Saturday, 23 January 2010

QROPS Advice: Taxation of ‘Non-Residents’ Living in Greece

Non-tax residents are taxable only on their income from Greek sources or income related to Greek duties, at the same tax ratesmapplicable to tax residents (as discussed under ‘Income Tax’ on the first page), with the exception of an additional 5% on the taxmfree bracket. Non-residents are not entitled to any of the deductions and allowances that may be claimed by residents, unless theymare EU residents who earn at least 90% of their worldwide income in Greece.
Non-resident aliens are taxed on salary earned for work performed in Greece or work considered to be ‘Greek related’, regardless of where payment is made and regardless of where it is remitted. Non-residents are not taxed on compensation relating to services performed outside Greece and related to non-Greek duties.
Double taxation treaties cover the taxation of the local income of expatriates working in Greece. In order to qualify for treaty treatment, the expatriate must be a resident of a treaty country and must fulfil all conditions provided by each treaty regarding the country of taxation. Alternatively, the expatriate must be employed by, or render their services to, an individual or legal entity of the treaty country where they maintain permanent residency. Particular treaties may contain other conditions.

QROPS Advice: Taxation of Expatriates Living in Greece

Subject to relevant tax treaty provisions, income tax is payable by all individuals earning income in Greece, regardless of citizenship or place of permanent residence. Permanent residents are taxed on their worldwide income. There is no clear definition
of “residency” in Greek tax law and individuals residing in Greece and indicating intent to remain permanently are considered to be tax resident.
Greece has concluded treaties for the avoidance of double taxation with over 40 countries.
There is no special tax regime for expatriates, although relief may be obtained from payment of social security contributions if suitable certification is received from the individual’s home state and submitted to the Greek social security authorities.

QROPS Advice: Taxation of ‘Non-Residents’ Living in Germany

Individuals who are not resident in Germany will be subject to ‘limited tax liability’ only on such income from German sources that are listed in the German Income Tax Act. A non-resident taxpayer will have to file a return and receive an assessment only if their German income is not subject to withholding tax. Where income is subject to withholding tax, the income tax liability is normally
settled through the withholding system and no returns or assessments are required.
The solidarity surcharge also applies to non-residents, but non-residents are not subject to church tax.
In the case of dividends sourced in Germany and payable to non-residents, withholding tax applies at the new rate of 25% with the 5.5% solidarity surcharge added thereon. However, in practice the tax due may be less owing to double taxation treaties.
Nevertheless, the German payer generally has to withhold tax at the higher rate of the two countries. Where the withholding tax has been deducted, the taxpayer may apply for a refund of the tax withheld in excess of the withholding tax applicable under the relevant double taxation treaty. Savings interest sourced in Germany and paid out to non-residents are not subject to withholding tax at source.
In the case of inheritance tax when neither the deceased person nor the donor are resident in Germany, only certain assets situated in Germany are taxable, e.g. real estate and business assets.
Applications for more favourable treatment
Non-resident individuals who derive at least 90% of their taxable income from German sources, or where the non-German income does not exceed a certain level, may apply for more favourable taxation in Germany in a manner similar to the taxation of German
A non-resident spouse of a resident tax payer can upon application be treated as resident in Germany if this is more beneficial, provided that the resident tax payer is a citizen of an EU/EEA member state and the spouse lives in a member state of the EU or EEA.

QROPS Advice: Taxation of Expatriates Living in Germany

The basis for taxation in Germany is determined by an individual’s residential status. Individuals who are residents of Germany are subject to ‘unlimited tax liability’, from the very first day of arrival in Germany, except insofar as a tax treaty assigns the right to impose tax on any income in favour of another country. An individual will be considered a resident of Germany with ‘unlimited tax liability’ under two circumstances:
• They take up residence in Germany by, for example, purchasing or renting a property for future indefinite use, or
• They have a habitual abode in Germany, i.e. a continuous presence in Germany for more than 6 months.
The German Income Tax Law offers very important deductions, which often apply to expatriates and which are unknown in other countries. These include income related expenses which are deductible from taxable income received by an employee, e.g. moving expenses, rent for a German apartment, expenses for returning to the home country, flights home under the ’double household regime‘ and telephone costs.
Inheritances and gifts are often taxable in both Germany and the expatriate’s home country. However, in some cases, national legislation allows taxes paid in one country to be deducted from the tax in the other country. Germany has an extensive network of tax treaties preventing double taxation on income signed with about 80 countries. Inheritance tax agreements are signed with a relatively small number of countries, such as Austria, Denmark, Greece, Sweden, Switzerland, and the USA. An inheritance agreement with France is currently in a discussion.
German social security contributions do not, in principle, apply to individuals who:
• are seconded to Germany for a limited period (3 to 5 years or, under some social security treaties, from 6 to 8 years), and
• work on behalf of a foreign (non-German) employer on their payroll or account, and
• have costs of the assignment charged to the host company (this is only possible with a cost-plus agreement to avoid German
social security)
The decision as to whether the provisions for a secondment are met is made, on application, by the social security authorities in the home and/or in the host country.

QROPS Advice: Taxation of ‘Non-Residents’ Living in France

If an individual is deemed to be a non-resident for tax purposes, they are subject to income tax on their French-sourced income
only. However, a basic distinction is made depending on whether or not the non-resident taxpayer has a dwelling at his
permanent disposal in France. If not, the general rule is that he/she is taxed exclusively on French-sourced income using the
same income tax rates as residents. However, the rate must not be less than 20% of income, unless it can be proven that the
overall rate of French tax on his worldwide income would be lower than 20%, in which case the tax liability is reduced
accordingly. If the non-resident taxpayer has one or more dwellings in France, and subject to large exceptions, he/she is taxed on
a deemed income equal to three times the annual rental value of his/her residence(s). If their French-sourced income exceeds
this deemed income, they are subject to tax on the basis of their French-sourced income. In general, this flat tax does not apply
to residents of countries which have concluded a tax treaty with France.
Non-residents who are liable to French personal income tax on employment income are subject to withholding tax. Following
deduction of the mandatory French employee social security contributions and the standard 10% salary deduction, employment
income is then subject to withholding tax at source by the employer, at the rates of 0%, 12% and 20%. The withholding tax at
0% and 12% frees the corresponding portion of net annual salary from further income tax. The French complementary personal
income tax is computed on the part of the remuneration liable in the 20% band. It is computed based on the French normal
income tax rates, with a minimum of 20%. If the resulting tax is lower than the withholding tax already paid at a rate of 20%,
the total withholding tax is the final tax liability of the employee. If the resulting tax is higher than the 20% withholding tax, the
20% withholding tax levied by the employer is offset but an additional income tax is due by the employee.
In respect of social security contributions, France has entered into agreements with more than 40 countries. Under these
agreements, where expatriates are temporarily transferred to France, they may remain under their home country’s social security schemes. 2009.pdf

