The Netherlands may soon partially eliminate one of their tax breaks for expats.
Now, this may not seem to affect you, if you don’t plan to move to the Netherlands, or if you are retiring and won’t be earning any income. However, it is part of a trend you need to be aware of – no matter which country you plan to move to.
What is happening in the world today
It shouldn’t be a surprise to anyone that there are serious economic problems happening right now. The US keeps increasing its debt. Talks about austerity measures and bailouts for European nations are in the news every day. Even China is showing some cracks with the massive governments projects they’ve done, building empty cities and roads to nowhere.
At some point, it is almost a certainty that things will get extremely bad. Personally, I don’t believe it will be like the movie Mad Max. But things will get very uncomfortable for most people living in the current “economic powerhouse” countries.
As things get worse in these troubled countries, their governments will “kick the can down the road”. Politicians and the voting public will do everything to postpone paying the price of fixing the problem, and very little to solve them. Solving the problem involves too much sacrifice.
However, whatever they do, there are going to be more problems. And more people will realize moving overseas is a great way for them to live a better life.
What will happen, once more people start to move overseas?
Several things are likely to happen.
1. It will be more difficult to get residency. The immigration departments of most countries are not known for being efficient. What do you think is going to happen when they have five times as many people applying for residency? In the future, it may easily take two or three times as long to get residency somewhere.
If a country sees too many foreigners moving there, they may start setting quotas to limit the number of immigrants. They might start charging higher fees, to support the additional staff they need to hire. They could also raise the requirements for permanent residency. Make it so you need to deposit twice as much money in a bond, to prove your financial stability. Increase the minimum required “points” (based on age, education, net worth, etc.) needed to apply for residency.
Ecuador used to have a nice, affordable residency program. Then the government decided to make it more difficult, in order to only let in the “right” people. You may have been able to get residency there last year, but not qualify next year.
For decades, the US and many other “first world” countries have made it difficult to become residents. What do you think is going to happen when other countries become the new places where everyone wants to live?
2. Costs of settling in a new country will be higher. Some people who move overseas are going to have a larger than average net worth. They’ll gladly overpay, just to get what they want. This starts to lead to higher prices for everyone, especially foreigners.
Suddenly, you won’t be able to buy a house for $50,000. Thanks to the demand of other, wealthier foreigners, you may be priced out of the market. If you can’t afford it, someone else can, so the seller will just wait for him or her to come along.
3. The local citizens will probably be less happy to see foreigners moving in.
Once “rich” foreigners start moving in, and spending their money, the prices go up (as mentioned earlier). Well, besides that being something bad for the foreigners who move in later, it also makes it bad for the families who have been there for generations.
They used to be able to afford eating at their favorite restaurant. Now the prices have doubled, because it’s catering to expats with more expensive tastes (and fatter wallets). Kids who planned to move out of their parent’s home are now competing in the real estate market with people who have six-figure investment accounts.
I know several people who have left the more popular expat countries, like Costa Rica, because they feel like they are targets – either as people to take advantage of or as someone to rob.
4. Your home country may make it more difficult for you to leave. Or they may just make it more difficult for you to move your money overseas.
We’ve already seen this in the US. The HIRE Act has added additional reporting requirements for people who have money abroad. There has been talk of eliminating the Foreign Earned Income Exclusion. The US government has put pressure on foreign banks to report accounts held by US citizens.
This isn’t only happening in the US. The German government is following the same steps to find German citizens who have money outside the country. They’ve even gone so far as to buy a CD full of bank records that were stolen from HSBC Switzerland.
If you keep waiting until “tomorrow”, you may find the window of opportunity has closed for you
Of course, it is possible that some countries will make it easier to move there. But you don’t know which countries will do that, and which will make it more difficult.
However, the overall trend is to make it more difficult to relocate. A few decades ago, there were several countries where you could legally get an economic citizenship after making a reasonable contribution to a local government program. Now, there are only two countries where you can do that. One will cost you US$ 100,000. The other is over US$ 300,000.
Just because you should act quickly, that doesn’t mean you should act rashly. Take your time to choose a country where you will be happy. Then, if you can get started on the residency process, do that as soon as possible.
If you were on a sinking boat, you wouldn’t want to keep passing up empty seats on lifeboats. Eventually, there won’t be any more available.
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Great Article!
Thanks. I have a feeling the next few decades are going to be “interesting”. Hopefully people will pay attention to what’s happening and prepare themselves for their best possible future.