Nine out of ten British expatriates say they enjoy a better quality of life abroad, according to the third annual NatWest International Personal Banking quality of life report.
According to the study, which was undertaken in conjunction with think tank, Centre for Future Studies, expats ascribe much of their happiness to maintaining a good work/life balance with 87% of respondents rating theirs as either excellent or good.
The survey asked expats to rate 16 key ‘life experience’ factors in their order of importance and how satisfied they are with them. Interestingly the natural environment, climate, culture and leisure, healthcare and education were all rated ahead of financial security and financial wellbeing which are rated sixth and eighth respectively.
Fewer return to UKNatWest International also found, despite the global economic downturn and the subsequent pressures put on people’s wealth, the number of expats who said they would return to the UK has fallen to 19% from 26% in 2008.
Dave Isley, head of Natwest international Personal Banking, said: “It seems the grass really is greener for Brits living abroad as our study shows.
“The fact fewer expats say they will return to the UK in the future, compared to three years ago, proves that the pace of life, work life balance and earning potential abroad means life as an expat is sunnier in more ways than one – and that they are weathering the financial storm.”
Higher WagesFurthermore, professional expats on average earn over £20,000 more than their counterparts back in the UK, according to the survey, with 92% reporting a salary increase over the past three years. The highest reported salary increase was in Hong Kong at 19% followed by the UAE at 17% and Spain at 14%.
In addition, while moving abroad often comes with fears of financial insecurity, the survey found the majority (63%) said they were comfortable with their financial position, while 27% said they were either very well off (10%) or quite well off (17%). Meanwhile, 59% said they were confident they will be better off financially in five years time.
“The dream shared by many Brits of living a happy life abroad is alive and kicking, despite the global economic factors which have to some extent affected British expats,” added Isley.
“Believe it or not, there seems to be more to having and leading a fulfilled life than just money. British expats have built their lives abroad on solid foundations - with the climate, culture and leisure, healthcare and education all deemed more important than financial security or financial well being for them.”
http://www.international-adviser.com/article/expats-enjoy-a-better-life-says-natwest-intl?utm_source=Sign-Up.to&utm_medium=email&utm_campaign=152613-IA+20+April+10
Showing posts with label QROPS Adviser Notes: Expat Information. Show all posts
Showing posts with label QROPS Adviser Notes: Expat Information. Show all posts
Thursday, 22 April 2010
Monday, 22 February 2010
QROPS Advice: Expats Plight
BRITONS struggling to live abroad on pensions as low as £6 a week want their desperate plight to become an election issue.
Of the 1.1 million expats entitled to draw UK pensions, 540,000 are denied their full allowance because of archaic rules.
They have their pensions index linked in all EU countries and in 15 others, including Barbados, the United States and Bermuda.
However, there are more than 150 other countries where they have had their pensions fixed at the rate at which they were first drawn in their new country of residence. Many are being forced to return to Britain.
Labour says it cannot afford the £540million needed to increase the frozen pensions, even though the sum is less than one per cent of the country’s pension fund.
Campaigner John Markham, 76, of the Canadian Alliance of British Pensioners, is visiting Britain to meet officials of all political parties. He said: “In the last general election the expat vote was 10,400, but there will be many more eligible to vote this time around. We want to get Britons living abroad to vote, but only for the parties that support our cause.”
Annette Carson, 67, who emigrated to South Africa just before drawing a pension at 60, is taking the Government to court, backed by 13 others in a similar plight. A judgment is expected in a few weeks.
Of the 1.1 million expats entitled to draw UK pensions, 540,000 are denied their full allowance because of archaic rules.
They have their pensions index linked in all EU countries and in 15 others, including Barbados, the United States and Bermuda.
However, there are more than 150 other countries where they have had their pensions fixed at the rate at which they were first drawn in their new country of residence. Many are being forced to return to Britain.
Labour says it cannot afford the £540million needed to increase the frozen pensions, even though the sum is less than one per cent of the country’s pension fund.
Campaigner John Markham, 76, of the Canadian Alliance of British Pensioners, is visiting Britain to meet officials of all political parties. He said: “In the last general election the expat vote was 10,400, but there will be many more eligible to vote this time around. We want to get Britons living abroad to vote, but only for the parties that support our cause.”
Annette Carson, 67, who emigrated to South Africa just before drawing a pension at 60, is taking the Government to court, backed by 13 others in a similar plight. A judgment is expected in a few weeks.
Friday, 19 February 2010
QROPS Advice: Proving residency is simply too taxing
How do you escape the taxman by proving you are not a UK resident? It is becoming increasingly hard to know, as Seychelles-based millionaire businessman, Robert Gaines-Cooper, has just discovered.
This week the Court of Appeal ruled that ensuring that you are in Britain for only 91days in any year is no longer enough. It seems that having property here, or children in a British school, or horses in a British stable or even regular attendance at Ascot, may be enough to bring you within the UK tax net.
There will be many who applaud the Revenue’s crackdown on the thousands of super rich who are the leaving the rest of us to fill the gaping hole in the public finances. But a system that encourages bizarre arguments about the “centre of gravity” of a person’s life is damaging.
As Barclays’ John Varley said this week Britain’s increasingly uncertain tax regime makes it a less attractive place in which to live and do business.
A vague definition of UK tax residency may have suited the Government in the past, as it has been able to take either a lax or strict approach, depending on which way the wind was blowing.