QROPS Advice: Taxation of Expatriates Living in France

An individual is deemed a French resident for tax purposes if:
􀂃 They have a home in France or, if they have no home in France or abroad, France is their principal place of abode; or
􀂃 France is the place where they perform principal professional activities; or
􀂃 France is the centre of their economic interests.
Only one of these criteria needs to be met in order to qualify as a French resident for tax purposes. If an expatriate working in France is considered to be a resident in both France and in their home country, reference will be made to the relevant tax treaty, if any, to determine the country in which the individual will be regarded as resident. France has an extensive network of double taxation treaties, with over 110 negotiated and in place.
Allowances and annual progressive tax rates apply in the same way to part-year and full-year tax residents. However, because of French income-splitting rules, a married taxpayer with children may not reach the maximum marginal tax rate during their first year in France. This means that there may be a significant benefit to an expatriate in shifting income into the first year or last
year of the assignment, depending on the date of arrival/departure. When a French tax resident leaves France during the course of a tax year, they remain liable to French personal income tax on the aggregate of world-wide income earned as a French tax resident and also their sole French-source income earned as a non-French tax resident, subject to the provisions of an applicable tax treaty.
A new ‘inbound assignee’ regime came into force on 6th August 2008 (Article 155B of the French Tax Code) and is applicable to employees assigned to France by their foreign employer as from 1st January 2008 or to employees directly recruited abroad by a French company as from 1st January 2008. In both cases, the individuals must not have been French tax resident during the five calendar years preceding the year of starting their assignment/employment in France. Under this new regime, individuals
assigned to France by their foreign employer can benefit from a French income tax exemption in relation to salary supplements connected with their assignment. For employees directly recruited abroad, the new regime would offer an option with regard to their tax treatment as follows:
• The exemption of the actual amount of salary supplements received; or
• In the event that there are no such salary supplements, upon election, a flat rate exemption of 30% of the total remuneration.
However, the new regime provides for a “floor” of reportable compensation (i.e. the taxable compensation cannot be lower than the taxable remuneration paid for a similar job in the same or a similar company established in France). It also provides for an exemption of part of the remuneration based on foreign workdays. However, the total exemption (i.e. on salary supplements – actual or not – and foreign workdays) is limited to 50% of the total remuneration, or the individual can elect for an exemption of French tax connected with foreign workdays limited to 20% of the taxable remuneration.
The availability of this new inbound regime is limited to five years as from the year of arrival.
Inbound assignees who benefit from the new inbound regime can also exempt 50% of the amount of their foreign interest, dividends, royalties, capital gains and industrial and intellectual property gains, under certain conditions. 2009.pdf

QROPS Advice: Taxation of ‘Non-Residents’ Living in Belgium

The taxation of non residents living in Belgium is different from that of residents. Non-residents are taxed on Belgian-source income only, namely income from employment in Belgium, Belgian-source property income, interest and dividend income paid by Belgian companies, as well as Belgian-source capital gains. They are not taxed on foreign capital gains or foreign investment income received outside the country. If, on death, a non resident leaves property in Belgium, an inheritance tax liability arises, with the tax chargeable being based on the gross value of the property.
Special Tax Regime for non-resident expatriates Expatriates in Belgium are generally regarded as Belgian tax residents and are therefore subject to Belgian income tax on their worldwide income. However, the Belgian authorities have encouraged multinational companies to transfer foreign executives to Belgium by introducing special tax concessions to non-Belgians who are ‘temporarily’ working in the country. The tax concessions allow such expatriates to be treated as non-residents for tax purposes. The concessions do not apply to inheritance tax.
To qualify for these special concessions, a number of factors are considered e.g. ‘does the employment contract specify a limited time?’, ‘has the expatriate’s family moved to Belgium?’, ‘is the expatriate’s centre of economic and/or personal interest in Belgium?’, and ‘is the employment with a qualifying entity?’
Under the special concessions:
• Only Belgian source income is taxable, including property income and dividend income.
• Additional taxes are payable at 7% of total federal income tax payable.
• Capital gains tax applies only to Belgian-source gains.
• Under certain circumstances, temporary expatriate workers who qualify for the special regime may be exempt from paying social security contributions (typically up to 5 years).
Expatriates who benefit from the non-residents’ special tax regime may not invoke double taxation agreements because they only apply for the benefit of Belgian residents. For certain expatriates qualifying under the special regime who originate from other EU Member States, the EU Savings Directive may have an impact on their Belgian-source interest payments, with a withholding tax of 20% being levied on such payments (increasing to 35% as from July 2011).

QROPS Advice: Taxation of Expatriates Living in Belgium

An expatriate living in Belgium will become liable to Belgian income tax, as residence rather than domicile is the relevant determining factor.
A resident of Belgium is defined as someone who has a family home or a place from where they manage their personal wealth/business/occupation in Belgium. People are automatically presumed to be resident of Belgium if their family lives in Belgium
and/or if they are registered in the Belgian population register.
Where an expatriate is resident in Belgium for only part of a tax year, income for that period is treated as if it were for a full year and full annual allowances can be claimed, as can the full bands for progressive rates of tax.
Expatriates that become permanently resident in Belgium are liable to inheritance tax on their worldwide assets. Any gifts, not already subject to gift tax, made three years prior to death will be added to the value of the estate. Inheritance tax rules differ according to the region where the deceased had their fiscal residence and the heir’s relationship with the deceased.
Foreign inheritance taxes paid on property situated abroad owned by a deceased Belgian resident can be deducted from Belgian tax payable on that property under certain conditions.
Expatriates may be considered to be tax resident in more than one country, but double taxation treaties between Belgium and many expatriates’ home countries should ensure that double taxation is avoided. Belgium has negotiated over 90 double taxation agreements.

