What steps might an individual be advised to consider before establishing residence in (or becoming otherwise connected for tax purposes with) the jurisdiction?
Private Client (2nd edition)
An individual may elect (within 90 days form his arrival) an adjustment year under which he would still be considered as a non-Israeli tax resident during the first year of arrival. Also, certain individuals that came for Israel as students or lecturers, for a certain period, may still be considered as a non-Israeli tax resident, under certain terms. Foreign individual may also restructure their holdings prior to their arrival to Israel and in particular engage in planning for their compensation.
The key steps that a non-Irish domicile individual should take are as follows:
- Segregate capital value and accumulated income and gains arising prior to the tax year in which the individual becomes Irish tax resident. These funds should not be mixed with income and gains arising in subsequent tax years, as they will collectively be considered as ‘clean capital’, which the individual can remit tax-free into Ireland.
- Rebase assets which have latent capital gains, to get an uplift in the base cost of the asset, provided it can be done in a tax neutral manner in the country of tax residence pre-entry.
- Receiving / gifting non-Irish situs assets to non-Irish resident individuals within the initial 5 years of Irish tax residence so as to avoid an Irish CAT charge arising.
Before emigrating to Belgium, one might consider the impact of the so-called ‘Cayman tax’ on his rights or entitlements towards trusts and low-taxed foreign legal entities (cf. question 23). Given the differences between the Regions with respect to inheritance and gift tax legislation, one might also consider the implications of settling in a certain Region.
An individual should consider contributing assets to a foreign trust prior to entering the US. If done more than 5 years prior to becoming a US Person, the trust assets in most cases will not be subject to US income taxation. If an individual is very wealthy (more than $10 million of liquid assets), the individual may want to consider investing through a private placement life insurance policy, which is not subject to US income tax. If the individual is moving to a US state that imposes an income tax, the individual may want to establish a trust in a US state that does not impose income tax to avoid state income tax on those assets.
The Cyprus International Trust, established under the International Trusts Laws of 1992 to 2013, is a very valuable and effective tool for asset protection, succession planning and tax planning. In order to establish a Cyprus International Trust, the settlor must not have been a resident of Cyprus for the calendar year prior to the creation of the trust. It is therefore prudent to establish any Cyprus International Trust prior to arrival in Cyprus.
As the Cyprus tax system is flexible and taxpayer-friendly, any other pre-entry planning that might usefully be undertaken would generally relate to overseas taxes.
First, the assets and income of the individual have to be determined. Depending on which income the individual predominantly earns, advantageous structures may be available from an Austrian tax perspective.
Residence is not prone to sudden, single step, changes. Becoming a Bulgarian resident is a process during which a person should establish sufficient links to Bulgaria and cut (lower the intensity of) any existing links to such person’s prior residence state as a potential change of residence is going to affect the taxing rights of that state. Therefore, it should be done carefully so that a person does not end up in the net of two different tax systems and absent a tax treaty be subjected to double taxation.
This is why, before establishing residence in Bulgaria, individuals are advised to consider whether or not there is a tax treaty between Bulgaria and their current state of residence, as well as the treaty’s applicability to their particular situation (some of the older Bulgarian tax treaties apply to Bulgarian nationals only thereby denying access to treaty relief to non-Bulgarian nationals). Hence, individuals considering Bulgarian residence as an option should consult a tax adviser beforehand.
An individual must consider that upon becoming an Argentine tax resident he/she will be subject to personal income tax (Ganancias Personas Físicas) on their worldwide income and if he/she becomes Argentine domiciled (as the case might be) he/she will be subject to Personal Asset Tax assessed on those assets located in Argentina and abroad as of 31st December each year. In this sense, he/she should be advised that Argentina has one of the highest tax burdens in Latin America.
The individual should consider too that Argentina have faced cyclical economic and political crisis (basically, every ten years) and that whenever a crisis arises, the right of ownership is at risk. Devaluation, asymmetric pesification, foreign exchange restrictions are a few examples of this. Insecurity is another important issue to consider.
Having said this, it would be advisable that if the person analyzing the possibility of establishing residence in Argentina is a High-net-worth Individual, he/she shall previously settle up a structure in order to tackle asset protection, avoid disclosure of assets in the relevant tax returns (mainly for insecurity reasons), and ease their eventual tax burden.
An individual who intends to establish residence in Monaco must obtain a residence card.
In certain cases, foreign tax authorities may request from individuals a proof of residence in Monaco.
The residence certificate is a proof of an individual’s current residence in the Principality. It is issued by the Monegasque authorities to residents of the Principality who reside in Monaco for at least 6 months a year or have their main centre of activities in Monaco.
Individuals moving to Italy under the forfait tax regime must consider the filing of a ruling on the entitlement to such special regime and its application to their specific facts and circumstances, and must consider any restructuring of their foreign assets that may help minimizing taxation of source since foreign taxes will not be creditable in Italy.
Individual moving to Italy under the ordinary tax regime may consider to reorganise their ownership structure to make them more tax effective in the light of Italian tax laws and to try to obtain a step-up the tax basis of assets.
As no direct taxes are applied in Bermuda, there are no particular steps an individual might consider before establishing residence from a tax perspective. However, appropriate immigration permission should be obtained.