How will Brexit affect UK citizens’ offshore plans?

Just two weeks have passed since UK voters did the unthinkable and voted to leave the European Union. Since then, the fallout has been unsurprisingly substantial. Global stock markets fell, the pound hit $1.2952 (its lowest since 1985), government bond yields dropped to record lows, the price of gold reached a two-year high, and three of the UK’s largest real estate funds froze 12 billion in assets.

This is the new normal and it’s far from settled.

While England and Wales voted in favor of Brexit, Scotland favored remaining by 62%, and 55.8% of Northern Ireland voted to remain. With those kinds of numbers, it is unclear what will happen next. Scotland could very well become it’s own country, or Northern Ireland could elect to rejoin Ireland. And then there’s the possibility that other EU countries will say ‘adios’ to the union, as well.

There really are no certainties at the moment.

But that’s what our strategies are all about. Things are in a constant state of flux and Brexit is just a loud reminder that you need to have a Plan B that works. You need a strategy that’s set up for the long haul and not just based on shiny objects and chasing the latest strategies.

You can see how strategies change overnight with just one vote… and when you least expect it. No one expected this and no one knows what the outcome will be. Regardless of how things turn out, it’s always best to hedge your bets.

This is your wake up call to take action and get a solid Plan B in place.

So how should UK citizens go about adjusting or creating their offshore plans? In this article we’ll cover every possible aspect of your offshore plan that could be affected by Brexit. Politics in the UK and the EU may be difficult to predict, but at least you can know how to address your taxes, living situation, business plans, second passport, residency options, and banking and investment in a post-Brexit world.

Taxes and Living

As members of the EU, many UK citizens were accustomed to the privilege of checking out of their home country and going to live in a place like Spain. This often granted them the privilege of being tax non resident (and, though I can’t think of a worse place to live than Spain for tax purposes, many people choose this option.)

Now, however, UK citizens will not have the same privilege. You are going to lose access to quite a few countries. As hard as it is to accept, you’ll basically be in the same boat as Americans: you’ll have to get a passport and won’t have automatic access to wherever you want to go.

It’s not the end of the world, but it does mean doing things differently with a few more limitations.

For instance, if you want the privilege of living in the EU, you’ll no longer be able to just redomicile somewhere else. Instead, you’ll need to have residency in an EU country by the time Brexit is finalized.

Without such a residency, retirees won’t have all their warm weather options. Entrepreneurs are in the same boat, as well. I don’t know why any entrepreneur would be moving themselves to one of those high tax countries in the Mediterranean, but other important options will be gone as well.

For example, you’ll no longer be able to set up shop in places like Malta or Ireland. Of course, you can still do the residency program in Malta, but it will be more difficult and cost you more. The price tag for Irish residency will be more difficult and expensive as well.

You will have plenty of residency options, but you are basically now demoted to US status. This means that you’ll probably have to make an investment in a country or fulfill whatever other requirements are asked of the rest of the world in order to live within their borders.

Post-Brexit business solutions

This situation will, of course, also affect business owners. This is probably one of the main reasons big business largely favored remaining in the EU. I may not be a fan of the bureaucracy coming out of Brussels, but the union does facilitate the movement of money, people and products throughout the region and the world.

If the UK can manage to stay in the single market, it would retain most of these benefits. However, if Britain’s pro-Brexit Independence Party pushes through work permit restrictions, it’s likely EU countries will reciprocate, barring UK citizens from living, working and doing business in their borders without visas.

If you’re an entrepreneur, that means that you won’t be able to just pack up and move to Lithuania with the intention of paying 15% tax and cutting your cost of living. You’re going to have to go through and apply for a Lithuanian visa, show that you’ve hired three qualifying employees, give proof of your company and make a deposit. You’ll no longer be able to simply show up and run your UK company from Lithuania and only pay tax on the UK company.

If you’re a Brit who already set up your business somewhere cheaper in Europe, it may not be a big deal if you’re living in the UK. It will be a big deal, however, for a Polish person (for example) with a business in the UK who is relying on the EU.

It could be that the UK convinces the EEA to let it stay, but the situation is a precarious one and I wouldn’t make my plans based on that hope. Instead, start planning for the worst. (And I mean that in the least pessimistic way possible. This is just an unpredictable reality that we’re dealing with here.)

If you’re selling physical goods or you have some kind of presence, this is an opportunity to figure out what the problem is or will be and fix it. If your business is largely EU-focused or you’re in the UK and selling to Europe, figure out a way to make it more digital or global.

Either way, where you live is going to matter more and increasingly affect your business options.

Will Brexit affect your passport?

One way to resolve this issue is to obtain a second passport. However, if your main concern about your passport is that your ability to travel will be limited, I don’t see this as an issue. I am really not concerned that the UK passport is going to be devalued.

Again, this is like the UK becoming more like the US. UK leaders may not be on top of their game and the country is experiencing it’s own inner turmoil, but the passport will be just as good. Brexit simply means that, unless something else is negotiated (which I don’t believe will be the case), UK citizens will be more like someone from America, Canada or even Moldova going to visit EU countries.

There’s no reason to freak out.