QROPS Advice: Taxation of ‘Non-Residents’ Living in Cyprus

If an individual is deemed to be a non-resident of Cyprus for tax purposes they will only be taxed on certain types of their Cypriot sourced income. Such income would be employment income (including benefits) in relation to services rendered in Cyprus, profits from a business activity which is carried out through a permanent establishment in Cyprus, rentals from immoveable property situated in Cyprus, and pensions in respect of employment exercised in Cyprus. These incomes are subject to Cypriot income tax at the progressive rates applicable. Unearned income such as interest and dividends earned from Cyprus sources are exempt from any income tax.

QROPS Advice: Taxation of ‘Non-Residents’ Living in Cyprus

If an individual is deemed to be a non-resident of Cyprus for tax purposes they will only be taxed on certain types of their Cypriot sourced income. Such income would be employment income (including benefits) in relation to services rendered in Cyprus, profits from a business activity which is carried out through a permanent establishment in Cyprus, rentals from immoveable property situated in Cyprus, and pensions in respect of employment exercised in Cyprus. These incomes are subject to Cypriot income tax at the progressive rates applicable. Unearned income such as interest and dividends earned from Cyprus sources are exempt from any income tax.

QROPS Advice: Taxation of Expatriates Living in Cyprus

An individual is considered to be resident in Cyprus for tax purposes if they spend more than 183 days in any one tax year in Cyprus. Anyone who becomes resident in Cyprus for tax purposes is liable to taxation on their worldwide income at the rates
described above.
If an individual is considered a tax resident of Cyprus, but is earning income from salaried services rendered abroad for more than 90 days in a tax year, the part of their salary earned abroad is exempt from tax. Such salaried services must be carried out for either:
􀂃 A non-Cypriot resident employer, or
􀂃 The foreign permanent establishment of a Cypriot resident employer.
Any individual taking up employment in Cyprus for the first time is given an extra tax allowance on their income for a period of three years commencing from 1st January following the date they commence employment. This allowance is the lower of 20% of income or €8,543 annually.
Expatriates in receipt of foreign pension income may opt for the Special Rate of 5% taxation to be applied beyond the annual exemption limit of €3,417.
Cyprus has an extensive network of double taxation treaties with over 40 countries in respect of interest, dividends and royalties paid from and received in Cyprus.
All employees, whether they are Cypriot or EU nationals, are subject to the social security system in Cyprus. EU nationals taking on employment in Cyprus may, however, apply for an exemption from the Cypriot social security system if they continue to make contributions of such nature to their home country’s fund under EU regulation No. 1408/71.
Non-EU nationals employed by Cypriot companies are not subject to the social security system in Cyprus provided the employer company does not trade within Cyprus and they are not considered to have their ordinary residence in Cyprus.
Foreign employees working in Cyprus who are subject to the Cyprus Social Security system have to register with the Social Security authorities after they have obtained their Alien Registration Certificate (ARC).

QROPS Advice: Taxation of ‘Non-Residents’ in Hong Kong

The liability to HKST on employment for an individual depends on whether the remuneration is received from an office in Hong Kong, from Hong Kong employment or from non-Hong Kong employment.
If remuneration is from Hong Kong employment an individual is fully taxable unless they render services entirely outside Hong Kong or spend not more than 60 days on visits to Hong Kong during any tax year, of which a full income exemption is available. Where an individual renders services partly in Hong Kong and partly in foreign territories, and the foreign services are subject to a tax which is similar to HKST in that particular country, only the amount of income relating to the Hong Kong services will be subject to Hong Kong tax.
If remuneration is from non-Hong Kong employment, an individual will only be liable to tax in Hong Kong if their visits to Hong Kong exceed 60 days during any tax year. Where an individual stationed in Hong Kong on regional duties is required to travel
frequently outside Hong Kong, they may apply to pay tax on a time apportionment basis by reference to the number of days spent in Hong Kong during the tax year. In this case the individual's income for foreign duties does not have to be subject to tax.
A person will generally be regarded as having a non-Hong Kong employment where:
􀂃 Their employer is resident outside Hong Kong; and
􀂃 The contract of employment has been negotiated and concluded and is enforceable outside Hong Kong; and
􀂃 The remuneration is paid to the employee outside Hong Kong.
However, the IRD reserves the right to look beyond these three factors when appropriate.

QROPS Advice: Taxation of Expatriates Living in Hong Kong

As taxes in Hong Kong are based on the territorial principle, nationality, residency or domicile are not relevant in determining whether an individual is liable to tax.
Liability to tax is assessed on an individual’s employment income to the extent that it arises in or is derived from Hong Kong, namely if it is earned from employment bearing a locality in Hong Kong or if it relates to services performed in Hong Kong.
Whether a person has a Hong Kong employment is determined by a number of factors, including whether that person has entered into a contract with a Hong Kong employer or resident company.
Hong Kong has comprehensive double taxation agreements in place with Belgium, Luxembourg, China and Thailand only. The Hong Kong government is currently negotiating a number of additional double taxation agreements of various types.

QROPS Advice: Taxation of ‘Non-Residents’ Living in South Africa

In general, foreign workers rendering services in South Africa on short term contracts would not become ordinarily resident and, depending on the period of the assignment, may also avoid becoming residents under the physical presence test.
Individuals deemed to be non-residents of South Africa for tax purposes will only be taxed on their South African sourced income and are entitled to limited deductions. Employment income earned by non-residents from offering their services in South Africa is taxable in South Africa irrespective of where, when and by whom it is paid. In contrast, earnings from services offered outside South Africa will not be taxable, even if it is paid by a South African employer.
South African sourced dividend income in the hands of non-resident individuals is exempt from tax. Interest derived by a nonresident is also exempt if they do not have a permanent establishment in the country and were not in the country for at least 183 days during the tax year. Non-residents are subject to a final withholding tax of 12% of the gross amount of royalties arising from intellectual property in South Africa. Rental income is generally fully taxable if derived from a property located in South Africa.
In general, non residents are only taxed on capital gains in the disposal or deemed disposal of immovable property or rights in immovable property situated in South Africa. CGT is levied at normal income tax rates on the first 25% of the gain realised by the individual.
Only property or deemed property situated in South Africa belonging to a deceased non-resident person is subject to inheritance tax.

