residence in another than one’s home country can offer the stability and freedom which international high net worth individuals seek. The Global Residence and Citizenship Handbook aims to be a comprehensive guide to the investor immigration and citizenship programs of the world and to help the smart investors and their advisors make well-informed decisions when deciding which options would be best suited to their individual needs.
JULIA ONSLOW-COLE
Global Head of Immigration PwC Legal LLP
PART I
Residence and Citizenship Planning
1
Residence Planning
Chapter Summary
Residence Planning is finding solutions to the complex range of considerations involved in moving your residence to another country, or obtaining residence rights in more than one country. This aspect of private wealth planning is growing in importance to optimize business and personal planning.
Improving your international tax situation is one of the key benefits of an alternative residence, alongside protecting your financial privacy and structuring matrimonial and inheritance interests in an advantageous manner. It also helps those who, due to political instability or other unfavourable elements, need to find a safe place to reside.
It is necessary to ensure that the country can accommodate all of your family, business, taxation and legal needs, and that the areas of infrastructure, physical environment, business and economy, and culture and lifestyle suit you.
Each country judges whether a person should be subject to taxation on a range of different factors. Residence Planning can help you achieve a reduction in your tax burden, whilst ensuring that you meet the exact requirements for that country.
The move from one country to another can itself trigger tax implications, and all financial calculations must take into account exit taxes and extended income tax regimes. The timing of any move is also critical and can have a sizeable impact on taxation.
International health cover is one of the most important elements to have in place when thinking of moving abroad. Cover must be maintained both during the time of the move and upon settling in the new country.
When moving countries, one of the key factors will also be the selection of a new home. While an emotive decision, there are many important factors to consider when selecting property, besides the obvious question of location. The decision should also include analysis of whether it would be advantageous to use a holding structure such as a company for fiscal and succession planning.
The term residence planning was coined by Henley & Partners over 20 years ago. At the time most international lawyers did not consider it necessary for international clients to look at alternative residence solutions, or to conduct the relevant planning for their clients. Rather, obscure and often illegal structures were devised to essentially hide assets, which were then typically parked in “secure” jurisdictions such as Switzerland, Luxembourg or many of the small island states and territories around the world.
Today the situation is different and many clients and advisors on all continents are working with this important aspect of private wealth planning. The political and legal climate means that the only sensible advice is to: “comply, or move out.”
1.1 Why become resident in another country?
Whatever your situation, there are many reasons why you should consider becoming a resident of another country, or holding a residence permit from more than just one country. However, anyone thinking seriously about moving their main residence to another country, or obtaining residence rights in more than one country, faces a series of questions which are not always easy to answer. Residence Planning analyzes those questions, reasons and possibilities.
Historically, since the invention of agriculture led to more permanent settlements, it was not easy for people to move their place of residence, and immigration as we know it today was not possible. Generally only natives of the land had full rights, and various rules prevented the movement of people even from one district to another. Only wars, extraordinary abilities or contributions to society and other special factors enabled people to move within a societal structure, and across territorial borders.
In today’s globalized world, moving from one’s native country to another, possibly more attractive, country has become increasingly easy and commonplace. Furthermore, the advances in communications and computer technology have made it possible for “knowledge workers” to work and live almost anywhere, and for entrepreneurs and investors to operate and supervise their businesses and investments 24 hours a day from virtually anywhere in the world.
Particularly for wealthy individuals and families, and business owners and investors with an international lifestyle, today’s globalized world offers tremendous opportunity to optimize personal and business planning. This includes in particular tax and estate planning, increasing international freedom of travel, and diversification not just of business but also on a personal level by having multiple residences and possibly multiple citizenships.
Moving to a more attractive country of course means different things to different people: for refugees, this may mean bare survival, personal safety and escape from war, violence and starvation; for an economic migrant, more job opportunities; business opportunities for entrepreneurs who are looking beyond their country’s borders; investment opportunities for international investors looking to diversify not only their assets but also their life and family ties geographically; or retirement and lifestyle options, combined ideally with tax and other benefits, for wealthy individuals and families with a global outlook.
Indeed, an alternative residence is an effective tool for international tax planning, and also facilitates more privacy in investment and banking as many reporting and exchange of information requirements are based on (tax) residence.
Depending on your current position, an alternative residence can also mean a better quality of life for your family, a good education for your children, and a safe haven in times of political instability in your home country. Political instability in many countries now leads to a need for wealthy individuals and families to seek a safe place outside their home countries in which to establish an alternative residence for reasons of security and personal flexibility. Canada, Dubai, Singapore, Switzerland and the UK, for example, play an important role as bases for such wealthy people to establish a safe second residence, which may well become the primary residence for some family members.
In view of the increasingly aggressive fiscal and regulatory environment in some otherwise reasonably stable high-tax countries such as Canada, France, Germany, the Netherlands, the UK, the US and others, a move of residence to a country with a milder tax regime is an attractive option for many who feel they have to pay more than their fair share, and who do not like the constant erosion of their privacy.
In fact, often the only way to reduce the tax burden and regulatory restrictions legally and in a significant manner is to move.
In Germany, for example, the Government has direct access to all bank accounts of all taxpayers. This intrusion in privacy is rather uncomfortable, particularly if you are doing everything correctly and earn an honest living. Whenever there is access to information, such information is prone to leaks, to the information being sold to anyone interested and offering sufficient money in exchange for the information
