Leaving a tax residency: what has to be done before you move, not after

Relocation creates a set of duties that arise from the change of status itself, not from earning anything. Penalties for them accrue regardless of income, which is exactly why they are so easy to miss: nobody sends an invoice.

The exit charge

Several countries treat ceasing to be resident as a deemed disposal: your assets are treated as sold on the day you leave and unrealised gains become taxable, whether or not anything was actually sold.

Where this applies, it is the single largest item in the whole exercise, and it is determined by the date of departure. Establishing whether your country has such a charge — and what it applies to — belongs at the start of planning, not at the end.

Notification duties

• Opening and closing accounts abroad — including brokerage accounts and, in several jurisdictions, payment services.
• Movements on those accounts — a separate periodic report in some countries, due even on nil activity.
• Acquiring a second residence permit or citizenship — an independent obligation with a short deadline in a number of jurisdictions.
• Participation in and control of foreign companies, with its own reporting on profits.
• The change of residency itself — sometimes through a departure return, sometimes by separate notice.

Why these get missed

Three reasons, all understandable. The duty is not connected to money, so it does not feel like a tax matter. The deadlines are short and run from the event rather than from the year end. And the person concerned is in the middle of a move, so paperwork slides.

What the automatic exchange means

Financial institutions report account information to the jurisdiction of the account holder's tax residency, and that information is exchanged between countries. The practical consequence is that a discrepancy between what you have declared and what your bank has reported surfaces without anyone investigating you.

This makes accuracy about your declared residency more important than it once was: the two records are compared automatically.

The order that works

• Establish the exit rules of the country you are leaving before choosing a departure date.
• Deal with assets that trigger a charge while you are still resident, if that is the better outcome.
• Close or document what needs closing — and obtain the paperwork you will need later, while you still have easy access to it.
• Take advice on both sides. No single adviser is competent in two jurisdictions, and the interaction between them is where the money is.