Living in Kandy, Sri Lanka (IL)

International Living January 2024
by Roland Dalton

• Name: Brendan Decker
• From: Houston, TX
• Living in: Kandy, Sri Lanka

After a year in Sri Lanka, my wife Lilly and I have no plans to return to the US.

We’d lived in Houston most of our lives. I’d retired from my job as an engineer at an energy company, and though we’d saved wisely, our life was still stressful. Lilly was suffering from osteoarthritis that cost tens of thousands of dollars to treat and left her inactive, and we were both tired of American politics permeating the culture.

Even before COVID-19, we’d felt the country was divided—but the political landscape became even more polarized during lockdown. We heard bickering in shopping malls, restaurants, on the street—and of course, on the news. We didn’t want to be a part of it, particularly when Lilly was already in physical pain.

A close friend working in Sri Lanka mentioned a treatment that had cured his own wife’s back pain: Ayurveda medicine, a centuries-old combination of traditional treatments like yoga, massage, acupuncture, and frequent soaks in fragrant herbal baths.

Kandy is the epicenter of Ayurveda treatment and offers it at local shops and luxury resorts alike. Perched on a plateau in mountainous central Sri Lanka, the city is home to well over two million residents, with around 10,000 expats and growing.

We decided we were too adventurous to stay put in the States, and applied for My Dream Home visas to make the leap to Kandy. The requirements were generally straightforward:

• You must be over 55 years old.
• You must deposit $15,000 or the equivalent in an approved bank in Sri Lanka.
• Monthly remittance of $1,500 for the principal applicant and $750 or the equivalent for spouse or dependents in an approved bank in Sri Lanka.

The application was processed in the capital of Colombo at the Department of Immigration and Emigration. The entire process took three weeks. We entered on a 30-day tourist visa, which we applied for online back in Houston, and brought only our passports, a passport photo, a certified bank statement, proof of supplementary income, and a Texas police clearance.

Now, a year later, we’re so glad we took the leap. The unhurried lifestyle, the crisp mountain air, and fresh food have undoubtedly improved our health. Lilly swears by Ayurveda medicine. After arriving, we met with Dr. J., who spoke perfect English (it’s the third official language of Sri Lanka) and was amiable and informative—a stark contrast with the condescension we were used to from doctors back in the States.

"We’ll begin with a treatment called Pinda Sveda, designed to assuage general aches and pains," he explained. "Then you’ll be soaked in warm oil targeting your painful areas, using muslin poultices of herbal powders." The treatment was continued with luxurious herbal baths, full-body warm oil massages, and the application of rich sandalwood pastes for two weeks.

Lilly’s back to playing lawn bowling and golf at the nearby Victoria Golf and Country Resort. Instead of watching the news, we take long walks through the nearby forests and tea plantations. Our favorite is the sprawling Kandy Botanical Gardens—said to be the best in Asia—and Bogambara Lake at the town center next to Sri Lanka’s most sacred temple, the Temple of the Tooth.

As an engineer, I also delight in taking the scenic eight-hour train ride from Kandy to the small hill town of Ella, passing through the local hills, forests, and tea plantations. Though it’s frequently named one of the most beautiful train journeys in the world, tickets cost only $1.80 (or $10, if you’d like to splurge on first class).

We spend the rest of our time enjoying Kandy’s wide selection of cafes and restaurants, many serving Western fare, as well as colonial gentlemen’s clubs and hotels—once used by the British to escape the heat. When we miss home-cooked food, we head to Secret Alley Café, which serves up full American breakfasts as well as smoothie bowls.

Sri Lankan food is a delicious variation on Indian food, cooked with copious amounts of coconut milk. Our favorite is lamparis, a meaty curry wrapped in a banana leaf and baked in a clay oven. It’s a combination of flavors from the Netherlands, Portugal, and Sri Lanka.