The Revenue has also favoured this approach because it has made it impossible for clever lawyers and accountants to come up with fool-proof schemes to keep clients outside the taxman’s grasp.
But it is surely time to set out in law what is meant by UK residency. Having a horse should not be one of the tests.
By David Wighton
This week the Court of Appeal ruled that ensuring that you are in Britain for only 91days in any year is no longer enough. It seems that having property here, or children in a British school, or horses in a British stable or even regular attendance at Ascot, may be enough to bring you within the UK tax net.
There will be many who applaud the Revenue’s crackdown on the thousands of super rich who are the leaving the rest of us to fill the gaping hole in the public finances. But a system that encourages bizarre arguments about the “centre of gravity” of a person’s life is damaging.
As Barclays’ John Varley said this week Britain’s increasingly uncertain tax regime makes it a less attractive place in which to live and do business.
A vague definition of UK tax residency may have suited the Government in the past, as it has been able to take either a lax or strict approach, depending on which way the wind was blowing.
The Revenue has also favoured this approach because it has made it impossible for clever lawyers and accountants to come up with fool-proof schemes to keep clients outside the taxman’s grasp.
But it is surely time to set out in law what is meant by UK residency. Having a horse should not be one of the tests.
By David Wighton
QROPS Advice: Are You Resident or Not?
Who stands where in the non-resident stakes
Resident and ordinarily resident People who are resident in Britain and domiciled here pay tax to the British exchequer on their worldwide income and capital gains. People who come to Britain are treated as resident and ordinarily resident from the date they arrive if they intend to live here permanently or for three years or more
Non-resident Non-residents are not generally liable for income or capital gains tax, except on money earned in Britain. They also usually pay national insurance contributions on work in Britain for a British employer. People become non-resident if they leave Britain permanently or live abroad for at least three years, and if their return visits since leaving are less than 183 days in any tax year, and on average less than 91 days per tax year. It is estimated that there are less than 10,000 non-residents
Not ordinarily resident People who are not ordinarily resident are taxed only on the earnings attributable to their British earnings. They are not taxed on the whole of their worldwide income. To qualify, the person must leave Britain after three years
Non-domiciled Non-doms are often people whose families originate from abroad and typically retain affiliations with that country. People born in Britain can claim non-dom status if their fathers were born overseas. Under recent changes to the rules, non-doms can avoid tax on money earned outside Britain and brought back into the country provided they pay the Government £30,000 a year. There are around 65,000 people with non-dom status, around 33,000 of whom are classed as not ordinarily resident
Resident and ordinarily resident People who are resident in Britain and domiciled here pay tax to the British exchequer on their worldwide income and capital gains. People who come to Britain are treated as resident and ordinarily resident from the date they arrive if they intend to live here permanently or for three years or more
Non-resident Non-residents are not generally liable for income or capital gains tax, except on money earned in Britain. They also usually pay national insurance contributions on work in Britain for a British employer. People become non-resident if they leave Britain permanently or live abroad for at least three years, and if their return visits since leaving are less than 183 days in any tax year, and on average less than 91 days per tax year. It is estimated that there are less than 10,000 non-residents
Not ordinarily resident People who are not ordinarily resident are taxed only on the earnings attributable to their British earnings. They are not taxed on the whole of their worldwide income. To qualify, the person must leave Britain after three years
Non-domiciled Non-doms are often people whose families originate from abroad and typically retain affiliations with that country. People born in Britain can claim non-dom status if their fathers were born overseas. Under recent changes to the rules, non-doms can avoid tax on money earned outside Britain and brought back into the country provided they pay the Government £30,000 a year. There are around 65,000 people with non-dom status, around 33,000 of whom are classed as not ordinarily resident
Tuesday, 16 February 2010
QROPS Advice: PBR - IHT planning with trusts clampdown
As you will be aware, the Chancellor took advantage of the Pre-Budget Report (PBR) to announce changes in legislation aimed at what it described as two artificial IHT mitigation schemes involving trusts, which had come to the attention of the Treasury.
The first scheme took advantage of the loophole caused by poor drafting of one particular part of the legislation introduced on 22nd March 2006. It is this scheme that will be considered here.
Planning with interests in possession
To explain. Before the changes, it was possible to create an interest in possession trust and have the transfer treated as a potentially exempt transfer (PET). The downside of this type of trust was that the full value of the trust fund was treated, for IHT purposes, as being in the estate of the beneficiary entitled to the income. Since IHT is primarily intended to tax assets once a generation, treating the interest in possession in this way ensured that aim.
Example: John created flexible interest in possession trust for the wider benefit of his family (excluding himself) but with his daughter Emily entitled to any income generated by the trust fund.
Under a discretionary trust, however, no beneficiary has a right to income and so IHT is not dependent on the life of a beneficiary. You could consider the discretionary trust as having an artificial life of its own – a transfer in is a chargeable lifetime transfer (CLT) and periodic and exit charges also potentially apply.
Example: John created a discretionary trust for the wider benefit of his family (excluding himself), under which no one individual was entitled to either income or capital.
In order to avoid a potential double charge to IHT under any new interest in possession trust, it was necessary to make a change in the legislation. The legislation introduced in 2006 provided that a new interest in possession created after that date would not form part of the Settlor's estate for IHT purposes.
It is worth repeating that: a new interest in possession created after 22nd March 2006 will not form part of the Settlor’s estate for IHT purposes.
That is the crux of the planning in this scheme.
