When people consider moving abroad, it is usually their sense of adventure and desire to experience a new culture that are the driving factors. However, there may also be several reasons to move abroad in order to improve your finances. Today, we look at five possible destinations where immigration may actually be beneficial to your bank balance.
1. Tax Advantages (Bahamas, Bahrain, Qatar, UAE, etc)
One major factor for employees moving abroad is often simply the amount of money that they can save through taxes. In the UK, income tax is paid on a sliding scale ranging from 20% for basic tax payers up to 45% for higher rate tax payers.
On top of that, employees also have the burden of National Insurance (Payroll tax) to pay as well.
An employee earning £30,000 per year in the UK, for example, would pay £3,880 in Income Tax and £2,363 in National Insurance, making a combined total of £6,343, equal to 21% of the employees’ salary.
As the infographic below shows, this is fairly similar to many other European countries:
- The Bahamas
- UAE (Dubai)
We have previously released an article written by a former colleague of mine, Simon Withington, who lived in Dubai for 2 years where he discusses this in more detail. He also highlights that employers there also usually cover the UAE equivalent of council tax, saving most people another hefty sum!
It’s a similar story in Bahrain, which we have also covered previously in our article: Have you considered moving to Bahrain? This is because, like Dubai, Bahrain has no income tax, no payroll taxes and no sales tax (equivalent to VAT on purchases).
You may have noticed that we’ve not included some “tax havens” on this list, such as Monaco or Switzerland. This is because whilst they are tax free for income, residents do incur social insurance taxes, which average at 35% of gross salary paid by the employer and an average of 13% paid by the employee. Residents also pay 19.6% VAT on most goods and services. Therefore, whilst taxes paid are less than the UK, it may not be considered a true “tax haven”.
The same could be said for Switzerland where a 13.2% federal tax rates applies and VAT charged on most products at 8%.
2. High Employment
To be fair to the UK, we are doing pretty well with this one. According to the European statistics for April 2015, the latest reported figures put the UK unemployment level at 5.4%, which is the second lowest in Europe, only behind Germany.
Compared to the EU average of 9.7% this is looking really healthy, and when you compare this to 12.4% in Italy, 22.7% in Spain and a whopping 25.4% in Greece, things are looking alright.
However, the unemployment rate in other non-EU countries is even more impressive and may be tempting to expats who are looking for a new job.
Recent figures, for example, show the following unemployment rates:
- Qatar – 0.3% (2013)
- Thailand – 0.9% (2014)
- Singapore – 1.9% (2014)
- Macau – 2.0% (2014)
- Monaco – 2.0% (2012)
- South Korea – 2.7% (2013)
- Hong Kong – 3.3% (2014)
- Japan – 4.1% (2013)
- Norway – 4.1% (2015)
3. Lower Cost of Living
As any follower of Moneystepper knows, improving that net wealth figure over time has two main factors: income (as we have already addressed through employment and taxes) and expenditure. The latter half of this equation can have a huge factor and is often a driving force for people looking to move abroad.
This is even more the case for people who are looking to retire abroad once their retirement income is fixed and there main variable is the expenditure half of the equation.
Numbeo regularly release data on this metric and it makes for very interesting reading. They release an indices which is relative to New York City, which means that NYC is at 100% and all other places are ranked against this basis.
They rank it by a variety of key indicators, but I think the most pertinent is the Consumer Price Plus Rent Index which is a combination of:
- Consumer Price Index (CPI) – relative indicator of the price of consumer goods
- Rent Index – estimate of renting private accommodation
This shows the following in the top 10 cheapest places to live. Remember, 20% in the index means that it costs 20% of the cost in New York. So, if it was $100 in NYC, it would be $20 in that country:
|Country||Consumer Price Plus Rent Index|
A lot of these options may not be interesting for people looking to move for an improved financial position. For example, 11th on the list is Syria, and whilst its only 24.6% of the price of New York, there probably won’t be many expats retiring there any time soon.
However, what is interesting are some of the other countries which fall below the UK score of 66.29%.
The first entry that strikes me, given the previous facts, is that the index score of UAE is very similar at 67.02%. Therefore, the savings that you will be making from a lack of taxes will generally be staying in your pocket rather than going on more expensive living. The same cannot be said for Switzerland which has the highest index score of 92.61%.
Some interesting results for countries with a score under 40 included:
- Mexico – 26.8%
- Turkey – 31.0%
- Thailand – 32.0%
- Peru – 33.6%
- Dominican Republic – 34.6%
- Croatia – 35.9%
- China – 36.0%
- Brazil – 37.4%
- Taiwan – 37.6%
- Portugal – 38.7%
- Jamaica – 39.7%
I’m sure you can find a few places on that list that you could imagine spending a significant amount of your time! I’ll let you check out the full list for yourself.
4. Real GDP Growth
Another economic indicator that may pique your interest is the country’s real GDP growth. The 2014 UK GDP growth according to the CIA World Factbook was 3.2%, coming in at joint 97th position with Poland, Afghanistan and Armenia.
For those looking to prosper from a growing economy and all the potential financial benefits that may hold, people may want to look elsewhere on the list.
Again, some of the key ones that stick out to me as interesting places to consider were:
- 5th – Monaco (9.3%)
- 13th – India (7.4%)
- 13th – China (7.4%)
- 19th – Sri Lanka (7.0%)
- 26th – Qatar (6.5%)
- 30th – Philippines (6.2%)
- 37th – Malaysia (5.9%)
- 59th – The Maldives (4.5%)
- 64th – UAE (4.3%)
There are many other exotic and interesting places on the list, so once again I’ll let you have a browse through!
5. Quality of Life
Numbeo also release an annual “Quality of life index” which looks at a number of factors in order to rank countries based on their apparent quality of life. This takes into account the following:
- Purchasing Power
- Health Care
- Consumer Price Index
- Property price to income ratio
- Pollution Index
- Traffic Index
Of all the countries ranked, United Kingdom comes 16th, being beaten by a host of countries across various continents, including, most surprisingly, Turkmenistan!
Here is the full list to peruse, but the top three are Switzerland, Germany and Sweden!
What To Do Before You Move?
After looking at these reasons to move abroad, maybe your adventurous side is now being supported by some potential financial factors.
However, before you rush in, make sure you have thought about absolutely everything you need to. I personally moved from the UK to Marseille, France in September 2012 and there was so much to remember and things to do before I left. It was difficult to keep track of, but I knew that I was ultimately making the right decision.
Luckily, AXA PPP International have put together a guide in their new infographic which gives you a good checklist of those big things to remember before moving abroad. They have also written a great in-depth article going into each stage of things to remember before you go in more detail: