Tips to manage your finances when moving to another country

Gallup, a US-based data analytics and research company, found in a survey in March 2013 that around 10 million Indians wanted to migrate to the US permanently. Though this number was less than that for Chinese (19 million) and Nigerians (13 million), one thing is clear-every year, more and more Indians are looking to leave their country in search of better career and life.

If you are among the people who dream of settling abroad, it is time to start the preparations in earnest. The reason, besides long queues at immigration counters, is the highly complex rules and regulations put in place by most governments for admitting people from other countries.

Immigration with permanent residency is more difficult than getting an education or temporary work visa. And even if you get through the rules and secure residence in your country of choice, there are some important issues such as taxation and investments that you have to address at home before you can board the flight.

We demystify some of the issues for you, beginning with immigration laws.

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PERMANENT RESIDENCY IS OFFERED PRIMARILY UNDER THE FOLLOWING CATEGORIES

Skill-based:

Many countries give permanent residency if you have certain 'skills'. These can be experience in an occupation or a specific qualification (the country may be lacking in these areas) and knowledge of the country's language.

The immigration application is processed on the basis of a point system. Points are awarded for age, work experience, education, familiarity with the local language and skills of the partner.

In New Zealand, for example, the minimum points required are 100. However, according to consultants, anyone with a score of less than 140 is unlikely to get a look in by the immigration department. For Canada, the minimum score required is 67; for Australia, it is 65.

Each country has a list of eligible occupations that one must look at it before applying. Some require the applicant to have work experience in a 'comparable' labour market. For example, New Zealand does not consider India as a comparable market. This means work experience in India does not count if you are applying for moving to New Zealand.

"Usually people make the mistake of looking at just the designations in the list without understanding points such as the educational qualification required and the ideal job profile," says N Rajaram, owner, Anzac Visa Consulting.

A lot of weight is given to recognised educational degrees. In New Zealand, for example, a doctorate gets 55 points, while graduate and post-graduate degrees get 50 points. Australia awards 20 points for a doctorate and 15 for bachelor's and master's degrees.

Some countries award additional points or waive some conditions if you have studied in their educational institution. For example, if you have studied in Australia, you do not have to meet the work experience requirement.

Knowledge of the local language also matters. This is besides the eligible occupation or educational qualification. In the UK, to prove your knowledge of English, you have to take the "Life in the UK" test. Australia and New Zealand require you to get pass the International English Language Testing System.

Employment-based:

Not all countries offer skill-based residency. The US and the UK require you to have a long-term job offer from a local employer.

In the US, employment-based permanent residency is offered under three categories-EB1, EB2 and EB3.

EB3 is for skilled workers with at least two years of training or experience, professionals with graduate or equivalent degree and workers in positions that require less than two years of training or experience.

EB2 is for professionals with post-graduate or higher degree or individuals with exceptional ability in science, business or arts. Any foreign degree must comply with US standards.

In both these categories the applicant should have a job offer from a US company.

Under the EB1 category, residency is offered to a multinational company executive who has been transferred to the US.

According to US State Citizenship and Immigration Services, 35,472 Indians working in the US with H-1B visas (temporary work visa) were issued permanent resident visas in 2012. All these visas were given under the EB2 category.

Even countries which allow skill-based immigration offer residency visa to individuals sponsored by a local employer.

If you are on a temporary work visa and have been living in the country for the minimum prescribed period, you can be granted permanent residency under the following conditions-your existing employer is ready to offer you employment for a longer period, you manage to score the minimum required points, or you have exceptional talent in arts, culture, sports, etc.

In Canada, a temporary foreign skilled worker may get permanent residency if the local employer offers him/her a full-time permanent job. A permanent job offer entitles the applicant to extra 10 points.

In some countries, provincial and state governments run special programmes under which temporary workers are offered permanent residency. Usually, the governments look for specific skills that are in short supply in their regions.

For instance, in Canada, many provinces have programmes under which they nominate foreign skilled workers for permanent residency. The rules may differ from province to province but mostly the attempt is to look for workers with specific skills that are in demand.

In Australia, if you are being nominated by a state or territory government, you have to live in specified regions or a low population metropolitan area.

Investment-based:

Many countries offer permanent residency to those who invest in their markets and generate jobs. The minimum investment varies from country to country.

