate taxes upon their death.
The nomenclature, basis of levy and exemptions vary significantly across countries. It is pertinent to note that India currently does not have an Estate Tax regime in effect.
In case someone with a significant estate is planning to migrate to any country, this is one tax which they should surely look up, and plan for with the help of Estate Planners before they set foot in another country.
If one is making a country one’s new home then it is a given that one will purchase property there at some point of time. This is where one needs to understand property tax that is usually levied on real estate by the local authorities as a percentage of the property value. Generally, the government of local authority would appraise the property and levy the tax in proportion to its monetary value. This tax and legal fees, thereunto could often add 6-10 per cent to the purchase price, with some recurring taxes per annum which vary depending on the region.
Capital Gains Tax
The Capital gains taxes arise on transfer of capital assets. Just as in other considerations that are talked about, this one also has a lot of variation across geographies. For example, Singapore and Hong Kong have no capital gains tax on equities, while their neighbour Malaysia has no capital gains tax on equities and real estate. Compare this to the fact that listed equities in India currently have zero capital gains tax, if held over a year.
Amongst nations having the highest capital gains tax rates in the world are the likes of Denmark, France and USA.
Health Costs/Medical Benefits
While, this might appear to be simple point to many, quite often it is the other way around. The health insurance taken in India may not always be valid outside India the reason being limited coverage of the Indian insurance companies. Therefore, it is essential that before leaving India, the individual should check the geographical coverage of the insurance taken. In case the same does not extend to the migrating state, a new insurance with adequate cover should be taken by the individual in the migrating state.
Cost of Living
Another aspect to be considered before making the move is the cost of living as it affects not only the person but also those moving along with him like his children, spouse or any other family member. Even basics such as the location of one’s new abode have to be thought about for it could have multiple implications in forms of rents and taxes, etc. The cost of living in countries like UK and US could be quite high as compared to other states. Thus, it helps to look into the cost of living so as to manage the expenses easily and also to adapt as per the norms of one’s new country.
Besides taxes other important points of consideration for many migrants are the proximity to India and language .
With such a dynamic global tax scenario and several kinds of taxes, most find it prudent to take expert help and assess the likely tax impact amongst other points before taking the final leap.