International relocation of private individuals to tax-friendly countries is the ultimate (tax) planning tool for (U)HNWI. In most cases a family office in Switzerland can support you with international relocation services and obtaining residency permits. Sometimes it is the best if a whole family relocates, and sometimes great tax planning possibilities can already arise if only one or a few of the family members relocate to another country.
International relocation is increasingly popular
Already for decade's wealthy individuals and families relocate to more tax-friendly countries like Switzerland, the United Kingdom, Monaco, Dubai, Malta, Singapore, Hong Kong, Gibraltar and other jurisdictions alike. Especially the last decade international relocation has become increasingly popular as a tax planning tool. The reasons for that are improved ways of communication (i.e. mobile internet, Skype etc.) making it easier to stay connected to relatives and the business, and much better, regular and cheaper international flight connections making it easier to travel between the country of origin and the country of choice.
Relocation to save taxes
The huge benefit of leaving and permanently breaking your relationship with your country of origin, lays in the fact that it creates in most cases a big tax benefit. Next to that you can select a new country to reside in based on elements like climate, infrastructure and secure political environment. But we also see international relocation because the children of (U)HNW families visit schools and universities in international locations like Switzerland, the United Kingdom and the United States of America. Often a family office can also support you quite well with this last issue.
Tax planning is a necessity when you relocate internationally
(U)HNW families often relocate to the United Kingdom or Switzerland. Next to that there are also great but not so well known other alternatives. For persons having an European Union (EU) citizenship, relocating within the EU or to Switzerland is not a problem. But for an (U)HNWI living outside the EU or Switzerland, international relocation to those countries can be more difficult. In all cases of international relocation careful planning is necessary, especially when it is primarily done because of tax reasons. For all persons intending to relocate for that reason, appropriate tax planning will be necessary. For some countries there is no tax planning necessary before entering the country, but in the case of business owners it will especially be necessary to plan the exit out of the country of origin in order to avoid negative tax consequence, or to create the objected positive tax results. Structures often used in connection with international relocation are Trusts and Life Insurance solutions. Sometimes it is also necessary to plan beforehand to obtain the necessary residency permits.
International relocation to Switzerland
Switzerland offers (U)HNWI who want to relocate to Switzerland the possibility to negotiate with the tax authorities before entry into Switzerland a fixed yearly amount of income and wealth tax, independent of the actual yearly income and wealth of the person. The main basis for negotiation with the tax authorities is the annual expenditure of the person. This arrangement is called lump-sum taxation. This means in a nutshell that a certain amount is agreed with the Swiss tax authorities upfront based on several criteria (i.e. worldwide expenditure, rental value of the new residence in Switzerland and the Cantonal minimum). The negotiated amount of tax is paid yearly to the Swiss tax authorities. The financial agreement can range from CHF 50.000 to over CHF 250.000 tax payable yearly, depending on your citizenship, your specific situation and your Canton of choice. Under the agreement you are not allowed to carry out any gainful activity in Switzerland. Persons wanting to take up residency in Switzerland need to obtain a residency permit. One of many family office services is to assist you with obtaining a residency permit and to support you with negotiating an attractive lump-sum.
International relocation to the United Kingdom
When you are relocating to the United Kingdom it is possible to benefit from the UK non-domiciled taxation. Under the non-domiciled taxation rules, foreigners that have internationally relocated to the UK will only be taxed on income and gains that arise or accrue in the UK, on assets they hold in the UK (including UK bank accounts), or on the income they generate outside the UK and then remit to the UK. This option is only open to persons which are not born and raised in the UK (non-domiciled). As a result of this system it is in theory possible to live fully tax exempt in the UK. It is possible to use the non-domiciled rules during the first seven years of residency in the UK without any costs. After seven years a minimum yearly amount will be levied of £ 30.000 up to £ 50.000 in case you want to keep enjoying the non-domiciled regulations.
International relocation to other tax-friendly countries
International relocation to countries like Gibraltar, Malta and Portugal offers the possibility to use specially developed schemes for (U)HNWI. Under these schemes there is little, to no tax, to be paid. You receive a residency permit and mostly access to Schengen countries becomes available without any visa requirements.
Hong Kong and Singapore have a so-called territorial tax system. In such a system only income generated on the territory of the countries is taxed. As both countries do not levy wealth tax and no gift and inheritance tax, they are an excellent base for (U)HNW families to reside in. And international relocation to tax havens like Dubai, Monaco and several tropical islands like Bermuda are always an option as they do not levy any tax at all on income, wealth or gifts and inheritances.
Although international relocation to the above-mentioned countries comes with great tax benefits, relocating to other countries can come with severe negative tax consequences. Some examples of these countries are the United States of America, France and Germany.
Last but not least there are for quite a number of countries really good opportunities to structure the family's assets before relocation in such a way (via trusts, life insurance, etc.) that the overall tax burden of the family decreases significantly.
A Swiss family office can support you with international relocation planning strategies and support you in complying with the local rules and legislation. As (U)HNW families become every year more international exposed this should normally be one of the most important services of a good family office in Switzerland.