QROPS Advice:Taxation of Expatriates Living in South Africa

Residence for tax purposes in South Africa is determined by reference to two tests:
1. Ordinarily Resident Test. A person’s ordinary place of residence will be regarded as the country to which he or she would naturally and as a matter of course return from his or her wanderings, i.e. usual, principle place of residence.
2. Physical Presence Test. For persons not deemed ordinarily resident in South Africa, the Physical Presence Test applies.
Individuals are deemed to be residents if they are physically present in South Africa:
a) More than 91 days in total during the relevant tax year
b) More than 91 days in aggregate during each of the preceding 5 tax years to the year of assessment under consideration
c) More than 915 days in total during the 5 preceding tax years.
Only one of these tests needs to be met in order for an expatriate to qualify as a South African resident for tax purposes. Foreign nationals deemed resident in South Africa are subject to the same taxation and qualify for the same allowances, credits and deductions as local residents. South Africa has an extensive network of double taxation treaties. Relief from double taxation is granted under tax agreements, as
well as unilaterally in terms of tax credit provisions contained in the South African Income Tax Act.

QROPS Advice: Taxation of ‘Non-Residents’ Living in Turkey

Non-residents in Turkey are only liable to taxation on their Turkish sourced income and are termed ‘limited taxpayers’. Certain individuals who stay in Turkey for more than six continuous months exclusively for the fulfillment of specific and temporary
assignments are not considered as resident and they will still be treated as limited taxpayers.
The liability to tax on Turkish source income is the same as that for residents with regards to income, capital gains, investment income and inheritances/gifts. The same rates and exemptions apply.

QROPS Advice: Taxation of Expatriates Living in Turkey

An individual’s liability to tax in Turkey is dependent on whether they are considered a Turkish resident by the tax authorities. For tax purposes an individual is considered resident if their legal domicile is in Turkey as defined by the Civil Code, or if the individual stays in Turkey continuously for more than six months in a calendar year.
Individuals considered residents are liable to tax on their worldwide income and are termed as ‘unlimited taxpayers’. There is no special tax regime for expatriates and resident foreign nationals are taxed the same as Turkish nationals.
Income received from overseas may be covered under a double taxation treaty. Turkey has negotiated tax treaties with over 50 countries around the world.
A foreign national with residence status in Turkey is not required to pay Turkish social security contributions if they remain covered by their home country and provided proof of foreign coverage is filed with the local social security office. If an individual is not covered by a foreign social security arrangement full contributions would usually be imposed in Turkey. Foreign nationals also qualify for unemployment insurance, provided there is a reciprocal agreement between Turkey and their home countries.

QROPS Advice: Taxation of ‘Non-Residents’ Living in Italy

The basis for taxation in Italy is determined by an individual’s residential status. Non-residents are only taxed on income and gains arising in Italy, compared to worldwide income and gains for residents. The tax is calculated in the same way as it is for resident individuals, with income tax assessed on the aggregate income derived within Italy.
Certain types of investment income realised by non-resident individuals are subject to a final withholding tax. However, interest on Italian bonds and similar, and interest from debenture loans issued by banks and listed companies, are no longer subject to a withholding tax if received by non-resident individuals who are resident of a State with whom Italy has signed a double taxation treaty providing an exchange of information.
Inheritance and gift taxes are levied without regard to the residence of the deceased/donor or the beneficiary if the transfer is executed in Italy or if the assets are located in Italy.

QROPS Advice: Taxation of Expatriates Living in Italy

Expatriates living in Italy will be classified as either resident or non-resident. An individual is considered resident if:
􀂃 for a period of 183 days they are registered with the registry office of the Population Registry (Anagrafe), or
􀂃 for a period of 183 days they have their principal place of business or residence in Italy, or
􀂃 for a period of 183 days they have their centre of vital interest (i.e. his family) in Italy
When moving to the country an individual needs to register with the Population Registry and in turn remove their name from the registry on departure.
If an individual is resident in Italy for a part year then any tax credits or allowances are pro-rated based upon the period of time the individual is resident in the country during the year.
In the case where part of a resident’s income is generated overseas, the greater part of foreign income taxes paid can be credited against Italian tax if paid in accordance with tax treaties stipulated by Italy.
Italy has tax treaties with most developed countries.
Self employed individuals living in Italy are taxed differently from employed individuals and are subject to a ‘regional tax on productive activities’ (IRAP). IRAP, typically 3.9%, is applied to the value of net production resulting from the business pursued within the relevant region. IRAP is payable in advance based upon the previous year’s tax return, with the final tax bill for the year being reconciled once the relevant tax return has been filed.
Italy has been implementing a series of tax reforms over the past few years with the aim of simplifying the fiscal system within the country, including that applicable to non-residents.

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QROPS Advice: Taxation of ‘Non-Residents’ Living in Sweden

A Swedish non-resident individual is subject to Swedish income tax only on income arising from sources in Sweden. Therefore expatriates regarded as non-resident individuals will only have a limited Swedish tax liability.
Non-residents will be subject to income taxes on remuneration arising from employment undertaken in Sweden and paid by a Swedish employer. Directors' fees paid by a Swedish company are always considered to have been earned in Sweden, regardless
of whether the activities are carried on in Sweden.
There is a specific concession available for non-resident expatriates working in Sweden. Non-residents may be taxed at a flat rate of 25% with no deductions applying. The 25% tax is withheld by the employer and is the final tax due on income. In order to benefit from the 25% flat rate (known as SINK) an application must be filed with the Local Tax Authority in advance, normally by the Swedish employer. There is normally no obligation to file an annual income tax return if you only have income from Sweden that is subject to a “SINK-ruling”. Non-residents working in Sweden and receiving the main part of their employment income from
Sweden may choose between being taxed according to the resident or non-resident rules, implying that certain deductions are available.
Non-resident individuals are generally not liable to pay capital income tax, though dividends received from a Swedish company are taxable unless tax exempt under a double taxation treaty. Non-residents are not generally liable to tax on gains of shares or on capital gains from the sale of personal assets. They will only be liable to tax on the gain resulting from the sale of real estate situated in Sweden and, where applicable, rental income from letting a home in Sweden (real property or flat).

