Financial Housekeeping for Moving Abroad

The last couple weeks have been a whirlwind of selling of stuff, packing what's left, moving the packed things, saying "goodbye" to our awesome friends in Edmonton, and traveling. All this to say things have been busy.

We took a 10 day trip to visit our friends in Toronto. I've never been there before and it has a lot to offer. If you haven't been, go visit Niagara Falls (the Canadian side)! We also took in a Blue Jays game (where they stomped all over the Orioles), visited Barrie and the Flying Monkeys Brewery, and enjoyed the South Asia Festival.

While I admit Toronto is a cool city to visit, the traffic and sprawl are quite insane. Our friends were sharing prices for houses, semis, and condos in different areas of the city. My god, I don't know why anyone would ever buy there. It's a ticket to financial destruction! Not to mention poking your eyeballs out driving in endless gridlock traffic day-in and day-out. If you want to buy a house and enjoy your life with much shorter commutes, move to Calgary or Edmonton folks!

Currently we are in B.C. visiting family and friends on the west coast (where house prices and financial madness are no better than GTA). We go to B.C. twice a year on average, so this will be the less touristy part of our trip. In about a week we will be flying out of YVR en-route to Hanoi.

Daily Banking

Some of the things I've been working on between the traveling and busyness is arranging our banking accounts for our move. A few months ago I opened up a Tangerine account and shifted most of our banking to the orange folks. (I was with an Alberta credit union before.) Since Tangerine is all online and fees are low, we will be keeping this account when we are overseas.

I must say I've been very impressed with Tangerine—especially considering they are owned by a big bank (Scotia) and I otherwise try stay away from the oligarchs. Customer service over the phone has been great, the app is clean and a pleasure to use, and the process of setting up our bill payments and deposits is easy. If you are banking with the big guys and are paying monthly fees, you should seriously consider switching. If you do, a free way to say thanks to me is by using my Orange Key: 55884598S1. We will both get around $50 from Tangerine as a thank you. (You have to use the Orange Key in the sign-up process.) As an aside, thanks to everyone who used my Questrade referral code! It has paid several hundred dollars so far, helping cover the costs of webhosting this blog.

I've also opened up a Borderless account with Transferwise. This is another awesome application that will allow me to move money across linked accounts (including Tangerine) and change currencies for extremely low fees. I was hoping to get a Mastercard debit card from Transferwise sometime this year, but it seems they have quietly put that program on hold in Canada.

I anticipate my wife will be opening a local account in Vietnam for local spending (a portion of her salary is paid in Vietnamese dong). Whether or not we can move Vietnamese dong out of the country (via Transferwise), or another compatible currency like Euros or British pounds remains to be seen. I know there are problems with U.S. dollar transfers.

Investment Accounts

As I've mentioned in prior posts, my wife and I will become tax residents in Vietnam effective on the date we land in Hanoi. This is based on the Vietnam tax code and their tax agreement with Canada.

Our RRSPs look like they won't be a problem. We can continue to invest within our RRSP accounts (including Locked-in RRSPs/LIRAs) as we always have without any additional tax repercussions. Questrade allows full access for expats and non-residents. We won't make any new contributions to our RRSPs though; there won't be any income earned in Canada which we can deduct the contributions against. With no new contributions for a while, I don't need to worry about currency changes; in the coming weeks I will switch these over to U.S. dollar accounts.

Our pensions will be partly moved into LIRAs and partly paid out (the excess portion). Neither my wife nor I have received our pension packages yet, so I don't know what their impact will be on our new worth. However, I anticipate it will be relatively substantial and I will not be leaving the money in the pension plans.

The payout will be made to us as foreign residents so it will be subject to a flat 25 percent tax. This might seem high, but it is important to remember that we contributed in the 30.5 and 36 percent tax brackets. Even if we remained residents in Canada, the excess portion would be taxed as regular income less any RRSP contributions we made. It is highly likely that the payout would be taxed at rates higher than 25 percent.

Unfortunately Vietnam doesn't recognize TFSAs as being tax free. I'm not sure if or when we would return to Canada as residents, so at the end of the month I will be moving money out of our TFSAs and into our regular investment account. This means we will be shifting more money from investing in Dual Momentum towards trend investing.

I'm looking forward to this move as it will play a key part in improving our overall capital efficiency. In our regular investment account I would love to get to 90 percent bonds (mostly short-term). I'm not precisely sure how this will look as I'm trying to find the best ways to allocate capital with tools like options and futures. But I do believe it will be doable while being tax efficient.

Taxes

In order to legally leave Canada, we will be paying a sizeable tax bill. All of our assets will be deemed disposed on the day we leave and taxed at their current fair value. This means some capital gains taxes will be owing. But I suppose that's the price to pay for moving to a much lower tax jurisdiction where our taxes should be much lower going forward. Pay now, save a lot more later.

As mentioned above, we'll also be paying taxes on pension payouts. This would happen inevitably with quitting our jobs, but the costs will add up nonetheless. With RRSPs, time will be on our side. We can keep them indefinitely and let them grow, or withdraw them at a 25 percent tax at any time once we are out of Canada. For now I'll keep them in place, mindful that any gains are effectively subject to a 25 percent tax while I make up my mind.

Taxes in Vietnam will be much lower than in Canada. Particularly on investment income and returns. Using UCITS funds (mainly listed in London), we can buy bond funds and have a low 15 percent withholding tax on interest income while also eliminating estate tax exposure. In Vietnam our tax rate on the interest income will be just 5 percent. The only other investment tax we need to worry about is effectively a sell-side transaction tax of 0.1 percent on equities and publicly traded instruments.

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3 Replies to “Financial Housekeeping for Moving Abroad”

  1. I’m curious how you made your decision to take the transfer value of your pensions rather than taking the pension later?

    1. Daren (Editor) says:

      I haven’t made the decision yet because I am waiting for the exact numbers to be mailed to me. However, in most plans it is far better to take the transfer value because of today’s low interest rates. I will do a post on the topic when I know my situation and can use it in an example.

  2. Looking forward to the break down of the gold plated pension plan transfer 🙂 I’m in the same boat it’s really terrible how most people believe our pension is amazing…. when they pass on they lose the entire principal balance 🙁 as well as a host of other down sides as you know already

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