Planning with reversionary interests
Before 2003, if a Settlor created a discretionary trust for the benefit of his family, it was possible to claim capital gains tax (CGT) holdover relief. The rationale for this being that if IHT was payable when creating the trust, CGT should not be so.
Those seeking to achieve the advantage of CGT holdover relief without actually incurring an IHT liability were advised to create trusts under which they retained a valuable right. This valuable right depressed the value of the transfer for IHT purposes, meaning no IHT was actually payable but secured CGT holdover relief nonetheless.
Example: John created a discretionary trust as before, with shares worth £1m having gains of £300k. The value of the CLT was £9,990k. No IHT is payable. CGT holdover relief was claimed in respect of the £300k gains, no CGT was payable at this time.
Clearly this was unacceptable to the Revenue and, having lost in the test case of Melville, legislation was introduced to combat this perceived abuse. However, it was accepted that the mechanism of depressing the initial value for IHT purposes achieved its aim.
Putting the two together!
Settlors were encouraged to create trusts under which they retained a reversionary interest but that reversionary interest was not in the full trust fund but in an interest in possession in it, i.e. a right to income for a specified period, typically 99 years. The initial transfer into trust, although being a CLT, was depressed by the significant value of the reversionary interest, i.e. it was negligible.
When the reversionary interest fell in and the interest in possession vested, at the end of whatever period the Settlor had determined, the full value of the trust fund fell out of his estate!
If he died, there would be no liability to IHT on the trust fund.
If he gave away his interest in possession, there would be no transfer of value. Further, there would be no value in the estate of the donee who received the interest in possession – and so on and so on, ad infinitum!
The “solution”
Whilst it had been anticipated that the Treasury would take steps to prevent interests in possession being treated in this way, i.e. to address the poor drafting which allowed this planning, as we have seen, the measures introduced have gone far further than this, impacting on the tax treatment of reversionary interests in general.
The impact for those caught
Bearing in mind that the changes introduced in 2006 intended to ensure that transfers into trusts that were within the relevant property regime actually gave rise to an IHT liability when the sums transferred were in excess of the available nil rate band, the “solution” might seem apt.
If a Settlor has created such a trust under which his reversionary interest has not yet fallen in or been given away, he will face a charge to IHT at lifetime rates when one or other of those events occurs.
In the PBR it was announced that “The Government announces it is also examining wider solutions to the problem of trusts being used to avoid inheritance tax charges.” It is understood that what is meant by this statement is that the Government will review the legislation introduced in 2006 to ensure, as far as possible, no other unintended “loopholes” exist. Clearly, we will have to keep an eye on developments!
By Deborah Moon - technical manager for Royal London 360° 16/12/2009
Solution
PRIVATE INTEREST FOUNDATIONS
Private foundations are legal entities set up by an individual, a family or a group of individuals, for a purpose of providing for the needs and objectives of the individual, family or group.
Foundations are more versatile and can accomplish more than Trusts, Companies, Wills and provide strict rules of confidentiality
No one owns a Private Interest Foundation, so you are not the owner of the Foundation, no one is according to the statutory laws of the jurisdiction in which it is held.
A Foundation is a tried and tested way to protect and shelter your assets including real estate, bank accounts, financial instruments, securities, art, family heirlooms, corporations, cars, planes, boats, etc., from existing or potential financial enemies. There is no limit to what a Foundation can own, and the business affairs of the Foundations are anonymous.
The Foundation’s assets are ring-fenced and are totally separate from the assets and liabilities of the party/ies who establish the foundation.
BENEFITS
A foundation can be used in a manner similar to a trust to pass on assets bypassing estate taxes at the time of death.
A Foundation can hold a corporation and a bank account which makes it the cornerstone of some of the best asset protection structures in the world today.
A Foundation cannot engage in business activities in its own right, like marketing and selling a product. A foundation can, however, own an offshore/onshore company and banking accounts. The offshore/onshore company can then engage in business activities.
Foundations do not pay tax on foreign sourced funds. This makes a foundation a great part of any tax planning strategy
A Foundation is an essential tool for asset protection particularly for those engaged in business and HNWIs
FOUNDATION V's TRUST
Operation of Private Foundation Very Similar to a Trust
Foundation Provides More Protections For Founders
Private Foundation is Multi-Generational, No Limit on Duration
Private Foundation is More Flexible
Founder Retains Full Control
Founder May Add, Remove Assets and Beneficiaries At Any Time
No Taxes within a Private Foundations
It is common for an onshore trust to be broken for any number of different reasons. If you want your wishes followed to the "letter" then a Foundation is your best option.
In the case of a Trust the Settlor has to contend with anit-trust legislation, non-recognition of trusts, sham trusts, defective trusts, thus giving away wealth and losing control. Alternatively, a Settlor or the beneficiaries may wish to change the jurisdiction or the trustees which, in most instances would not be welcomed or be resisted by those effected.
The Foundation, however, provides complete control at all times.
Trust Law a constantly being reviewed, for example in the UK trusts can no longer use trustees based in overseas jurisdictions (which enjoy a low or nil rate of local tax and double taxation treaties with the UK to mitigate capital gains tax)
A Foundation would be immune from such disadvantages.
WHAT CAN A PRIVATE FOUNDATION DO?