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QROPS Advice: Taxation of Expatriates Living in Sweden

The basis for taxation in Sweden is determined by an individual’s residential status. Swedish residents are taxed on their worldwide income and non-residents only on income arising from sources in Sweden.
Expatriates are considered resident in Sweden if they meet the following conditions:
􀂃 they are domiciled in Sweden, i.e. have a permanent home in Sweden, or
􀂃 they stay permanently in Sweden, i.e. stay continuously for more than 183 days in the country, or
􀂃 they are considered to have an essential connection with Sweden after leaving the country/moving abroad
When determining whether an individual has an essential connection with Sweden, all important ties with Sweden, both economic and social, are taken into consideration by the tax authorities.
Individuals who are Swedish nationals, or foreign nationals who have been resident in Sweden for a total of ten years, are deemed to be resident in Sweden until five years have elapsed from the date of moving out of Sweden, unless the person can prove that their essential connections with Sweden have been broken. After five years the burden of proof is reversed and the tax authorities have to prove that essential ties still exist between the individual and Sweden.
An individual who is considered resident in Sweden may, at the same time, be considered resident in another country under that country's domestic legislation (dual residence). If there is a tax treaty between that country and Sweden there are normally provisions in the treaty to determine in which country a person shall be considered resident in case of dual residence, or how double taxation is to be eliminated. Sweden has negotiated double taxation treaties with over 80 countries including all countries in the Nordic region.
Special rules on taxation apply to foreign experts and key personnel. According to these regulations, only 75% of the income earned is subject to income tax and social security charges during the first three years in Sweden. Some benefits, such as school fees and allowances for moving residence, are tax exempt. These regulations apply to foreign personnel employed by a Swedish company, or a foreign company with a permanent establishment in Sweden. The employment and residence in Sweden must be
limited in time, not exceeding five years, and the employee should not have been a resident in Sweden prior to the employment.
To qualify for this exemption it is necessary to obtain a ruling from the National Tax Board, which is part of the Swedish Tax Administration. The application must be filed within three months upon arrival.

QROPS Advice: The Expatriate Financial Guide for UK Expatriates working overseas

An individual who is considering a move from the UK in order to work overseas will need to take into account a number of factors, including the impact of their move upon their tax position.
One aspect is the taxation regime of the country to which the UK expatriate is moving. The tax regimes of countries around the world vary considerably. Generally, most countries will levy a tax on at least any employment income earned in the country.
Others will tax the worldwide income or capital gains of an individual, in addition, perhaps, to raising an inheritance/estate tax on the worldwide wealth of an individual if they should die whilst living in the overseas country. The exact tax regime applied will depend upon the country in question, as well as the personal circumstances of the UK expatriate, for example, the length of time they have lived in the country and/or whether they have purchased a permanent place of residence in the country. The Association of International Life Offices (“AILO”) tax guides provide an overview of the tax regimes in a number of popular destinations for UK
A UK expatriate’s continuing liability to UK taxes will depend upon their residence, ordinary residence and domicile status. An individual who is both resident and domiciled in the UK is liable to income and capital gains tax on their worldwide income and gains, as well as inheritance tax on worldwide assets (as a consequence of their UK domicile). For UK tax purposes residence and domicile are generally defined as follows.
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QROPS Advice: The Expatriate Financial Guide for UK Expatriates Retiring Overseas

An individual who is considering a move from the UK to retire overseas will need to take into account a number of factors, including the impact of their move upon their tax position.
One aspect is the taxation regime of the country to which the UK expatriate is moving. The tax regimes of countries around the world vary considerably. Generally, most countries will levy a tax on any income earned in the country. Others will tax the worldwide income or capital gains of an individual, in addition, perhaps, to raising an inheritance/estate tax on the worldwide wealth of an individual if they should die whilst living in the overseas country. The exact tax regime applied will depend upon the country in question, as well as the personal circumstances of the UK expatriate, for example what length of time they have lived in the country and/or whether they have purchased a permanent place of residence in the country. The Association of International Life Offices (“AILO”) tax guides provide an overview of the tax regime in a number of popular destinations for UK expatriates.
A UK expatriate’s continuing liability to UK taxes will depend upon their residence, ordinary residence and domicile status. An individual who is both resident and domiciled in the UK is liable to income and capital gains tax on their worldwide income and gains, as well as inheritance tax on worldwide assets (as a consequence of their UK domicile). For UK tax purposes residence and domicile are generally defined as follows.

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QROPS Advice: Taxation of ‘Non-Residents’ Living in Portugal

The basis for taxation in Portugal is determined by an individual’s residential status. Non-residents are liable to Portuguese tax on Portuguese source income, and non-residents receiving employment income from a Portuguese employer are subject to a
withholding tax of 20%.
Capital gains earned by non-residents are generally fully taxable at a flat rate of 25%, with an exception with respect to capital gains on the disposal of shares, which are taxed at 10%. Furthermore, if the shares are held for more than twelve months, the related capital gain will be exempt to taxation in Portugal as mentioned above. However, if the assets of the company to which the shares relate are composed of 50% or more of property located in Portugal the tax rate is 10%, regardless of the duration for which the assets are held.
Rental income earned by non-residents is taxed at a flat rate of 15% and there are no deductions available.
Non-residents who reside in a country with a low tax regime may be subject to higher rates of tax in respect of property transfers and may be subject to tax on deemed income from property.