We have several expat friends from the States and Europe. Some are here running small textile businesses, since there’s a plethora of clothes factories just outside of Kandy. Others, like us, have come here for retirement. Lilly and I spend only $2,800 a month, including holidays in the Maldives and southern India. Some of our expat friends live a champagne life on a beer budget of $1500 a month, and enjoy a quality of life that rivals that of the US.

The Sri Lankan rupee has been falling for years, and we get such good value for our dollar that I sometimes feel like we must be getting stuff for free. Dinner plus drinks at a good restaurant costs under $15. A large beer only costs $1.

We pay $820 a month for a two-bedroom colonial home with a lush tropical garden (frequently visited by colorful birds) near the center of town. Our gardener, Mr. Jagarth, brings along grandchildren who delight in assisting (okay, sometimes hindering) his work. Lilly loves to spoil them with ice cream kept on-hand for their visits. We also have a wonderful maid called Sumina, who cooks mouthwatering local and Western dishes and looks after Lilly with devoted attentiveness.

Rent also includes cable TV… but we stay away from American news.

Moving abroad? What to know before taking the big leap

MoneyTalk August 22, 2023

Ever thought about moving to a new country to build your life, raise your family or even retire? If so, there are a number of things to consider to help make the transition smoother. Mindi Banach, Tax and Estate Planner, TD Wealth, joins Kim Parlee to talk about what people should know about this major life decision.

K: Have you ever thought about moving to a new country to build your life and raise your family in a new place? Well, if so, there are a number of steps to consider to help make that transition a bit smoother. It's a major change, after all, and Mindi Banach, Tax and Estate Planner at TD Wealth, is here to tell us what you need to know.

K: Maybe it could be maybe raising your kids a new place. Maybe it's retiring to a new place. But everyone, I think, has the fantasy of maybe doing something like that. So let's start from the beginning. What are the things you need to think about getting in order?

M: The first thing that you need to do is do your research. You want to understand what the custom and the cultures are in that new country, but you also want to understand the tax and the immigration laws. I mean, you're going to need to know what visa requirements that you need in order to live, work, or study in that country. In addition to researching, you want to understand, financially, can you afford to move? So understanding your financial plan, your financial budget. What is your living situation going to be? What is your transportation situation going to be? You want to make certain that your documents are in order-- so your passport, your vaccination card, your driver's license, your estate planning documents. Which documents do you need to update and which documents are you going to need to replace when you move to a new country?

K: I was thinking it was fun, and now I'm like, it's a lot of work.

M: It can be.

K: Yes, I think it is. OK, from a tax perspective—you named a couple little things in there, but what else do we need to think about? And I'm sure there's a lot.

M: Yeah, this is the big question. This is a loaded question. And the first thing that you really need to consider when it comes to a tax perspective is understanding your residency because here in Canada, the tax system is based on Canadian residency. So for instance, if you are a resident of Canada, you will be taxed on your worldwide income, and you likely will be required to file a tax return here in Canada. If, however, you are a non-resident of Canada-- and I want to emphasize and highlight we are not talking about Canadian citizenship. We're talking about Canadian residency. Again, if you're a non-resident of Canada, you're only going to be taxed on your Canadian source income. And whether or not you're going to be required to file a Canadian tax return, if at all, is going to be dependent on the specific type of Canadian source income you receive. One other thing that I do want to highlight here is that there is a possibility that you may be a dual resident of both Canada and another country. And if that's the case, you want to be concerned about double taxation.

K: Right, because everybody wants the full tax then.

M: Exactly. Now, Canada does have tax treaties with certain jurisdictions and certain countries that may decrease or eliminate that double taxation risk. But Canada does not have a tax treaty with every country. So if you are moving to a country that Canada does not have a tax treaty with, obviously, you may want to consider some pre-immigration planning, because you may be subjected to double taxation, which you don't want.

K: We don't want. The single taxation is hard enough as it is. OK, so if you are a Canadian resident, you're considered a Canadian resident from a tax perspective, it's probably somewhat similar to what it is today. If you are declared a non-resident, it's different. How does one become a non-resident? What does that entail?

