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Taxes Doing the math behind a calculated move to distant shores

Ten years ago, I took advantage of an opportunity offered by Vancouver Island's Comox Valley school district and enjoyed a life-changing sabbatical.

For the previous three years, I had taught high school English while a third of my salary went into a trust. During the year of my leave I had the balance automatically deposited into my bank account at the beginning of each month. It allowed me to poke around Portugal, Spain, Morocco, the U.S. and Mexico. According to my contract, I would be guaranteed a job in the same school district upon my return. But I never lived in Canada again.

I wound up my sabbatical by flying to a job fair in Boston. There, I interviewed with the superintendent of Singapore American School, and landed a job teaching high school English in the Lion City. I've been in Singapore ever since.

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If you ever have the opportunity to work overseas, I urge you to give it serious consideration. While the drawbacks should not be underestimated, the advantages can be huge. Here are four points to ponder before making your own move.

Look at the hidden benefits

My salary is only slightly higher than a Canadian teacher's. However, my taxes are far lower, allowing me to keep more of what I earn. I pay a mere 9 cents of income tax for every dollar I make. The highest marginal tax rate in Singapore is 18 per cent, but salaries have to exceed $250,000 (Canadian) to trigger it.

What about capital gains taxes? Simple: I don't have to pay any. My investments can compound like an RRSP, but when I start selling my retirement assets, I won't get hit with a tax bill.

But factor in the hidden costs

Ah, but there's a catch. If you want to live a Canadian lifestyle in a foreign country, count on paying a premium. I wouldn't dream of buying a new vehicle in Singapore. A new Volkswagen Golf GTI would set me back $170,000. A 7 Series BMW costs $325,000.

Every country is different, of course. What doesn't change, however, is the need to consider the entire picture before deciding if a move makes sense.

Beware the expat disease

From what I have seen, a low tax regime doesn't always indicate that a person will come out ahead financially. Most middle class expatriates that I meet spend more lavishly on luxuries than they would in Canada. They travel prolifically, they dine out and they pamper themselves with regular massages, manicures and pedicures. Call it the expat disease: Without the support network of old friends and family around you, it's easy to fill the emotional void with the latest clothes, the newest gadgets, another exotic trip.

Many expats relinquish pensions to work overseas, and if they choose to repatriate, they could be in for a surprise. If they're out of Canada long enough, they might jeopardize their Canada Pension Plan or Old Age Security payouts. Many expatriates enjoy an epicurean lifestyle, but end up with less wealth than their professional compatriots back in Canada. Mind you, it doesn't have to be like that. My wife and I are far wealthier than the average Canadian teaching couple. But that's largely because we chose not to surrender to the material lifestyle so prevalent in large Asian cities.

Money's only part of the equation

The best reason to become an expat is if you're genuinely interested in experiencing a foreign culture. But adjusting to a new society, a new climate and a new language can be exhausting, especially at first.

Don't underestimate the emotional wallop. Time spent away from loved ones back home is draining. Locals may be friendly, but often don't see the point of developing a close attachment to someone who may soon be moving on. There's a reason expats tend to hang out with other expats.

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You will inevitably change. After nearly a decade of living in Singapore, I still feel Canadian – but with a distinctly Asian viewpoint and a metabolism that has come to expect hot, humid weather. Once I planned to come back to Canada; now I doubt that I will. My wife and I have begun to debate where we would like to retire. After visiting more than 30 different countries, we find ourselves overwhelmed with options.

There's one thing we do know. We love Canadian summers, but after living on the equator for a decade, neither of us want to experience a Canadian winter again.

Andrew Hallam is a Canadian who teaches English and personal finance at Singapore American School. He is the author of Millionaire Teacher: The Nine Rules of Wealth You Should Have Learned in School.

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