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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