Ensure Founder’s Confidentiality
Minimize Taxes on Assets and Investments
Protect Assets and Investments From Creditors
Manage Assets and Investments
Defer Income
Preserve Family Assets Over Multiple Generations
Make Distributions to Beneficiaries Like a Trust
Orderly and Quick Distribution of Assets to Beneficiaries Upon Founder’s Passi
TAX BENEFITS OF A FOUNDATION
No Inventory Tax
No tax reporting requirements
No Income Tax
No Capital Gains Tax
No Interest Income Tax
No Sales Tax
No tax on issuance of corporate shares
No tax on shareholders
No property tax
No estate tax
No stamp duty
No gift tax
No succession tax
FLEXIBILTY
What Kinds of Assets Can Private Foundation Hold?
No Limit
Cash in Foreign or Local Bank Accounts
Certificates of Deposit
Interest-Bearing Claims of Any Denomination
Real Property
Intangible Property
Shares (Tradable and Private)
Beneficiary Interests Example: Right to Receive Dividends
Art and collectibles
Corporations
Boats, planes & cars
Ownership of an existing Offshore Company Can Be Transferred to Private Foundation, No Need to Change Offshore Companies’ Structure, Simply Make Foundation the Owner
WHO WOULD BENEFIT FROM USING A FOUNDATION?
Persons Seeking to Manage Taxes
Persons Wanting to Consolidate Holdings Under
Single, Flexible Umbrella
Persons Wanting to Ensure Confidentiality
Persons Who Want a Discreet, Reliable Way to Provide For Loved Ones
Persons Seeking a Vehicle For Retirement
Persons Seeking a Vehicle For Estate Planning
Call 01664 444625 and ask about Foundations
The first scheme took advantage of the loophole caused by poor drafting of one particular part of the legislation introduced on 22nd March 2006. It is this scheme that will be considered here.
Planning with interests in possession
To explain. Before the changes, it was possible to create an interest in possession trust and have the transfer treated as a potentially exempt transfer (PET). The downside of this type of trust was that the full value of the trust fund was treated, for IHT purposes, as being in the estate of the beneficiary entitled to the income. Since IHT is primarily intended to tax assets once a generation, treating the interest in possession in this way ensured that aim.
Example: John created flexible interest in possession trust for the wider benefit of his family (excluding himself) but with his daughter Emily entitled to any income generated by the trust fund.
Under a discretionary trust, however, no beneficiary has a right to income and so IHT is not dependent on the life of a beneficiary. You could consider the discretionary trust as having an artificial life of its own – a transfer in is a chargeable lifetime transfer (CLT) and periodic and exit charges also potentially apply.
Example: John created a discretionary trust for the wider benefit of his family (excluding himself), under which no one individual was entitled to either income or capital.
In order to avoid a potential double charge to IHT under any new interest in possession trust, it was necessary to make a change in the legislation. The legislation introduced in 2006 provided that a new interest in possession created after that date would not form part of the Settlor's estate for IHT purposes.
It is worth repeating that: a new interest in possession created after 22nd March 2006 will not form part of the Settlor’s estate for IHT purposes.
That is the crux of the planning in this scheme.
Planning with reversionary interests
Before 2003, if a Settlor created a discretionary trust for the benefit of his family, it was possible to claim capital gains tax (CGT) holdover relief. The rationale for this being that if IHT was payable when creating the trust, CGT should not be so.
Those seeking to achieve the advantage of CGT holdover relief without actually incurring an IHT liability were advised to create trusts under which they retained a valuable right. This valuable right depressed the value of the transfer for IHT purposes, meaning no IHT was actually payable but secured CGT holdover relief nonetheless.
Example: John created a discretionary trust as before, with shares worth £1m having gains of £300k. The value of the CLT was £9,990k. No IHT is payable. CGT holdover relief was claimed in respect of the £300k gains, no CGT was payable at this time.
Clearly this was unacceptable to the Revenue and, having lost in the test case of Melville, legislation was introduced to combat this perceived abuse. However, it was accepted that the mechanism of depressing the initial value for IHT purposes achieved its aim.
Putting the two together!
Settlors were encouraged to create trusts under which they retained a reversionary interest but that reversionary interest was not in the full trust fund but in an interest in possession in it, i.e. a right to income for a specified period, typically 99 years. The initial transfer into trust, although being a CLT, was depressed by the significant value of the reversionary interest, i.e. it was negligible.
When the reversionary interest fell in and the interest in possession vested, at the end of whatever period the Settlor had determined, the full value of the trust fund fell out of his estate!
If he died, there would be no liability to IHT on the trust fund.
If he gave away his interest in possession, there would be no transfer of value. Further, there would be no value in the estate of the donee who received the interest in possession – and so on and so on, ad infinitum!
The “solution”
Whilst it had been anticipated that the Treasury would take steps to prevent interests in possession being treated in this way, i.e. to address the poor drafting which allowed this planning, as we have seen, the measures introduced have gone far further than this, impacting on the tax treatment of reversionary interests in general.
The impact for those caught
Bearing in mind that the changes introduced in 2006 intended to ensure that transfers into trusts that were within the relevant property regime actually gave rise to an IHT liability when the sums transferred were in excess of the available nil rate band, the “solution” might seem apt.
If a Settlor has created such a trust under which his reversionary interest has not yet fallen in or been given away, he will face a charge to IHT at lifetime rates when one or other of those events occurs.
