A summary of tax regimes around the world - with a focus on the most popular locations where people choose to live, writes BDO tax partner and chair of its global private client strategy group, Richard Montague.
For many years individuals have emigrated from their home countries in search of a new life. When choosing a destination to live, the thought process often includes such matters as climate, lifestyle, cost of living, education and crime statistics. However, individuals want to balance lifestyle and financial factors, ensuring that their financial affairs and global assets are structured in an efficient manner.
Ensuring long-term asset preservation while complying with global tax obligations is no easy task. An understanding of the tax regime in the country of choice is key, as tax efficiency does not necessarily mean reducing the annual tax bill, but rather ensuring that it is not increased unexpectedly.
While a few countries, such as the US, tax based on citizenship, most countries will tax individuals based on whether they are resident in their country. The concept of tax residence is complex and varies between countries. Indeed, it is possible to be resident in more than one country, or resident in none.
In recent years the UK government has made, and continues to make, a number of major legislative changes which impact the thought process of individuals seeking a high quality of life while structuring their domestic and international affairs in an efficient and compliant manner.
As well as the introduction of the remittance basis charge in 2008, there have been more recent legislative changes in respect of high-value UK residential property, such as capital gains tax for non-UK-resident owners and the Annual Tax on Enveloped Dwellings, and there is uncertainty surrounding the longevity of non-UK domicile status. These changes have often been a key factor for individuals who are considering moving away from the UK.
When considering the tax implications of moving to a new country, particular attention should be paid to the different types of taxes. Most countries have some form of indirect taxation, such as Value Added Tax (VAT) or property transfer taxes, and will also apply direct tax on income and profits on the disposal of assets.
Other countries will seek to tax capital gifted or inherited, or apply an annual tax on net wealth. Some countries even seek to apply an exit tax when individuals break tax residence. There are many pitfalls for the unwary.
Irrespective of the legislative changes, the UK still retains a competitive tax regime, particularly for foreign individuals coming to the UK. However, so too do many other countries around the world. The competitive regimes range from a low headline rate of tax to exemption for tax on foreign income, tax breaks on local employment income and lump sum tax regimes. There is a wide array of options for individuals looking to relocate.
The practicalities of relocating are burdensome, with complex cross-border taxation for individuals moving between countries and legislation often circumscribed with detailed anti-avoidance legislation. This may include tax on income and gains on return to the home country within a short period of time, or ongoing tax in the home country after leaving.
There is a lot to consider, particularly with the ever increasing global sharing of information. At BDO our goal is to guide our clients smoothly through the relocation process, providing reassurance that they are complying with their global obligations while effectively structuring their affairs for asset preservation — and meeting their lifestyle objectives.
The Global Opportunities report concludes by summarising the likely considerations from an economic and financial perspective for different types of individual. The following destinations are described as meeting more of the objectives of the ‘entrepreneur’, ‘global executive’ and ‘pensioner’.
- The Entrepreneur: Canada, Monaco,
Singapore, Switzerland, UK
- The Global Executive: Hong Kong,
Ireland, Singapore, Spain, UK
- The Pensioner: Cyprus, Malta,
New Zealand, Portugal, Spain
Global Opportunities report
THE RIGHT CONNECTIONS
BDO’s Global Private Client Services Innovation Centre is a global network of private client specialists with multi-jurisdiction understanding of leading issues and a commitment to exceptional client service. Our global private client tax team working together provides a complete range of tax services to individuals, including:
- Tax-efficient relocation to other countries
- Tax advice on investing money effectively around the globe
- Estate and gift tax structuring
- Tax advice on investing in real estate in other jurisdictions
With a global footprint in 154 countries, our integrated network ensures that clients get the best tax advice no matter where they live or invest.
To find out more about Private Client Services at BDO, go to: www.bdo.co.uk/en-gb/services/tax/private-client-services