However, if you want an EU passport for other purposes, you’re going to have to live in the EU. If you’re an entrepreneur, there are one or two ways to get an EU passport without much residence in that particular country. It will, however, cost you in taxes and you’ll be required to run a business. But the option exists.

Another option is to pursue citizenship by descent. If you have Irish (or even Italian) ancestors, you may already qualify for citizenship. This will save you thousands of dollars and even years of residency.

A final option is to buy a Malta passport. If passport-level access to the EU is worth a million euros to you, go for it. Requirements are getting a bit more strict for EU citizenship programs, but it is an option.

Ultimately, unless you have an Irish grandparent or parent, be ready to spend some money, start a business, pay some tax and do some paperwork. Or, be ready to invest in real estate and go and live somewhere. OR, be willing to write a big check (i.e. Malta). If you’re not willing to do any of those things, then stop worrying about your passport because your ability to travel is not going to be affected.

Consider getting a residency NOW

However, if you just want to live in the EU and bounce around full time, then you should consider getting a residency by investment. This is where you put money in a bank or buy bonds in exchange for residency and a path toward eventual citizenship. If you don’t have or want to spend that much money you can get an entrepreneur visa that could also lead to a passport.

Here’s the thing, though, that I always remind people about with residency programs in Europe: if the end goal is a passport, don’t waste time getting started. The EU streamlined naturalization requirements a few years back so that the minimum naturalization period across the board is five years. Belgium used to be three, but the EU had them change it to five.

So, if being able to live and travel full time in the EU is a priority for you, then you should get off your tuchus and do it now. Acting swiftly is especially important because you’re still going to be without an EU passport for a period of time no matter what you do. If you get your residency now, you can minimize the amount of time you’re not an EU citizen.

If you’re not willing to do it now, then maybe you don’t really care that much about it. It’s worth it to have an honest gut check here.

The other question is which residency/passport to get, or which to avoid. After all, there’s no knowing what’s going to be left of the EU. The good news is that the countries that I tend to like in the EU for entrepreneurs will probably stick around.

As a word of caution, I would probably skip on Hungary. Not only should you not trust them with your money for a whole year (they’re all a bunch of crooks), but there’s a good chance they might leave the EU as well.

If you have money, the answer is probably Portugal. You can live there and not pay tax; plus, it’s warm.

But, again, if you’re not willing to start a business, hire someone, put money in a bank and pay a government fee, don’t bother with a second residency.

Banking Offshore

From my standpoint, the main ailments of Brexit are financial. Look at what happened with the pound. It’s a mess.

This is the perfect reason to be diversifying out of your home country. Plus, opening a bank account in the EU can get you EU residency and potentially a passport (if you’re willing to do the work). This is a great way to kill two birds with one stone: open a bank account, get twelve currencies and use that to get a residency in the EU.

The main goal here should be diversification. I, for one, don’t know why you would store gold in London to begin with. I know it’s a financial center, but the country has so many issues between the EU and its own internal problems — and you’ve got VAT on top of that — so I don’t get the allure of banking there.

This is the perfect opportunity to remind yourself to move your gold offshore where you can get some leverage on it and make a better investment. Keep it somewhere outside the European Union. Somewhere not in turmoil. You never know what’s going to change next.

For instance, what happens if Brexit negotiations go poorly and there are budget shortfalls in the UK? Will the government decide it needs to raise taxes? What if they follow Cyrpus’ example and determine that they have to grab money from people’s bank accounts? They could even go down the path the Netherlands has taken and impose a wealth tax.

There are too many ‘what if’ situations that could play out to your disadvantage. Do you want all your money sitting in the UK when the politicians need your money? This was never a very tax friendly country to begin with. Now who knows what will happen.

Why not make this your excuse to go somewhere else?

Make smart investments

On a similar note, I would stay away from the UK for a while in terms of investments. Property values could go down and investment taxes could well go up. You’re going to have problems, you’re going to have turmoil.

I’m not trying to be super pessimistic, but you shouldn’t be investing in the UK anyway. London is a bubble. It’s expensive, it’s overpriced, the yields stink, and you have a government that is stable, but not exactly trustworthy.

So make this your excuse.

Things could get worse. They might not, but there’s a lot of writing on the wall. Create your insurance policy. If anything, this whole affair should serve as a kick in the behind to do what you should have done anyway and invest somewhere else.

Oh, and if you have real estate investments in the UK that you can sell, sell them. You can then use that money to buy real estate in an EU country to qualify for residency and a passport. Just another way to kill two birds with one stone.

Many options, one goal

As unexpected as Brexit may have been and as unpredictable as the outcomes may be, you have plenty of options to accommodate your offshore plan to the circumstances.

The options are endless, really.

Between banking, residency programs, passports, investing, businesses, and more, you have a wealth of good decisions you can make. And there are plenty of good countries to choose from as well, including Malta, Ireland, Portugal, Latvia, Hungary, Czech Republic, Estonia, Lithuania, Slovenia, and Bulgaria.

There are so many different options bouncing around, so what are you going to do? As always, how are you assembling your goals? What is your number one goal?

Whatever it is, figure it out and act now before another unexpected turn of events comes your way.