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QROPS ADVICE: Taxation for residents living in Portugal

The basis of taxation in Portugal depends on an individual’s residence status, with Portuguese residents being taxed on their
worldwide income and non-residents on their Portuguese sourced income only. An individual is determined to be resident if:
• They remain in Portugal for more than 183 days during a calendar year, or
• Regardless of the number of days spent in the country, an individual maintains a residence which pertains to be the
individual’s habitual residence as at 31 December.
All members of a family unit are considered resident if either the husband or the wife is resident for tax purposes in Portugal.
However, this condition does not apply if one of the spouses remains less than 183 days in Portugal and proves that their main
economic activities are not linked with the Portuguese territory, as described above. Should this be the case, this individual is
considered non-tax resident in Portugal while the other spouse is considered a Portuguese tax resident. This rule has recently been
introduced into Portuguese tax legislation and, as such, there is no information yet regarding the type of proof needed by the tax
Portugal has negotiated over 52 double taxation treaties.

full details on

QROPS ADVICE: Taxation of Expatriates Living in Spain

Expatriates living in Spain will be classified as either resident or non-resident. An individual is considered resident if:
􀂃 They spend more than 183 days in Spanish territory in a calendar year or,
􀂃 Their principal place of business, professional or economic interest is based in Spain or,
􀂃 Their spouse and/or dependent children are habitually resident in a Spanish territory (unless the individual is separated from
their family, or can prove tax residence elsewhere)
In Spain there is no concept of a part tax-year. An individual will be considered to be resident or non-resident for the whole tax year according to the above rules and taxed accordingly.
Income tax is raised in two parts: the majority is raised by the central government, with a smaller percentage being raised at a regional level by the ‘Autonomous Community’ in which the individual is living. The ‘Autonomous Communities’ also control inheritance/gift tax rates. If the ‘Autonomous Community’ does not establish its own tax scales then a default tax scale is applied.
Income generated from employment for services rendered in a foreign country is tax exempt up to a limit of €60,100 (2009),provided that the work is performed for a company or entity non-resident in Spain, or for a permanent establishment located in a foreign country and provided that a tax similar to the Spanish Personal Income Tax is applied in the territory where the work is performed. In addition, the territory must not be considered a ‘tax haven’ by the Spanish tax authorities. At present, the UK Dependent Territories of the Channel Islands and the Isle of Man, as well as the UAE, Hong Kong and Singapore, are all included on a ‘blacklist’ of tax havens maintained by the Spanish Tax Authorities.

full details at

QROPS ADVICE: Investment News: Low volatility signals end to credit crunch

Equity volatility has fallen to a 27-month low. The much-watched Chicago Board Options Exchange's VIX index dipped below 18 per cent this week, its lowest level since October 2007. A year ago, it was over 42 per cent.
This is a sign that investors are less fearful of big falls in share prices. One interpretation of these numbers is that the probability traders attach to the S&P 500 falling 5 per cent or more in the next month has halved, from 34 per cent last January to 17 per cent now.
It could also be a sign that investors have become worryingly complacent. Since the credit crunch began in August 2007, there's been a strong correlation (0.54) between the VIX index and subsequent six-monthly changes in the All-share index, with a low VIX leading to bad returns and a high VIX to good ones. If this relationship continues to hold, there's a four-fifths chance of the market falling between now and July.
But the link between the VIX and subsequent returns changes over time. In bear markets, a particular level of the VIX leads to bad returns, but in bull markets it leads to good ones. It could be, therefore, that the low VIX signals not that investors are over-confident, but that the trade-off between volatility and subsequent returns has improved.
One reason to believe this is that the economy is recovering, a fact w hich is usually accompanied by lower volatility. Economists expect figures later this month to show that the UK joined other economies by pulling out of recession in the fourth quarter, whilst analysts expect UK companies' earnings per share to grow by 27.5 per cent this year. "It's far too early in the cycle to dump equities," says Philip Isherwood, equity strategist at Evolution Securities.
Whether the fall in volatility is warranted or not, it's having a beneficial effect - it's led to a spate of bond issues, of which Manchester United's is one of the most prominent.
The connection here is that lower equity volatility is a sign that investors believe the chance of disaster has declined. This means the chances of firms defaulting on their debt have fallen, and so investors have become happier to buy corporate bonds; there has for years been a huge correlation between equity volatility and credit spreads. In this sense, lower volatility is helping to end the credit crunch.
by: Chris Dillow


Although BRIC (Brazil, Russia, India, China) funds have been in vogue over the past few years, Ashburton prefers to focus on what it describes as 'the two giants' and their growth prospects with its Chindia Fund - launched in December 2006.
"These two investment areas complement each other because there is little competition between China and India," says Jonathan Scheissl, fund manager of the Ashburton Chindia Equity Fund. "India is predominantly a service economy while China is focused on manufacturing."
And, while the Chinese economy is more advanced than that of India, the Indian stock market is much older and more effective at capturing the growth of its underlying economy. MSCI China, by contrast, does not yet capture a lot of the underlying growth in this economy.
The International Monetary Fund (IMF) estimates that Chinese gross domestic profit (GDP) will grow 9 per cent in 2010, while India is projected to grow 6.4 per cent. Brazil is set to grow 3.5 per cent and Russia should grow 1.5 per cent.
Mr Schiessl points to the fact that while over the past 10 years the MSCI World Index has not delivered much growth, MSCI Asia ex-Japan is up around 100 per cent.
Strong growth areas in China not captured by MSCI China include infrastructure, fixed assets and consumption. But Mr Schiessl says this is set to change, for example, consumer-facing companies such as department stores can now list at a premium, which should encourage more of them to do this.
He adds that funds can already get better exposure to underlying Chinese GDP growth, for example, by purchasing Hong Kong-listed Chinese companies which better represent the domestic market. These accounted for 46 per cent of Ashburton Chindia's assets at the end of November.
by: Leonora Walters


As the equity markets rebounded sharply last year, savvy investors piled into that area of the market that had been hardest hit during the sell-off - smaller companies. Consequently, as risk aversion began to recede, smaller companies outperformed all other sectors of the market, returning their best one year performance since 1977 according to the latest research by London School of Economics professors Elroy Dimson and Paul Marsh.
The pair are responsible for creating the RBS Hoare Govett Smaller Companies index (HGSC), which covers the bottom 10 per cent by value of the UK stock market. The index has now been extended back to 1955 and also boasts various derivations - such as the HG1000, the smallest 1,000 stocks, and the HSGC plus Aim (Alternative Investment Market).
The absolute performance of the HGSC during 2009 saw a positive return of 54.2 per cent, better than all but five of the previous 54 years and beating the All-Share by 30 per cent. Even more impressive was the performance of the HG1000, which recorded growth of 60.5 per cent. This shows that the most significant outperformance during the year came from the lowest end of the market, indeed the FTSE Small Cap and Fledgling indices both outperformed the HGSC over 2009.
Fallen Angels rise from the ashes
What was notable was the strong rebound recorded by so-called fallen angels - those companies whose shares tumbled into the lower reaches of the equity market after a sustained period of poor performance. The HGSC started the year with 43 fallen angels, comprising 20 per cent of the index, and they produced total returns of 77 per cent. Compare this with the stocks that graduated upwards from the HGSC in the previous year, which added 19 per cent.
Further findings show that growth companies outperformed value stocks during 2009 and that a previously successful momentum trading strategy completely broke down during 2009. The 12/1/1 strategy, which involves ranking companies performance over 12 months, waiting one month then buying and holding for one month, would have resulted in an annual return of 24 per cent for those companies with the best performance. But buying a 'loser' portfolio, based on the worst-performing stocks, would have produced a 152 per cent return.
by: Graeme Davies

