Case study: International residency and domicile planning – getting it right first time

Theodora is a successful Turkish businesswoman who is married to an equally successful UK-domiciled husband. They are both currently resident in Monaco but plan to start a family and are therefore looking to move to another European country that will offer a secure and less constricted environment in which to bring up children. They intend to move during this calendar year before the UK’s departure from the EU becomes final.

Both Theodora and Sebastian enjoy high income streams from successful trading companies and income-producing assets. As a part of their relocation plan, they intend to consolidate all their commercial and personal arrangements before leaving Monaco, which will involve restructuring certain companies and assets.

Sebastian has lived in a number of different countries around the world over the last two decades but has been unable to shed his UK domicile of origin and acquire a new domicile of choice because he has never lived in one country for more than three or four years at a time.

After reviewing their residency options, Sebastian plans to relocate to one of the French-speaking cantons in Switzerland and apply for the special tax regime of lump-sum taxation, which is available to resident non-Swiss nationals who do not carry out a gainful activity in Switzerland. This taxation is based on the taxpayers’ actual annual living expenses rather than on their income and assets.

Theodora does not have any status in the UK. Before departing Monaco, her moveable assets – an investment portfolio, shares in overseas companies and other non-UK assets – are to be settled into trust and a Singapore Private Trust Company (PTC) will be set up to act as the corporate trustee. A Singaporean bank account will opened in the PTC’s name and an Isle of Man holding company will be established to acquire downstream companies and other movable assets.

It is further anticipated that the Isle of Man company will later establish a UK Family Office, which will be a regular UK company structured to undertake a raft of administrative, advisory, accounting, compliance and corporate governance activities for the family’s overall assets, including Sebastian, Theodora, their parents, relatives and associates. This company will be administered on a cost-plus basis.

Prior to relocating to Switzerland, it is decided that Theodora will also apply for a UK Tier 1 Investor Visa in this UK fiscal year. As a part of this application, she will make a qualifying investment of up to £10 million that will be transferred from her private overseas bank accounts into a UK personal bank account. This ought to enable Theodora to obtain Indefinite Leave to Remain (ILR) status in the UK after two years, at which time her qualifying investment can be liquidated, repatriated and redeployed.

IPR status in the UK will provide Theodora with the opportunity to live and work in the UK, where she has existing business and personal interests. During the two-year qualifying period she will reside in the UK but enjoy the status of being non-UK domiciled. Once her ILR is established, she will join her husband in Switzerland and become both non-UK domiciled and non-UK resident.

During these two years Sebastian will have to be extremely careful when visiting his wife in the UK not to become UK resident again. He will need a full Statutory Residence Tax advice. Provided that he does not work when in the UK, he can spend either 90 or 120 days (depending on the year in question) in the UK without becoming UK resident. If Sebastian forms an ultimate intention to remain permanently resident in Switzerland, a decision that may be taken after four to five fiscal years of being habitually and permanent resident of Switzerland – and once Theodora has also relocated to Switzerland – it is highly likely that he will be able to acquire a Swiss domicile of choice and therefore deactivate his UK domicile of origin.

If Sebastian succeeds in losing his UK domicile, he will then be able to set up an Excluded Property Trust in which to settle a raft of his non-UK assets. This will enable him to enjoy comprehensive asset protection and will mean that his non-UK situated assets should no longer be assessed or subject to UK Inheritance Tax for as long as he continues to be resident and domiciled in Switzerland.

For further information on the lump-sum taxation regime in Switzerland, Singaporean Private Trust Companies or establishing a UK or overseas family office, please contact Simon Denton by email to Sdenton@SovereignGroup.com or by telephone on 0207 389 0555 or 07887991649.