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! 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. 🙂