QROPS Advice: Investment News: Profit From Inflation

Imagine a world where the price of pretty much everything is going up the whole time – and fast. Whether it's a loaf of bread, a pint of beer, the gas bill or dental work, the cost is surging by double-digit amounts each year. At the same time, though, your wages and the interest you get on your savings aren't rising by enough to keep up. The same goes for your house and many of your investments. Welcome to inflationary Britain.
To anyone who lived through the 1970s, this scenario will be all too familiar. During that decade, the price of many things got completely out of control. Aside from making everyday life more uncertain – especially for pensioners and others surviving on fixed incomes – it was a disastrous time for investors. And there are growing fears we could be doomed to repeat that miserable era before too long.
As of early 2010, Britain is only just crawling out of its longest recession on record. Despite the weakness of the economy, inflation in Britain is above where it is in other developed economies. In fact, the governor of the Bank of England may soon be obliged to write a letter to the chancellor explaining why inflation is more than 1 per cent above its target level. Even before the credit crisis – when the economy was growing steadily – inflation seemed more under control than this.

By:Dominic Picarda

QROPS ADVICE: Investment News: British Land enters buy-to-let market

The UK's second-largest property company is backing a new buy-to-let property fund for wealthy investors - but should you? Spun out of the law firm Charles Russell, the CR Property Fund plans to raise £300m, and will be managed by British Land (which will also invest up to £6m in its coffers). Launched last Thursday, with modest gearing it will be able to acquire between 450-500 London properties.
It is planned that two-thirds of the fund will comprise flats between £300,000 and £800,000 in areas such as Fulham and Battersea. The top slice will be prime central London homes of up to £5m in value. The closed-ended Guernsey fund has a lifespan of between five and nine years (depending on market conditions) and an ambitious gross target return of 14.5 per cent a year (the majority is expected to come from capital appreciation rather than rental yield). It will pay a 2 per cent annual dividend to investors, who must stump up a minimum £100,000.
The London buy-to-let market is a great place to be - if you can afford to get in. The rising property market means that last year the average UK amateur landlord enjoyed a 7.6 per cent annual return on th eir investment, according to figures released last week from LSL Property Services. In London, where property prices are now back to 2007 levels in some areas, performance has been even stronger, despite a cooling off in the corporate rental market.
CR Property Fund is not the first to target central London properties - we have previously written about uninspiring attempts by Candy & Candy and the London Central Residential Recovery Fund to bring products to market. However, British Land's involvement could give this fund real credibility - especially when one considers that up to 80 per cent of its investors are expected to hail from outside the UK.
By: Claer Barrett

Friday, 22 January 2010

QROPS ADVICE: Investment News: Crude at a LOW

Crude oil dropped to its lowest this year in New York on Tuesday, amid speculation global stockpiles remain more than adequate and as a stronger dollar dampened hedging demand. The Organization of Petroleum Exporting Countries won't need to raise oil production this year as its output of natural gas liquids increases, the International Energy Agency's deputy executive director said yesterday.


Mexico's peso is winning over the world's largest foreign-exchange traders as the economic recovery in the neighbouring U.S. boosts the value of one of the cheapest currencies in emerging markets. "The Mexican peso offers the most potential upside in Latin America," said Brett Diment, who manages USD4.6 billion at Aberdeen Asset Management Ltd. in London. "It's massively undervalued. The U.S. economy recovery prospect clearly remains positive, which means Mexico's exports to the U.S. will increase in value."


International demand for long-term U.S. stocks, bonds and financial assets rose in November as private investors purchased a record amount of government securities, a Treasury Department report showed. Net buying of long-term equities, notes and bonds totalled USD126.8 billion for the month, compared with net buying of USD19.3 billion in October, the Treasury said. Including short-term securities such as stock swaps, foreigners purchased a net USD26.6 billion in November, compared with net selling of USD25.4 billion the previous month.

QROPS ADVICE: Investment News: STANLEY "Stick with the BRIC"

Morgan Stanley said investors should "stick with the BRICs" and add to their holdings in China and Russia as faster economic growth will allow emerging-market stocks to catch up to developed-market gains this year. "Stick with the BRICs," strategists led by Jonathan Garner wrote in a report, referring to Brazil, Russia, India and China. "BRIC tends to outperform in non-recession years such as the 2003 to 2007 period, whilst it has underperformed in recession years."

QROPS Advice: Investment News: The U.K. inflation rate jumped in December

The U.K. inflation rate jumped in December by the most since records began in 1997, posing a challenge to policy makers as they consider when to start raising interest rates. Consumer prices climbed 2.9 percent from a year earlier, 1 percentage point more than in November, the Office for National Statistics said on Tuesday. The rate rose after oil prices jumped and 2008 cuts in sales tax and retail prices weren't repeated. The pound extended gains after the release. The rise caused the pound rise to a four-month high against the euro, and two-year gilt yields jumped the most since November.

Main QROPS Advice website is QROPS Advisers available on 0044 (0) 1664 444625

QROPS Advice: £500m transferred to Qrops | News | Money Marketing

£500m transferred to Qrops | News | Money Marketing

QROPS Advice: "China and other developing Asian lead global recovery."