The US offers permanent residency under a programme called EB-5. To qualify, one has to invest a minimum of $500,000 and generate at least 10 jobs. The investor gets permanent residency (or a Green Card) for self, spouse and unmarried children who are less than 21 years old. The authorities not only waive requirements such as qualification or work experience, they also process such applications faster.

Singapore has a similar programme called Global Investor Programme (GIP) under which one can invest up to 2.5 million Singapore dollars in a GIP-approved fund, a new business or for expansion of an existing business, and get permanent residency.

In Canada, an investor and his/her immediate family can get permanent residency by investing 800,000 Canadian dollars for five years. The Canadian government reimburses the full amount without interest after five years.

Family-based:

A citizen or permanent resident can sponsor immediate relatives (spouse, parents and children) as well as others such as married children, brothers/sisters and grandparents. Some countries even allow fianc(e) on sponsorship.

Some even allow a conjugal partner in relationship with a citizen or permanent resident for at least 12 months to live and seek residency. Conjugal partners include same-sex partners.

In case of fianc(e), authorities first give a temporary visa and ask the sponsor to marry her/him within a stipulated time (90 days in the US and nine months in Australia). After marriage, SENGUPTA | 41, Married the spouse can apply for permanent residency.

The process of applying for a sponsored family member is the same. The sponsor has to fill the form on behalf of the relative and furnish the necessary documents, including proof of relationship.

"There are limits on the number of immigrant visas which can be issued to spouses and children of lawful permanent residents (LPRs). This means there is a waiting period here as well. But in general spouses and minor children of LPRs have a shorter waiting period than adult children of LPRs," says Lakshmi Challa, managing attorney of US-based Challa Law Office.

Each country issues a limited number of permanent visas every financial year. Usually, the queue is long. This is the main reason for the long wait.

An Indian, due to the huge number of applications from India, has to wait for about nine years for a decision on the EB-2 application. For most countries, this period is six years.

Another reason for the delay is compliance. For example, some countries require you to spend a specific time on temporary visa before applying for permanent residency. The period may be based upon the application category.

In the UK, the spouse or unmarried partner of a permanent resident/citizen has to stay in the country for at least two years to get permanent residency.

The above process can be exhausting. Once you are through, the sense of relief may take the focus off another equally important aspect-working out finances and investments .

Here are the things that you should do before leaving.

Re-designate bank accounts:

Before you pack your bags, convert resident bank accounts to non-resident ones. Here, an NRI has three options-nonresident (ordinary) account (NRO), non-resident (external) rupee account (NRE) and foreign currency non-resident account (FCNR).

"The account will have to be altered from resident to non-resident," says Lovaii Navlakhi, founder and CEO, International Money Matters.

First, one should open an NRO account, as any income generated from India which cannot be credited to any other non-resident account will be held in this account. You can repatriate only up to $100,000 a year in an NRO account.

In an NRE account, income from India as well as abroad can be held and repatriated without restriction. Both NRE and NRO are rupee accounts. An FCNR account is similar to the NRE account, except for the fact that it can hold funds in foreign currencies as well.

Interest earned on NRE and FCNR fixed deposits is not taxed while that on NRO accounts is taxed at source at the rate of 30%. The interest rate on NRE/NRO accounts cannot be more than what is being offered on domestic deposits of same tenure.

"An NRI can look at the opportunity to earn higher interest on FCNR and NRE deposits. The interest income on these deposits is not taxed in India. It is also freely repatriable," says Rajesh Iyer, head, investments and family office, Kotak Wealth Management.

Changes in KYC details:

After changing the status of the bank account, the next step is to update your know-yourcustomer, or KYC, details in your share, mutual fund and insurance accounts. KYC compliance is a must for investing, buying insurance and opening bank accounts.

Give power of attorney (PoA) to a person you trust:

In your absence, someone may have to do legal, financial or other work in your home country on your behalf. It is, therefore, important that you give a person you trust the PoA to act on your behalf.

PoA can be of two types-special power of attorney, for a specific task, and general power of attorney, which authorises its holder to do whatever is necessary.

A PoA holder can sell your property. He can also do stock/mutual fund transactions on your behalf, pay premium for your insurance policies and even borrow money on your behalf. A PoA should have signatures of both the issuer and the holder.