In the PBR it was announced that “The Government announces it is also examining wider solutions to the problem of trusts being used to avoid inheritance tax charges.” It is understood that what is meant by this statement is that the Government will review the legislation introduced in 2006 to ensure, as far as possible, no other unintended “loopholes” exist. Clearly, we will have to keep an eye on developments!
By Deborah Moon - technical manager for Royal London 360° 16/12/2009
Solution
PRIVATE INTEREST FOUNDATIONS
Private foundations are legal entities set up by an individual, a family or a group of individuals, for a purpose of providing for the needs and objectives of the individual, family or group.
Foundations are more versatile and can accomplish more than Trusts, Companies, Wills and provide strict rules of confidentiality
No one owns a Private Interest Foundation, so you are not the owner of the Foundation, no one is according to the statutory laws of the jurisdiction in which it is held.
A Foundation is a tried and tested way to protect and shelter your assets including real estate, bank accounts, financial instruments, securities, art, family heirlooms, corporations, cars, planes, boats, etc., from existing or potential financial enemies. There is no limit to what a Foundation can own, and the business affairs of the Foundations are anonymous.
The Foundation’s assets are ring-fenced and are totally separate from the assets and liabilities of the party/ies who establish the foundation.
BENEFITS
A foundation can be used in a manner similar to a trust to pass on assets bypassing estate taxes at the time of death.
A Foundation can hold a corporation and a bank account which makes it the cornerstone of some of the best asset protection structures in the world today.
A Foundation cannot engage in business activities in its own right, like marketing and selling a product. A foundation can, however, own an offshore/onshore company and banking accounts. The offshore/onshore company can then engage in business activities.
Foundations do not pay tax on foreign sourced funds. This makes a foundation a great part of any tax planning strategy
A Foundation is an essential tool for asset protection particularly for those engaged in business and HNWIs
FOUNDATION V's TRUST
Operation of Private Foundation Very Similar to a Trust
Foundation Provides More Protections For Founders
Private Foundation is Multi-Generational, No Limit on Duration
Private Foundation is More Flexible
Founder Retains Full Control
Founder May Add, Remove Assets and Beneficiaries At Any Time
No Taxes within a Private Foundations
It is common for an onshore trust to be broken for any number of different reasons. If you want your wishes followed to the "letter" then a Foundation is your best option.
In the case of a Trust the Settlor has to contend with anit-trust legislation, non-recognition of trusts, sham trusts, defective trusts, thus giving away wealth and losing control. Alternatively, a Settlor or the beneficiaries may wish to change the jurisdiction or the trustees which, in most instances would not be welcomed or be resisted by those effected.
The Foundation, however, provides complete control at all times.
Trust Law a constantly being reviewed, for example in the UK trusts can no longer use trustees based in overseas jurisdictions (which enjoy a low or nil rate of local tax and double taxation treaties with the UK to mitigate capital gains tax)
A Foundation would be immune from such disadvantages.
WHAT CAN A PRIVATE FOUNDATION DO?
Ensure Founder’s Confidentiality
Minimize Taxes on Assets and Investments
Protect Assets and Investments From Creditors
Manage Assets and Investments
Defer Income
Preserve Family Assets Over Multiple Generations
Make Distributions to Beneficiaries Like a Trust
Orderly and Quick Distribution of Assets to Beneficiaries Upon Founder’s Passi
TAX BENEFITS OF A FOUNDATION
No Inventory Tax
No tax reporting requirements
No Income Tax
No Capital Gains Tax
No Interest Income Tax
No Sales Tax
No tax on issuance of corporate shares
No tax on shareholders
No property tax
No estate tax
No stamp duty
No gift tax
No succession tax
FLEXIBILTY
What Kinds of Assets Can Private Foundation Hold?
No Limit
Cash in Foreign or Local Bank Accounts
Certificates of Deposit
Interest-Bearing Claims of Any Denomination
Real Property
Intangible Property
Shares (Tradable and Private)
Beneficiary Interests Example: Right to Receive Dividends
Art and collectibles
Corporations
Boats, planes & cars
Ownership of an existing Offshore Company Can Be Transferred to Private Foundation, No Need to Change Offshore Companies’ Structure, Simply Make Foundation the Owner
WHO WOULD BENEFIT FROM USING A FOUNDATION?
Persons Seeking to Manage Taxes
Persons Wanting to Consolidate Holdings Under
Single, Flexible Umbrella
Persons Wanting to Ensure Confidentiality
Persons Who Want a Discreet, Reliable Way to Provide For Loved Ones
Persons Seeking a Vehicle For Retirement
Persons Seeking a Vehicle For Estate Planning
Call 01664 444625 and ask about Foundations
QROPS Advice: Tax relief for migrants
Tax tips from a technical Expert Tax relief for migrantsAs we struggle through what may shape up to become the coldest winter for many years, which followed yet another “wettest summer on record in the UK”, I think I would be sympathetic with anyone who decides enough is enough and goes in search of a warmer climate.
In fact I have since discovered that, every year since 2000 in the UK, over 300,000 people* (*Source: UK Office of National Statistics, October 2009leave the cold British weather to work overseas. What many do not realise is that it is not just the weather that can be attractive. An investment in an offshore bond could bring some valuable tax benefits from any absence from the UK.
Chargeable event liability
A UK resident will normally incur an income tax liability on any gain when a chargeable event occurs, for example, when they cash in the full value of an investment bond.
However, a claim can be made to reduce any gain and any associated tax charge in respect of all time spent outside of the UK during the period the bond has been invested. This is referred to as ‘time apportionment relief ’.
