What steps might an individual be advised to consider before establishing residence in (or becoming otherwise connected for tax purposes with) the jurisdiction?
The individual should be aware that Bulgarian tax residents are obliged to tax on their worldwide income and subject to reporting of certain items in their Bulgarian annual tax return. Avoidance of double taxation is possible through the methods for avoidance of double taxation in a double tax treaty (if any applicable) or in the national legislation, where the „tax credit” method is foreseen. It is advisable to consult with a tax specialist in advance regarding his/her tax residency status and taxation in Bulgaria.
The key steps that an 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, to get an uplift in the base cost of the asset, provided it can be done in a tax neutral manner.
- 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.
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.
Before becoming French resident individuals may contemplate setting up trusts in order to hold their assets (see § 23, 24, 25 and 26) and plan the transfer of their estate upon their death without the intervention of a French “notaire”. They may also contemplate deferring the payment of French income tax. Other estate planning arrangements including intermediate holding and/or operational companies should be considered in order to mitigate the legal consequences of becoming resident in a Civil law jurisdiction.
All steps involved in the structuring of ownership should however be properly handled with adequate substance. They should also have another purpose than avoiding taxes. therwise they might be challenged under the doctrine of abuse of law.
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.
Israeli tax law provides new immigrants with 10 year exemption on their foreign income see Question 10. The regime is quite simple and there are no special steps that should be taken in order to be entitled to the benefits.
If the individual holds any kind of interest or connection in Foundation(s), Trust(s) or similar formations, a thorough analysis and assessment of inheritance and tax aspects will need to take place prior to establishing residence in Greece.
The individual would also be advised to consider the double taxation avoidance treaty that might be in place between Greece and their jurisdiction(s) as well as whether their jurisdiction(s) is listed as a non cooperative or preferential treatment regime for tax purposes, particularly if the individual intends to acquire property in Greece utilizing foreign entities residing in such regimes.
As there’s no automatic step-up for assets held by an individual moving to Germany (safe for the case of shareholdings in corporations of at least 1% if the state of expatriation levies an exit tax), it may be advisable to check the options of a tax efficient step up before becoming tax resident in Germany. As German gift tax will apply once the donor or donee has become tax resident, it should also be considered to make inter-vivos gifts before moving. Furthermore, as Germany has quite unfavourable rules on the taxation of settlors or beneficiaries of foreign trusts, also trusts structures should be checked with respect to the potential tax consequences for German residents.
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 22). 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.
British Virgin Islands
He or she should consider the impact of the individual’s liability to taxation in other jurisdictions to which that individual might be subject, because of citizenship or other factors.
Residence in Dubai is based on obtaining a UAE visa. For most expatriate residents, this will be a work visa obtained for them by their UAE employer, although other types of visas, such as investor visas, can also be obtained. Visa rules and regulations do change from time to time, and advice should be sought prior to moving to Dubai if not going down the traditional work visa route.
Families who intend to come to New Zealand as permanent residents must therefore take planning advice in advance of their coming to New Zealand. This is because it is possible to establish pre-migration structures outside New Zealand that can be used to hold families’ overseas investments and property.
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.
Before establishing residence in Switzerland, a taxpayer should consider the place of residence (because of the different applicable tax rates at cantonal and municipal levels for the main applicable taxes). One should also examine the possibility to opt for the lump-sum taxation regime when applicable. Finally, structures like trusts should be examined before the move to Switzerland, as trust can be recognized under Swiss tax law under certain conditions.
11.1 Before becoming UK-resident (§1.5-1.7), an individual should consider certain preparatory steps. In view of the territorial limits described in §1.2, such steps should normally be carried out in a tax year (§2.13) before the tax year in which the individual first becomes UK-resident, and reliance should not be placed on split year treatment (§2.13). It is assumed below that the individual is not domiciled (§1.9), deemed domiciled (§1.10) or deemed domiciled for inheritance tax purposes (§5.9) in the UK, and is not temporarily non-resident (§1.8). Before taking any step such as mentioned below, the tax consequences of the step in any non-UK jurisdiction should be considered.
11.2 The individual should consider realising income or capital gains so as to create a cash fund (often called "clean capital"), which he should be able to use in the UK without giving rise to UK tax charges, and placing that clean capital in a separate non-UK bank account. Arrangements could be made with the bank for any income produced by the clean capital to be paid into a separate account and not remitted to the UK (§10.3), with all remittances to the UK being from the clean capital account only.
11.3 The individual should review his worldwide property, including shareholdings in companies and life insurance policies, and the terms (and historical income and capital gains) of existing trusts (§19.1) and foundations, to ensure that his becoming UK-resident (§1.5-1.7) will not give rise to adverse tax treatment of these structures. The individual might consider steps to rebase the value of any assets standing at a capital gain. Consideration should be given to taking a substantial dividend from a wholly-owned company, or winding up such a company or an existing family trust, to create clean capital (§11.2) and avoid heavy UK tax charges that might arise on distributions from such structures during the individual's period of UK residency. Funds extracted in this way and not required for expenditure during the period of UK residency might be used to establish a new trust or foundation structure, potentially allowing those funds to be held tax-efficiently on a long-term basis for the benefit of future generations.
11.4 The individual should ensure that any directorships do not give rise to UK tax charges, as the exercise in the UK of control over a non-UK company may bring any profits of that company within the scope of UK taxation and cause various UK tax regimes to apply in relation to that company.
11.5 Assuming the individual has a non-UK domicile (§1.9), he should protect this status by ensuring that at all times he has evidence of a plan, and of practical preparation, to leave the UK after a limited period or on the occurrence of an event such as retirement.