What should I consider financially when choosing to work abroad?

By Rob Renaud AAA
A:

Globalization has made working abroad an option for many skilled workers, and the benefits of working abroad can be very enticing. However, bringing money back home from a different country is a complicated and probably costly task that you would be well advised to consider before accepting a position abroad.

If you're set on working abroad, it is to your advantage to warn prospective employers of your residence status in the country in which you plan to work, as well as how long you expect to stay. Although it is impossible to provide advice that suits every working ex-patriot who is moving back home, there are a few guidelines that apply to most countries. They include:

1. Status: Check with your prospective employers to see what your residence status will be if you work abroad, and be ready to give them a time frame for how long you plan to be working overseas. For most nations in the developed world, your residence status abroad has a huge impact on how you will be taxed when you try to bring money back to your home country. If you're changing your principal residence, you may not be required to pay taxes on the money you bring back home. If, on the other hand, your home government views you as someone who worked overseas for a year to earn a very high income and pay minimal taxes on it, it will be more inclined to tax your earnings when you try to bring them home. The more ties you cut with your home country, the less likely you are to be taxed on the money you try to bring back.

2. Skills: If your government views you as someone who went abroad to learn valuable skills or to make an impact on a developing country, you are likely to pay less tax when you return home. Facilitators of international trade and people who improve international relations are viewed favorably by most governments, and they pay lower taxes as a result.

3. Imports/Exports: If your home country does a significant amount of trade with the country to which you're moving, or if your home country will benefit from your working overseas, your government is going to be less inclined to apply a punitive tax rate to your foreign earnings. Your home country will be likely to favor your work overseas if you're increasing exports, importing new technology or bringing back relevant foreign-learned skills.

4. Work Permits And Visas: If your employer is going to be sponsoring your work permit or helping you get permission to work in another country, they're likely in a better position to get you a visa than you are. Most employers have better resources than the average individual for bringing workers into a country. If you have special skills that would make you an asset to your prospective employers (for example, being fluent in a different language than the one spoken in their country), they may be able to make a case for you with their country's government by proving a need for skilled labor found outside their nation's borders.

5. Income Levels: Generally speaking, if you're a highly skilled worker who earns an income significantly above the average in your home country, working for a foreign employer in another country for even more money is going to cost you when you try to bring that money back home. The government will most likely ask you for its share upon your returning home.

As always, it's good to plan ahead. Before you make any firm commitments to work abroad, check with both your federal government and the government of the country where you wish to work to have a good idea of just how much you will be taxed both at home and abroad.

Finally, if you do work abroad, you may feel the effect of a change in the exchange rate. Foreign-exchange risk can be hedged against, and it's worthwhile to consider its effects on your earnings. To learn more about foreign exchange and its effects on the money you make overseas, check out A Primer on the Forex Market.

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