Only an offshore bond can generate this relief, as this is a unique benefit to offshore bonds.
So for any individual looking to invest, if there is a chance they may spend some time working outside the UK, the potential tax advantages of time apportionment relief should not be overlooked.
Example
Here’s an example to illustrate what I mean:
Kate invested in an offshore bond in March 1999 and then spent some time working overseas as a non UK resident. She returned to the UK in June 2003 and was regarded as a UK resident from that date. In November 2007, Kate decided to cash in her bond when she was a higher rate taxpayer, with a chargeable gain of £63,500.
Instead of paying tax of £25,400 (40% of £63,500), Kate has used the time she spent outside of the UK to reduce her tax charge to £13,249, a saving of £12,151 because time apportionment reduces chargeable gain to only £33,122.
The formula for time apportionment relief is:
Gain x Number of days as UK resident/Number of days the bond has been in existence
This benefit applies to additional investments into an existing offshore bond as these may also benefit from time apportionment relief, even though the additional investments may not have been made during a period of non UK residence.
In this way it may also be appropriate to continue to invest in an existing bond after returning to the UK. Topping up an investment could be more beneficial than taking out a new bond as it should reduce the tax charge on the gain from the additional investment with the benefit of time apportionment relief.
By Mark Green
For advice on Offshore Bonds Call 01664 444625
In fact I have since discovered that, every year since 2000 in the UK, over 300,000 people* (*Source: UK Office of National Statistics, October 2009leave the cold British weather to work overseas. What many do not realise is that it is not just the weather that can be attractive. An investment in an offshore bond could bring some valuable tax benefits from any absence from the UK.
Chargeable event liability
A UK resident will normally incur an income tax liability on any gain when a chargeable event occurs, for example, when they cash in the full value of an investment bond.
However, a claim can be made to reduce any gain and any associated tax charge in respect of all time spent outside of the UK during the period the bond has been invested. This is referred to as ‘time apportionment relief ’.
Only an offshore bond can generate this relief, as this is a unique benefit to offshore bonds.
So for any individual looking to invest, if there is a chance they may spend some time working outside the UK, the potential tax advantages of time apportionment relief should not be overlooked.
Example
Here’s an example to illustrate what I mean:
Kate invested in an offshore bond in March 1999 and then spent some time working overseas as a non UK resident. She returned to the UK in June 2003 and was regarded as a UK resident from that date. In November 2007, Kate decided to cash in her bond when she was a higher rate taxpayer, with a chargeable gain of £63,500.
Instead of paying tax of £25,400 (40% of £63,500), Kate has used the time she spent outside of the UK to reduce her tax charge to £13,249, a saving of £12,151 because time apportionment reduces chargeable gain to only £33,122.
The formula for time apportionment relief is:
Gain x Number of days as UK resident/Number of days the bond has been in existence
This benefit applies to additional investments into an existing offshore bond as these may also benefit from time apportionment relief, even though the additional investments may not have been made during a period of non UK residence.
In this way it may also be appropriate to continue to invest in an existing bond after returning to the UK. Topping up an investment could be more beneficial than taking out a new bond as it should reduce the tax charge on the gain from the additional investment with the benefit of time apportionment relief.
By Mark Green
For advice on Offshore Bonds Call 01664 444625
Thursday, 11 February 2010
Where should I retire to?
Where should I retire to?
Tax regimes around the world vary enormously. The majority of countries levy tax on pension income at your highest marginal income tax rate.
While some countries have a top rate the same or higher than Britain’s forthcoming 50% — Belgium’s is 50% and Sweden’s is 55% — others are far kinder on your pocket, figures from Gary Heynes at Baker Tilly, the accountant, show.
Hong Kong has a top rate of only 16% and Singapore has 20%. In America, the top rate of income tax is 35%, and in Cyprus it is 30%.
Pensioners living in Cyprus and drawing an overseas pension can opt to pay a fixed rate of 5% on income above a small tax-free personal allowance of €3,420 (£3,136). Alternatively, they can pay the normal rate of up to 30%, in which case the first €19,500 is tax free — so the smaller your income, the better off you are under the normal system.
France and Spain can be less attractive than the UK — unless you expect retirement income of £150,000 or more, which would mean you would be hit with Britain’s 50% tax. France levies a top rate of income tax of up to 40% and Spain 43%.
In New Zealand and Australia income tax is charged at up to 39% and 45%. However, Australia does not charge tax on pension income, provided you are over 60.
Heynes said: “Recent changes to pension rules in Australia allow you to contribute more to your pension if you move there before you retire, and since July 2007, income drawn from retirement savings has been tax free if you’re over 60.”
Consider other aspects of tax regimes around the world, too. Capital gains tax (CGT) is levied at a flat rate of 18% in Britain. However, in places such as New Zealand and Hong Kong there is no charge. In America, CGT is 15%.
In Australia it is a hefty 45% — although residents are eligible for relief on their main home as in the UK.
Expats receive a tax uplift on their worldwide assets based on their date of arrival, so if you bought a painting, for example, for £5,000 and it had appreciated in value to £20,000 by the time you moved to Australia, you would be liable for CGT on growth only from that point.
Australia does not charge inheritance tax (levied at 40% in the UK), but France has rates of up to 60%.
Tax regimes around the world vary enormously. The majority of countries levy tax on pension income at your highest marginal income tax rate.
