“Kathleen, I have enjoyed and followed your writings since before the turn of the century. In a recent comment, you seemed to mention in passing that you recommend new expats do not take their cars with them. Could you elaborate on that? Seems a pretty radical idea to move to a foreign land with no transportation.
“Also, with respect to the income tax exemption of about US$92,000 per year for U.S. expats, does that refer only to wages earned abroad or to income from any source? Many of us will have dividend and capital gains income from both U.S. and international investments. Are those income sources exempted also, up to the US$92,000 limit?”
–Charles C., United States
Well, if you were to ship your car with you, it wouldn’t likely show up in your new country of residence at the same time as you, so you’d still be arriving on the scene car-less. Depending where you’re going, that’s probably not a big deal. Most places you’d likely settle would have taxis, buses, etc. And the best way to get to know a new place is to walk around it. In Paris, we never had a car and delighted in the chance to walk or to take the Metro anywhere we wanted to go. My daily commute to and from the office was a 20-minute walk across the river and through the Tuileries gardens.
Here in Panama City, we resisted the urge to buy a car our first year here, forcing ourselves to walk and take taxis everywhere we wanted to go. Once we felt like we had the lay of the land, we finally invested in a vehicle.
All that aside, the practical reasons why I don’t recommend you you’re your car to your new country of residence are these:
First, shipping a car across international borders can be expensive. You have the shipping costs. You have import duties (if you aren’t exempt as a result of the type of residency visa you’ve obtained). And you have the sales tax (typically not exempted even under residency visa benefit programs). Buying a new car most places around the world is more costly than buying one in the United States, because of duties and taxes; however, you still generally come out ahead compared with shipping a car from one country to another.
Second, your car from where you’re coming from may not make sense for where you’re going to. Years ago, friends from Canada shipped their van down to connect with them in Nicaragua. That country’s roadways chewed up that white van and spit it out in rusty pieces. After a few months, they gave up on the never-ending repairs and bought a pick-up truck locally.
Which leads to the third consideration when shipping a car from one country to another: Will you be able to find the parts and labor you’ll need to repair and maintain it? Our friends with the van in Nicaragua had to order parts they needed for repairs (before they finally decided to ditch the silly thing) from Miami and have them shipped to Managua. They’d have to wait weeks for the parts to show up…and then they’d have to pay import duties to get them into the country!
Regarding the Foreign Earned Income Exclusion, it applies to earned income only, not to dividends, interest, capital gains, or anything else un-earned.
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