If you want to continue to invest in Indian shares even after settling abroad, the only way you can do so is by opening a portfolio investment scheme (PIS) account with a bank in the country. You can have only one PIS account.

For this, you need an NRE/NRO account. You also need to open a demat account and a trading account with a Sebi-registered brokerage firm. An NRI cannot buy or sell shares in India except through a stock broker.

Also, NRIs cannot hold more than 10% paid-up capital of an Indian company. A PIS account helps the Reserve Bank of India ensure that the limit is not breached. Each PIS transaction is reported to the RBI.

NRIs cannot trade shares in India on a non-delivery basis, that is, they can neither do day trading nor short-sell.

Make provisions to clear loans and other payables:

If you have any debt, either close the loan or give ECS mandate to your bank for timely payments. Do this also for insurance premium and mutual fund systematic investment plan payments.

"You must also check if the auto debit or ECS instructions are working. At times, especially in case of insurance, the auto debit facility does not work properly," says Suyra Bhatia, a certified financial planner and principal consultant, Asset Managers. Consolidate investments: Should you liquidate your insurance policies or the additional flat bought as an investment? And what about the mutual fund investments?

"You have to limit your investments in India if you are planning to settle abroad," says Surya Bhatia of Asset Managers. This is because managing them from a distance may not be an easy task.

"It may be prudent to continue (life insurance policies) till one finds an alternative cover. We have noticed that Indian life insurance policies are cheaper, even more so if they were bought at a young age," says Lovaii Navlakhi of International Money Matters.

If you are going to settle in Canada or the US, check if you can continue to hold your mutual fund units bought in India. This is because some fund houses do not allow NRIs to invest in their schemes. Various regulations in the US and Canada require mutual funds which accept investments from investors in these countries to register with their capital market regulators and comply with their norms. Many mutual funds, to avoid this, don't accept investments from NRIs in these countries.

NRIs are not allowed to invest in small savings schemes such as Public Provident Fund and National Savings Certificate. However, they can continue existing accounts till maturity.

A number of countries have restrictions on real estate investments. "NRIs can acquire/transfer immovable property in India (except agricultural land/plantation property/farm house) without the RBI's consent. But they cannot engage in trading/leasing of immovable properties," says Rajesh Iyer of Kotak Wealth Management.

Moreover, if you are settling in a country with which India does not have a double taxation avoidance agreement, or DTAA, you may end up paying tax in India as well as the country of your residence.

"The good news is that India has signed tax treaties with more than 75 countries which enables Indians settled in those countries to avoid paying tax twice," says Vineet Agarwal, director, KPMG.

The first thing you should know is the rules regarding the residence status in India. An individual is considered a resident in India if any one of following conditions is satisfied:

>> He is present in India for 182 days or more during the financial year; or

>> He is present in India for 60 days or more during the financial year and present in India for 365 days or more in the last four financial years.

If either of the above conditions is not satisfied, the individual will qualify as a non-resident.

The DTAA benefits a non-resident by way of lower withholding tax (tax deducted at source or TDS), exemption from tax and tax credits.

The tax treaties authorise the country where the income is generated to tax it according to its laws. The country of residence gives credits for this tax and taxes the income at a lower rate.

For example, if India taxes long-term capital gains at 20%, the country of residence where such gains are taxed at 30% will levy only 10% tax on such income.

In many cases, if an individual establishes his residency in a country with which India has signed a DTAA, then income generated in India will be taxed at the rate mentioned in the treaty. For example, if a person is a resident of the US in an assessment year, TDS on interest earned on fixed deposits in India will be 15% instead of the domestic peak rate of 30%.

If a person has to claim tax exemption or tax credit on the basis of tax paid in a non-resident country, he/she will have to furnish the relevant documents to the tax authorities. These include tax residency certificate (TRC), self-attested copy of the PAN card, selfattested copy of passport and visa, and copy of proof that the taxpayer is a person of Indian origin in case the passport has been renewed during the financial year.

The TRC has to be submitted to the deductor (in most cases it is a bank). TRCs are issued by the tax/government authorities in the country of residence.

"The taxpayer should keep and maintain documents which are necessary to substantiate the information furnished. The authorities may ask for these documents in relation to a claim of benefit under the tax treaty," says Amit Maheshwari, head, direct tax, Ashok Maheshwary & Associates.