While some countries have a top rate the same or higher than Britain’s forthcoming 50% — Belgium’s is 50% and Sweden’s is 55% — others are far kinder on your pocket, figures from Gary Heynes at Baker Tilly, the accountant, show.
Hong Kong has a top rate of only 16% and Singapore has 20%. In America, the top rate of income tax is 35%, and in Cyprus it is 30%.
Pensioners living in Cyprus and drawing an overseas pension can opt to pay a fixed rate of 5% on income above a small tax-free personal allowance of €3,420 (£3,136). Alternatively, they can pay the normal rate of up to 30%, in which case the first €19,500 is tax free — so the smaller your income, the better off you are under the normal system.
France and Spain can be less attractive than the UK — unless you expect retirement income of £150,000 or more, which would mean you would be hit with Britain’s 50% tax. France levies a top rate of income tax of up to 40% and Spain 43%.
In New Zealand and Australia income tax is charged at up to 39% and 45%. However, Australia does not charge tax on pension income, provided you are over 60.
Heynes said: “Recent changes to pension rules in Australia allow you to contribute more to your pension if you move there before you retire, and since July 2007, income drawn from retirement savings has been tax free if you’re over 60.”
Consider other aspects of tax regimes around the world, too. Capital gains tax (CGT) is levied at a flat rate of 18% in Britain. However, in places such as New Zealand and Hong Kong there is no charge. In America, CGT is 15%.
In Australia it is a hefty 45% — although residents are eligible for relief on their main home as in the UK.
Expats receive a tax uplift on their worldwide assets based on their date of arrival, so if you bought a painting, for example, for £5,000 and it had appreciated in value to £20,000 by the time you moved to Australia, you would be liable for CGT on growth only from that point.
Australia does not charge inheritance tax (levied at 40% in the UK), but France has rates of up to 60%.
QROPS: Advantages and Disadvantages
What are the potential benefits of QROPS?
Tax efficiency. Subject to the laws of the overseas country in which you become resident, it may be possible to receive income from your retirement fund at lower tax rates than would apply in the UK.
Investment choice. There is no need to buy an annuity, so you can retain control of your pension savings capital, and you can hold assets such as residential property, which are not usually allowed in UK pension funds.
Passing wealth between generations. QROPS enable you to pass the portion of your pension savings that you do not spend to your heirs and, depending on the tax laws of the country where you choose to become resident, there may be a lower rate of Inheritance Tax to pay or – as is the case in Cyprus – be no local equivalent of this tax.
Avoid or diminish exchange rate risks and costs. You can take income and capital from your QROPS in the currency of your choice.
What are the potential disadvantages of QROPS?
Costs. Legal and administrative fees involved in setting up and maintaining QROPS vary widely and need to be considered carefully in advance. Take account of initial and annual fees when assessing whether their impact on your retirement fund can be justified by increased choice and tax-efficiency.
Investment risk. If you decide not to buy an annuity and to keep your QROPS invested in stock market-based assets, or any other assets whose value is not guaranteed, there is a risk that your income and capital could fall and you may not get back as much as you invested.
Regulation gap. Some countries with lower tax rates than the UK also offer less investor protection in terms of regulation of financial services and they may not offer any statutory compensation scheme. That is why it is vital to seek pension advice only from professionals who are fully authorised in the UK as well as the overseas jurisdiction to which you are considering retirement.
Fiscal change. Some experts reckon the opportunities offered by QROPS are simply too good to last. Critics claim QROPS enable British savers to obtain generous tax relief while accumulating pension funds and then to avoid British taxes when it comes to enjoying the benefits. If too many people take up these opportunities HM Revenue and Customs may act, subject to European Union rules.
Consider your options carefully but without unnecessary delay
No decision affecting your retirement capital and income should ever be taken in a rush. Remember the old maxim: ‘Act in haste – repent at leisure.’ If any adviser seeks to put pressure on you for an immediate decision, then your answer should be ‘No, thank you.’
However, as mentioned earlier, the sooner you start to plan for retirement, the easier it will be to ensure that this really is the holiday of a lifetime. The earliest pounds you invest in a pension will have the longest to accumulate for your benefit. The sooner you begin to consider how – and where – you enjoy the fruits of your prudence, the more likely you are to reach the right decision for you and, where relevant, your family.
Quicker, cheaper and more comfortable international travel has widened everyone’s choice about where to live. People who retire overseas need no longer wave goodbye to friends and family forever.
QROPS extend that choice into one of the most important financial choices many people ever make: how to fund and enjoy retirement. Make sure you consider your options carefully and in a timely manner with a specialist pensions professional who is fully authorised to advise on all the options you enjoy today.
Tax efficiency. Subject to the laws of the overseas country in which you become resident, it may be possible to receive income from your retirement fund at lower tax rates than would apply in the UK.
Investment choice. There is no need to buy an annuity, so you can retain control of your pension savings capital, and you can hold assets such as residential property, which are not usually allowed in UK pension funds.
Passing wealth between generations. QROPS enable you to pass the portion of your pension savings that you do not spend to your heirs and, depending on the tax laws of the country where you choose to become resident, there may be a lower rate of Inheritance Tax to pay or – as is the case in Cyprus – be no local equivalent of this tax.
Avoid or diminish exchange rate risks and costs. You can take income and capital from your QROPS in the currency of your choice.
What are the potential disadvantages of QROPS?
