Mistakes I’ve made / things I’ve overlooked when moving to Germany

Canada-Germany

While I was planning my move to Germany 4.5 years ago, I focussed more on the Germany parts rather than tying up lose ends in Canada.

Which has come to bite me in the @ss now.

That’s why when my dear friend recently asked me for advice on moving to Europe, I centred my advice almost entirely on finances. I didn’t mean to, it’s just that I overlooked so much before moving abroad and wanted to shield her from that.

Most of the advice I found online for moving to Germany for North Americans, were to: 1) leave electronics behind since the voltage is different in Europe; 2) bring peanut butter/baking soda/brown sugar/vanilla extract; 3) bring English books, and 4) LEARN GERMAN!

That list is only mildly important (asides from the Deutsch sprechen). This is the advice I wish I *had* followed before moving to Germany:

1. Set up passive income streams! Preferably from low maintenance dividend generating equities. It’s hard to earn a living in Germany as a fresh off the boat expat. Having passive income can’t hurt, and will help soothe the pressure of being unemployed abroad. Keep some cash for emergencies, but otherwise put that money to work!

2. Open RRSP and TFSA accounts with a discount online broker. For tax-sheltered, tax-free passive income, this is so important!!! Trying to organize this from abroad is so much more difficult, and possibly even illegal. So do it while you’re firmly on Canadian soil. Don’t put it off.

3. Then max out your RRSPs and TFSAs! Once you have #2 set up, max out everything. For various reasons, mainly attributed to laziness, I did not do this. I even closed my brokerage account. 😦 Now it gets tricky because I may not be considered a Canadian resident anymore. While I’m allowed to max out for the years I lived in Canada, I don’t have the accounts set up in the first place and it’s illegal to open off-shore accounts. Boo! Don’t be like me. I had to write to the CRA to ask them to help me determine my residency status, and after months, am still waiting for their response. If the CRA determines I am still a resident, I may have to return to Canada to open my accounts – or at least pretend I’m there. If they’ve decided I’m not a Canadian resident, I won’t be able to open any accounts until I move back. 😦

4. Understand the Canada-Germany tax treaty. This should probably be #1, but as I haven’t read it myself, I feel embarrassed advising other people do it first. I merely glanced at this treaty before moving abroad, and carelessly determined that I would only need to pay tax in either country, but not both. While in general this is the jist of the treaty, my interpretation is far too simplistic. The devil’s in the details!Β  Richard from Banks Germany has brought this treaty to my attention again, and I know it’s time to delve into it.

5. Make a list of tax-efficient or tax-free investments in both Canada and Germany. Another suggestion from Richard, and a very good one! Assume you will retire in either Canada or Germany, and go through the different scenarios from a tax/pension perspective. Mr. German and I will do this research over the next several weeks, and I’ll blog about it (don’t all rush here at once!). We need to inform our investment strategy so it isn’t overly tax-complicated.

While this list is for Canadians moving to Germany, it could be applied broadly to all expats. Moving abroad can be so stressful, and having financial problems/complications doesn’t help. It’s worth it to think about where you want to retire, to read the tax treaties if any, and to set financial structures up before you leave.

Also, use Skype to video chat with your Mom. πŸ™‚

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12 thoughts on “Mistakes I’ve made / things I’ve overlooked when moving to Germany

  1. Yikes! That is quite the important list that should be complete before going anywhere! How well are you coming along at completing it? Have any passive income working for you??

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    • Hi keefer! It’s quite a long list, and upon reading it again, maybe not ALL of it needs to be done before moving abroad. Getting the financial part in your home country set should already be priority whether you move abroad or not, and the rest like the tax treaties can be set figured out later.

      I’m still in the process of working on it all and should be receiving my passive income (dividends) in a week or so!

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      • That fantastic! Congratulations! Are you still happy you moved to Germany? What would you consider the positives of this big-time move?

        Also, have you considered investing in Real Estate over there? Where it be fix and flips or being a landlord? This may require a bit more capital, but it is an almost sure fire way of making a good stream of passive income!!!

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      • My favourite thing about living in Germany? Definitely my husband! πŸ™‚

        We’ve been looking at real estate here for a while, but probably won’t end up buying anything. It’s not so easy to flip here, as the taxes are high. Also, rent is low and the market isn’t too elastic from what I can see. I’d prefer to put my money in the stock market. Much less hassle that way. :mrgreen:

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      • I can see how that would pose a challenge…! Haha! Please keep writing posts about your progress in the SM! It can really shine a light on how passive it can be, not to mention the risk that can be involved! Keep up the great work! It’s inspiring!

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  2. Hi Jess! The joys of becoming an expat. We can relate to your post very well. Reading the tax treaty between your home country and your newly adopted one is a very important tip. We definitely learned a lot from doing that over the years. One thing we wish we had done from the beginning was to contribute to my 401K (especially when there was a company match!) the first year I worked here in the US. However, at the time we had no idea what our future plans were and put it off. We live and learn :).

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    • Hi DJ! Being an expat can be complicated, eh? πŸ˜‰ It’s hard to know where you’ll end up, so don’t beat yourself up about it too much. Especially since you and MC are doing so well!!

      I thought Germany would be a short stint too. Little did I know I would be here for so many years. Doesn’t help me sort through my Canadian stuff, but at least I don’t rely on my Canadian money to support myself anymore. Good thing too, since the Canadian dollar is weak compared to the euro right now!

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  3. Luckily as an accountant I worked most of this stuff out before I moved to England, and was therefore able to avoid many of the pitfalls of moving half way around the world and back!

    I even found that something as simple as opening a proper bank account is much harder if you aren’t physically there – you wouldn’t think it would be such a problem in this day and age but banks and tax collectors are a bit backwards, aren’t they?!

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    • Hi IA, I’m jealous of your accounting skills and your foresight! It really does complicate things tax-wise when you move around the world. I will likely have to hire a tax specialist soon. *sigh*

      Not sure about AUS/UK, but in Canada there are anti-laundering laws which is why I can’t open accounts now that I’m no longer a Canadian resident. The banks are clear on it, but at the same time, no one (at the bank) really checks. I’m just nervous to use the registered accounts IF I sign up, because the government will check that. So I may have to forgo any tax shelter/tax free privileges that residents get. 😦

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  4. Pingback: My investment journey so far | Ms. Canadian Expat

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