M: So the determination of residency status is going to be on a case-by-case basis by the CRA. And the first thing you need to really assess is your residential ties to Canada. And the CRA actually has a list of what they consider to be the significant residential ties to Canada. So, for example, owning a home in Canada, having a spouse and/or dependents living in Canada-- those are considered significant residential ties. The CRA also has a list of secondary residential ties. So, for example, Canadian passports, Canadian driver's license, owning Canadian bank accounts. And in order to declare yourself to be a non-resident, it's not a matter of just making some sort of verbal declaration. You actually have to take some actions to become a non-resident. And what you need to do is that you actually need to sever your residential ties, both significant and the secondary residential ties, and then at the same time establish stronger residential ties to that new country. So for example, you want to be selling and/or leasing out your Canadian home and purchasing or renting a home in that new jurisdiction. You want to be closing out the Canadian Bank accounts and opening up new bank accounts in that other jurisdiction. Now, I do want to mention that there is a possibility that the CRA may take the position that they're going to reject your claim that you are a non-resident. They really do look at whether or not you've severed ties and established new ties in other jurisdiction. There is a form that you could file with the CRA to ask the CRA for their determination as to whether or not you are a non-resident or a resident. It's specifically on form NR73, but it is not a mandatory form that you have to file. It is voluntary.

K: You better be sure. This is not a halfway measure. What about departure taxes? Is that something that Canadians have to worry about?

M: Possibly, yes. It really does depend on the specific type of asset that you're going to continue to hold when you become a non-resident of Canada. Now, certain assets are exempt. So, for example, registered Canadian accounts like RRSPs and TFSAs, you're not going to be subject to a departure tax. You may not be required to pay the departure tax immediately. You may be able to elect to defer. But if it's above a certain amount, you may have to post a security.

K: If you become a non-resident, obviously, there's a benefit to you from a Canadian taxation standpoint, potentially. You have to kind of see that too. But there's also costs-- health care, benefits you may have been receiving. So just people need to be aware of that at the same time too.

M: Yes, absolutely. The reality is for certain provincial and government benefits that you may be eligible for, one of the requirements is that you need to be a resident of Canada. And so if you cease to be a resident of Canada, you may lose your eligibility for certain, for example, OHIP or any other provincial health care plan—GST, HST credits, Canada Child Benefit credits. Again, you may lose your eligibility for that. I do want to mention, if you become a non-resident, you may still be able to get Old Age Security, but taxes will need to be withheld-- usually at the standard tax rate unless there is a tax treaty in place.

K: And what if—I'm going to try and squeeze this one in. You mentioned earlier about RSPs, and TFSA, and other, let's say, non-registered investing accounts. How does that function if you're a non-resident?

M: So each one has their own implications. If we're talking about RSPs, there's not going to be a departure tax, and you're not going to have to pay taxes on it until you withdraw the money, again, the withholding tax rates. You won't be able to contribute any funds while you're a non-resident. With respect to a TFSA account, similar to RSPs, you will not be able to contribute to your TFSA account while you are a non-resident. You won't be taxed in Canada, but you do want to look into the tax laws and rules in that other jurisdiction that you are moving to, because they may treat RSPs and TFSAs differently. And with respect to non registered investment accounts, again, it's going to be dependent on the specific Canadian source income that you receive as to whether or not you have to pay taxes and, arguably, whether or not you're going to have to file a Canadian tax return. 

K: What about your citizenship? If you become a non-resident, is your Canadian citizenship at risk?

M: So there's nothing Canadian rules that indicate that you're going to lose your Canadian citizenship if you become a non-resident of Canada, certainly. But I do want to highlight if you are going to decide to renounce your Canadian citizenship, you do need to be a citizen of another country. You can't be stateless.

