Internationally Mobile Clients and the Importance of Establishing Tax Residency

The Covid pandemic has provided a very practical demonstration that it is not only possible, but often equally or more productive, to work remotely from the office. This in turn has led many individuals and families, not just high-net-worth individuals, to reassess and plan changes to their lifestyle.

For some this does not just mean moving to ‘the country; it means moving to a new country – even countries. And they may not just be in pursuit of a more comfortable living and working environment, but better healthcare, educational and business opportunities as well, not to mention enhanced tax efficiency.

When developing the most suitable residency, tax residency, citizenship and/or accompanying wealth management strategy for an individual or family, each factor will have a determining impact on the other.

Those who intend to establish their permanent residence and spend the majority of their time in one country require a strategy that is based on the rules and regulations applied within that country. Should they also intend to spend time in another country, it is important that they do so in such a way that they do not trigger tax residence in that country. If this is unavoidable, the rules of both countries must then be taken into consideration.

In recent years there has been a marked increase in the number of individuals and families who wish to divide their time between multiple countries and regions, and to the extent that it may not appear that they automatically qualify as a tax resident in any one country.

This might sound like a good idea in theory, but in practice it can create a whole host of difficulties when it comes to managing their personal wealth and/or their business affairs. If they cannot provide a permanent residential address and a tax ID number – or if they provide them but they are no longer applicable or valid – then they will have enormous difficulties in respect of any substantial transactions, opening accounts, meeting reporting requirements or securing licences or authorisations. It could also mean that they are deemed tax resident of a country – even countries – where they don’t actually live.

In other words, it is essential to have some substance somewhere. And if you need residency, it makes sense to establish that residency in a country that provides qualifying applicants with a special tax status and numerous additional benefits. Depending upon the programme selected, these benefits could include:

• No tax on foreign-sourced income, unless it is remitted to the country in question
• Reduced tax rates applicable to locally-generated income
• Reduced or no tax applicable to foreign-sourced, dividends, rental income, interest and/or capital gains
• Preferential local corporation tax rates
• No estate duty or inheritance tax
• Access to numerous double taxation treaties

A list of countries that offer tax residency programmes and/or preferential rates for non-domiciled individuals is included in the tables below.

A Wide Range of Solutions

Sovereign’s extensive network of offices, experienced local teams and professional service partners ensure that we are best placed to assist clients with the development and implementation of the most suitable overall strategy for their needs. Our solutions can be subdivided into three main categories:

• Residency
• Tax Residency
• Citizenship

Each of these categories can be implemented independently or they can be combined to adapt to a client’s personal requirements. Available options include, but are not limited to, the following country programmes:

* Countries offering official tax residency programmes or preferential rates for non-domiciled individuals who establish tax residency.

** After five years of residency, applicants may qualify for citizenship.

Comprehensive tax efficient solutions

Sovereign works closely with applicants at every stage of the planning and implementation process. When combined and managed correctly, the following Sovereign Group services enable families to develop and implement a comprehensive, flexible and tax efficient strategy:

• International residency and citizenship programmes
• Tax residency
• Trusts and foundations
• Estate and succession planning
• International retirement plans
• Wealth management
• Corporate structures and banking
• International life and medical insurances.

Contact us

If you have any questions or would like to discuss how you and your family could benefit from the creation and implementation of an international residency, tax residency and citizenship-based strategy, please contact Ceri Pratley.