The head of the IMF said China and other developing Asian economies are leading a global recovery that is faster and stronger than expected, but warned that money rushing into emerging markets could lead to asset bubbles. Dominique Strauss-Kahn, the managing director of the International Monetary Fund said "The forecasts we're going to release in a couple of days will show that this recovery is going faster and stronger than we expected several months ago."
Conversely, an Asian Development Bank Economist suggests that China has no need to raise interest rates because there isn't any clear sign of an asset bubble, "There's no compelling reason for an interest-rate hike yet," Donghyun Park, a senior economist at the ADB, said. "There are some signs of overheating in the property markets. But there's no clear, concrete, specific evidence of a bubble."

Main QROPS Advice website is QROPS Advisers available on 0044 (0) 1664 444625

Thursday, 21 January 2010


India's benchmark stock index may rise as much as 20 percent this year, led by lenders and information technology companies as earnings growth gains pace, UTI Asset Management Co. predicts. "It's just a matter of time before you see consumption really taking off in financial services and others," Harsha Upadhyaya, a fund manager with UTI who manages about USD1.1 billion in equities, said. "Per capita income for the working class has been doubling every five to six years."

Wednesday, 20 January 2010

QROPS ADVICE: Spotlight on Absolute Return Funds

Being a relatively new type of asset, you would be forgiven for not knowing a great deal about Absolute Return funds, although recent market volatility has ensured that they have quickly become one of the most popular investment choices around, with the majority of the world's biggest fund managers having such a fund in their range.
A fund manager running an Absolute Return strategy aims to generate positive returns in any stock market cycle, by deploying techniques that are able to profit from both the ups and downs in markets and stock prices. The opportunity to use such techniques is relatively new and is possible as a result of an EU Directive introduced in February 2007; UCITS III (Undertakings for Collective Investments in Tansferable Securities). A major effect of the directive, in addition to where a fund can be marketed, is to allow greater flexibility in the investment powers of the manager.
The general concept is not too dissimilar to traditional pension funds, which retreat to defensive, fixed interest investments as the client's risk profile gradually becomes less adventurous. Or a 'mixed asset' fund, that can hold both equity and fixed interest-based investments dependent on market conditions (albeit at set, prescribed amounts in accordance with the fund's constitution). Each of these types of funds will make a profit when the value of the assets into which they invest increases, however, being able to make a profit when the value of such assets decreases is what distinguishes Absolute Return funds from their traditional counterparts.
Generally, there are two techniques employed to achieve this. The first is to use 'short selling'; this is selling a stock that is not owned by the fund manager hoping the price will go down, then buying it back at a lower price to settle the trade, making a profit on the whole transaction. The second technique is using the wider asset types now available and diversifying with supposedly non-correlated assets, using the 'if one goes down the other goes up' approach. The one great advantage of the funds is the manager's ability to give protection in falling markets by using derivatives, which is not possible with funds that don't take advantage of the UCITS III rules.
Such is the popularity of Absolute Return funds, figures released by the UK's Investment Management Association show that that the Absolute Return fund sector was the highest selling sector in September 2009 - accounting for GBP442 million of net retail inflows, and overtaking the Sterling Corporate Bond fund sector which had spent 10 consecutive months at the top of the sales chart.
Most Absolute Return funds will concentrate on a particular asset type or geographic focus, Vincent Devlin of BlackRock Investments, Manager of the recently launched Hansard BlackRock European Absolute Return Strategies Fund (MX51, available in HIL and HEL) commented on the outlook for the European-focussed fund in 2010, "We expect market returns will continue to be driven by stock-specific factors and we are focusing our fundamental research on companies where there is a likelihood of earnings upgrades. In our view, this environment is well suited to our bottom-up fundamental investment approach."

Contact 01664 444625 to discuss you investment requirements or email

Monday, 18 January 2010

QROPS ADVICE: Trouble QROPS up for NZ but Gib gets the OK

Gibraltar has been given the green light by the UK as a QROPS domicile after agreeing to revise its pen-sion legislation.
Its long-awaited stamp of approval follows high-level talks between Treasury offi-cials and the territory's chief minister Peter Caruana, sources said. Details of the deal were not immediately available but it is believed it will involve a change to Gibraltar's pension law.
Since the middle of last year, Gibraltar trustees of QROPS have voluntarily suspended pension trans-fers from the UK, pend-ing resolution of HMRC's concerns.
The territory taxes the pension income of people over 60 at 0%, and it is this provision that was the focus of HMRC's concern.
The Gibraltar move comes amid growing unease at schemes in New Zealand offering 100% encashment. The country is now believed to be under new scrutiny as a suit-able home for UK pensions as schemes offering 100% encashment have rung alarm bells within HMRC. This has raised speculation that the country may follow Singapore in being barred as a QROPS domicile.
Pension trustees in other jurisdictions have been receiving increasing requests for transfers from their own schemes to New Zealand, in some cases with advisers specifically stating the intention is for their client to cash-in 100% of their pension.
Such actions fly in the face of the UK's stance on overseas pensions. Although transfers can be made to jurisdictions where benefits are taxed and paid in varying ways, an over-riding principle is that any egy, suffering from lower yields and costly voids."
George Hankinson, managing director of LCP, added prices were likely to climb again soon, particu-larly as foreign investors return to the market.
The cost of the fund's gearing is 1% over the Bank of England base rate, a financing levy few private
Projected fund returns
pension savings are to be used in retirement.
New Zealand has a far less prescriptive pension framework than the UK and some schemes allow 100% commutation from age 18. For advisers, trans-acting such business can be lucrative. Some charge clients up to $600 per transfer plus fees in excess of 7% when the commuta-tion is completed.
HMRC declined to com-ment on any probe but industry sources have con-firmed they have supplied it with information on New Zealand schemes fol-lowing requests. In 2008, investors would be able to attain on a mortgage.
The fund has a mini-mum investment of £50,000 and adviser commission is available.
It is eligible for SIPP, SSAS, PEP and ISA inves-
tors, and offshore inves-tors who qualify for capital gains and inheritance tax exemptions.
all Singapore pensions were stripped of QROPS approval after HMRC found some were promot-ing 'pension-busting'.
Roger Berry, manag-ing director of Guernsey QROPS provider Concept Group, said: "The last thing we wish to see is a repeat of the Singapore loss of approval. This caused great difficulty for those involved and suppressed the market by creating doubt in the minds of those contemplat-ing transfers."
In another development, Malta last month received approval from HMRC as a
QROPS domicile.