Tax planning when moving between countries

Planning before any move, even a temporary one, requires careful tax planning.

If you are thinking of moving between countries for more than a short-term holiday, whether to take a secondment for a few years to advance one’s career, seek better education for one’s children, escape political or social upheaval, or simply to reside in a more congenial atmosphere, clients typically find there is enormous benefit to taking tax advice well before arriving in the new jurisdiction.

For example, individuals moving to the US or UK who do not take pre-arrival advice may find that, not only do they owe income or capital gains tax on all of their worldwide investment assets when sold (including those located outside of the jurisdiction of residence), but upon their death they also may well owe estate or inheritance tax based on the value of all of their worldwide assets. This can easily decimate a family’s finances, when they discover to their dismay that upon the death of the matriarch or patriarch the family will be subject to taxes that can be 40% or even 50% of the family’s entire fortune.

Understanding the global tax issues is vital to your tax planning

We can help ensure that you structure you affairs to mitigate the tax inefficiencies arising for today’s mobile population.

For example, if you live in the UK but do not intend to remain there permanently, you may be eligible to pay tax on the remittance basis. This means that you do not have to pay tax on your foreign-source income and gains, as long as these are not remitted into the UK.

If moving to the US, placing one’s assets into an insurance or annuity policy before arrival can eliminate income tax on income and gains arising from the policy. If the policy is owned by a trust, the value can also be shielded from the individual’s taxable estate at death.

If moving to Hong Kong, participation in Share Award Schemes or other retirement vehicles may be helpful to reduce both current tax obligations and reporting burdens.

Withers advises many people in this position and our extensive experience enables us to achieve optimal efficiency and to identify the most efficient wealth-holding structures for your circumstances.

In light of recent changes to the UK remittance basis we also offer guidance on how to use it without falling foul of the rules on, for example, what constitutes residence and remittance.

‘The UK government has restricted this regime over the past eight years so it’s less beneficial than it was,’ says London partner Chris Groves, ‘but it still has major benefits and offshore trust planning can be an effective means to mitigate UK taxation.’

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Track record

Two food entrepreneurs

We used our experience of working with entrepreneurs to help the founders of a food business providing goods to UK high-street retailers as they sold their company. Our lawyers assisted with the commercial aspects of the sale to a private equity firm, handling complex UK remittance tax issues and US tax issues. We were also involved in our clients’ reinvestment in a new holding company.

Structuring international assets

Advised on UK tax aspects and co-ordinated the structuring of the purchase and use of a plane and a New York apartment for a UK resident non-domiciled individual. Our team of lawyers worked with trust professionals in many time zones and with different specialisms bringing its own challenges.

Tax planning when relocating

Advised several high profile families in relation to tax planning strategies for their moves to the UK from countries including Canada, France, Poland, Russia, Spain and the US.

First Italian non-dom

A team in Milan and London delivered the first successful application for non-dom status in Italy to a client and his family.

Brazilian family offshore structuring

We worked alongside Brazilian counsel to advise a client on the FATCA and CRS reporting requirements applicable to their complex succession structure for his offshore assets. These included a private trust company, trusts, companies and other entities, a private investment fund and multiple investment accounts, and involved the Bahamas, the Cayman Islands, Switzerland and the US. The advice also needed to take into account the client's plans to relocate his family from Brazil to London, and possibly thereafter to New York City.

Pre-immigration planning for Brazil-USA move

A Brazilian private equity fund executive requested advice on pre-immigration planning in connection with his relocation to the United States. We helped to coordinate the timing of his tax recognition from certain transactions to occur while he was still a Brazilian tax resident and others to be taxed after becoming a US tax resident. We also established different types of trust structures to protect assets from US estate tax, a foreign trust to defer income taxation on existing carried interests, and a traditional US estate planning trust for carried interests not yet paying out.

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