Tax often comes way down the list of why expats up sticks and move from Britain to other countries in Europe.
The weather, a cheaper cost of living and quality of life are often cited as reasons to look overseas in retirement.
However, tax pitfalls can await the unwary even though the European Union is a single market as many nations have significantly different tax systems, according to the Global Opportunities Report from financial firm BDO.
The study warns expats should carefully consider the tax implications of their move – especially if they have substantial assets spread across more than one country. Besides the usual expat haunts, the report also throws up a couple of surprise contenders for retirees.
The report looks at several popular expat destinations and highlights tax issues expats might face.
Chilling in Cyprus
Cyprus has a tax-friendly regime with low income tax, capital gains tax limited to property disposals on the Mediterranean island and no withholding taxes on earnings from investments, but, tax is sliced from bank savings interest and dividends, says the firm.
Switching to the Channel Islands
Jersey and Guernsey seem as British as can be at first look, but for tax purposes, they are not part of the UK. Both islands have flat rate income tax charged at 20% and a notional 1% rate in Jersey for wealthier individuals with incomes exceeding £625,000 a year.
Going to Gibraltar
Gibraltar has regular border scraps with envious neighbour Spain, but is a home from home for British expats perching on the edge of the Rock. Owning property has tax benefits, income tax is capped and capital gains tax and inheritance tax do not exist.
Malta’s tax teaser
Foreign income is only taxed if remitted to Malta; overseas capital gains are exempt from tax and paid at a low rate on property disposals on the islands. Wealthy individuals also escape any form of inheritance tax.
An attractive visa regime that offers benefits to skilled workers and retiring pensioners is a tax-effective lure for British expats, explains the firm.
Dark horse Denmark
Not considered a traditional expat destination, Denmark has many tax benefits for expats, the study points out.
Denmark has a little-known special income tax scheme that is charged at a flat rate for the first five tax years an expat lives in the country. The nation also has a beneficial inheritance tax and capital gains tax systems for incomers.