K: Last question—and I always ask this to you. Who should you talked to before you decide to make this somewhat gargantuan move?

M: Yes. There's going to be professionals you want to speak to, as well as non-professionals. So the professionals are the typical ones you think of-- your lawyer, your accountant, your financial advisor. But you also want to talk to the non-professional-- your friends, your family, people who have already made the move, people who live in that other country, because they're going to provide some valuable insight that a professional may not provide for you.

©2023 Moneytalk. All Rights Reserved.

Long Term Travel

Long term travel can be difficult because of stay restrictions in most countries. For example, the Schengen area of the EU allows a maximum of 90 days at which point you have to leave. If you are planning to move around within the Schengen, there is a handy Shengen calculator that helps keep track of your stay there to avoid overstaying your allowed visit time.

The EU is implementing, what is essentially a digital ID for foreign visa-free travellers in the Schengen Zone known as ETIAS, which stands for European Travel Information and Authorization System. From their website:

It is a completely electronic system that allows and keeps track of visitors from countries who do not need a visa to enter the Schengen Zone....
The legal procedures to pass the ETIAS have started in 2016, and the system is expected to be fully operational in November 2023.

The ETIAS is not yet implemented (as of August, 2022). The EU travel website will post updates on the program and when it will be in operation.

Another handy website is Sherpa which provides information on travel requirements for your destination depending on the passport you hold.

Here is a good video of a couple who travelled in Europe for a year. They detail how to avoid the visitation restrictions in the various areas of the EU. This primarily involves moving within the EU but going in and out of the Schengen area.

Slow Travel

From video from perpetual travellers 2GoRoam on their Youtube channel discussing "slow travel." This is the idea of extended stays in each location. 

They typically use AirBnB for accommodation and have discovered that stays beyond about 28 days provide a significant discount to shorter stays, sometimes up to 50%. 

They also try to stay in great out of the way places that are significantly cheaper to stay. Numbeo's global cost of living index is a good resource.

Cost of Living Overseas

On staying or living in other countries, advice can be found on many expat forums. One I found informative is Expat Exchange. Also, found in International Living, the website Numbeo has a global cost-of-living guide which is very helpful when looking for a place to settle.
On the healthcare side, there are a few indices that rank healthcare quality and each uses different criteria. The WHO rankings are based on quality and overall efficiency. For 2021 the WHO ranks France #1, Italy #2, Malta #5, Spain #7, and Portugal #12 in its world ranking (by comparison Canada is ranked 30th and the U.S. 37th). CEO World bases their ranking more strictly on the quality of healthcare. They rank, from 1 to 10, South Korea, Taiwan, Denmark, Austria, Japan, Australia, France, Spain, and Belgium.

Banking

Non-resident Bank Accounts 

Opening foreign bank accounts in a country if you are not a resident is almost impossible now. Only a few countries allow non-residents to open an account. Georgia and Montenegro do; Singapore and Malaysia also do but require substantial deposits. I asked a person at a bank in Dubai if non-residents can open accounts there. He said yes, but I don't know what the minimum requirements are.

Expat Residence Accounts 

A local bank account is a necessity when living in a new country. A little more research is required to see which bank in each country would be best. Most countries for expats require a local bank account in order to show you have sufficient funds on hand to support yourself.

To start, a survey of best banks for expats in Portugal.

Travel Medical Insurance

I recently purchased travel insurance through CAA (of which I have been a long standing member). They do all of the paperwork, and, interestingly, the insurance company that CAA uses is now owned by CAA.

Medipac Travel Insurance is recommended by the Canadian Snowbird Association and the Canadian Legion as a supplier of travel medical insurance for Canadians. I have not used them.

Safety Wing provide medical insurance for digital nomads and expats. 

Blue Cross travel insurance is available through its Ontario agent.

You should also look at what, if any, vaccinations you will need, and arrange to get them. The Government of Canada travel website has a list of suggested vaccinations by country. You can also contact your physician or local health unit.