Costs. Legal and administrative fees involved in setting up and maintaining QROPS vary widely and need to be considered carefully in advance. Take account of initial and annual fees when assessing whether their impact on your retirement fund can be justified by increased choice and tax-efficiency.
Investment risk. If you decide not to buy an annuity and to keep your QROPS invested in stock market-based assets, or any other assets whose value is not guaranteed, there is a risk that your income and capital could fall and you may not get back as much as you invested.
Regulation gap. Some countries with lower tax rates than the UK also offer less investor protection in terms of regulation of financial services and they may not offer any statutory compensation scheme. That is why it is vital to seek pension advice only from professionals who are fully authorised in the UK as well as the overseas jurisdiction to which you are considering retirement.
Fiscal change. Some experts reckon the opportunities offered by QROPS are simply too good to last. Critics claim QROPS enable British savers to obtain generous tax relief while accumulating pension funds and then to avoid British taxes when it comes to enjoying the benefits. If too many people take up these opportunities HM Revenue and Customs may act, subject to European Union rules.
Consider your options carefully but without unnecessary delay
No decision affecting your retirement capital and income should ever be taken in a rush. Remember the old maxim: ‘Act in haste – repent at leisure.’ If any adviser seeks to put pressure on you for an immediate decision, then your answer should be ‘No, thank you.’
However, as mentioned earlier, the sooner you start to plan for retirement, the easier it will be to ensure that this really is the holiday of a lifetime. The earliest pounds you invest in a pension will have the longest to accumulate for your benefit. The sooner you begin to consider how – and where – you enjoy the fruits of your prudence, the more likely you are to reach the right decision for you and, where relevant, your family.
Quicker, cheaper and more comfortable international travel has widened everyone’s choice about where to live. People who retire overseas need no longer wave goodbye to friends and family forever.
QROPS extend that choice into one of the most important financial choices many people ever make: how to fund and enjoy retirement. Make sure you consider your options carefully and in a timely manner with a specialist pensions professional who is fully authorised to advise on all the options you enjoy today.
Tuesday, 9 February 2010
QROPS Advice: Survey: the good life ‘turns sour’ for many expat Britons
Expatriate Britons are struggling to cope with the mostly weakening pound in a number of key offshore markets, a survey by foreign exchange provider Moneycorp has found, with those in Spain described as suffering the most. Émigrés in Australia and
New Zealand, however, appeared “relatively unaffected by the weakening pound”, the survey noted. It also found expats “hit hard” by problems in many foreign property markets.
The findings echo those of other recent surveys, as well as the recent comments of
many financial advisers with expatriate clients. The survey was conducted in October and November for Moneycorp by consultancy Vanson Bourne. It sought the opinions of some 250 Europe based UK expats, and another 250 British expats from Canada, Australia and New Zealand.
Expats living in these last two countries appeared to be faring better than some other Brits living far from home. “Less than a quarter of British expats in Australia
(23%) and New Zealand (24%) said their spending power had decreased,” Moneycorp said.
Other findings of the survey:
■ More than four in five (85%) Spanish expats say the value of sterling has impacted them financially, with three quarters (79%) saying that their spending power has decreased as a result.
■ Britons living in Germany and Italy are also being significantly impacted by the fall in sterling, as 67% and 66% of expats in these countries, respectively, reported
feeling the pinch.
■ In France, the story is similar, with nearly half reporting they are being
impacted by the fall in sterling; the figure in the
US was 61%.
BY HELEN BURGGRAF
New Zealand, however, appeared “relatively unaffected by the weakening pound”, the survey noted. It also found expats “hit hard” by problems in many foreign property markets.
The findings echo those of other recent surveys, as well as the recent comments of
many financial advisers with expatriate clients. The survey was conducted in October and November for Moneycorp by consultancy Vanson Bourne. It sought the opinions of some 250 Europe based UK expats, and another 250 British expats from Canada, Australia and New Zealand.
Expats living in these last two countries appeared to be faring better than some other Brits living far from home. “Less than a quarter of British expats in Australia
(23%) and New Zealand (24%) said their spending power had decreased,” Moneycorp said.
Other findings of the survey:
■ More than four in five (85%) Spanish expats say the value of sterling has impacted them financially, with three quarters (79%) saying that their spending power has decreased as a result.
■ Britons living in Germany and Italy are also being significantly impacted by the fall in sterling, as 67% and 66% of expats in these countries, respectively, reported
feeling the pinch.
■ In France, the story is similar, with nearly half reporting they are being
impacted by the fall in sterling; the figure in the
US was 61%.
BY HELEN BURGGRAF
Wednesday, 3 February 2010
QROPS Advice: Finance News: World Recovering Faster Than Expected
The world economy is recovering at a faster-than-expected pace but still needs government stimulus efforts to keep it going, the International Monetary Fund said on Tuesday. The IMF raised its forecast for world economic growth in 2010 to nearly 4 percent, up from an estimate of 3.1 percent last October. It expects the U.S. economy to grow by 2.7 percent this year, significantly higher than its previous forecast of 1.5 percent.
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Greece_2009.pdf
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
residents.
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf
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
residents.
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf
• 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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Germany_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/France 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).
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf
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).
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Belgium_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Cyprus_2009.pdf
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Cyprus_2009.pdf
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.
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Cyprus_2009.pdf
http://www.ailo.org/common/externalPage.asp?intURL=/publications/default.asp&extURL=/downloads/Cyprus_2009.pdf
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