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U.K. Budget Proclaims Death Knell For Remittance Basis Taxation

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U.K. Budget Proclaims Death Knell For Remittance Basis Taxation

As was widely anticipated, the Chancellor of the U.K. used his budget speech on March 6 to announce the termination of the non-domicile regime and remittance basis of taxation effective April 12, 2025. In its place, a new foreign income and gains (“F.I.G.”) regime will be available for individuals who become U.K. tax resident after a period of 10 tax years of nonresident status.  Individuals who qualify for the new regime will be able to bring F.I.G. to the U.K. free from any U.K. tax for up to four years. Current non-doms who cannot qualify for the F.I.G. regime can benefit from a 50% deduction on remittances through April 5, 2026. Kevin Offer, C.A., a partner of Hardwick and Morris L.L.P., London, explains these and other provisions that will apply as the U.K. enters a brave new world.

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Greek Tax Incentive Regimes for Newly Arrived Residents and Family Offices

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Greek Tax Incentive Regimes for Newly Arrived Residents and Family Offices

The segment of European countries that have enacted favorable tax regimes to attract the wealthy are well known. Switzerland has its forfait regime, the U.K. has its nondom tax regime, Portugal and Italy have new resident regimes, and Malta and Cyprus have favorable regimes designed to attract new residents. To that list of countries, Greece is a new arrival, having introduced several tax incentive regimes designed to create a favorable tax environment for nonresident individuals transferring tax residence to Greece and the establishment and operation of family offices in Greece. Natalia Skoulidou, a partner of Iason Skouzos Law Firm, Athens, provides an overview of (i) the 5A Nondom Tax Regime, (ii) the 5B Pensioner Regime, (iii) the 5C Employee and Self-Employed Regime, and (iv) the Family Office regime.

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The 15 Most Important Questions That Should Be Asked When Estate Planning for a Foreign Parent with U.S. Children

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The 15 Most Important Questions That Should Be Asked When Estate Planning for a Foreign Parent with U.S. Children

· U.S. estate tax planning is said to be among the most complicated aspect of tax planning because of the numerous moving parts and the changing needs and objectives of the family. The exercise becomes complicated when the client is not a U.S. person, but the heirs live in the U.S. and have started families in the U.S. For an estate planner with a focus on domestic clients, the customary tools may not work. It is easy to know what you know, but not always easy to know what you don’t know. Neha Rastogi and Stanley C. Ruchelman ask and answer 15 questions that highlight the favorable and unfavorable provisions of U.S. tax law affecting nonresident, non-citizen individuals having U.S. persons as heirs.

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Insights Vol. 5 No. 8: Updates & Other Tidbits

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Insights Vol. 5 No. 8: Updates & Other Tidbits

This month, Rusudan Shervashidze, Neha Rastogi, and Nina Krauthamer look at several interesting updates and tidbits, including (i) potential tax reasons for Cristiano Ronaldo’s move to Italy, (ii) a law suit brought by high-tax states against the U.S. Federal government in connection with the T.C.J.A. limitations on deductions for state and local taxes, (iii) the finding of the European Commission that the aid given to McDonalds by the Luxembourg government did not constitute illegal State Aid, and (iv) a successful F.A.T.C.A. prosecution against a former executive of Loyal Bank Ltd.

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Israeli Court Case First to Interpret Ten-Year Exemption

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Israeli Court Case First to Interpret Ten-Year Exemption

Effective in 2007, Israel’s New Immigrant Benefits rules are intended to promote immigration through the grant of substantial tax benefits: (i) a ten-year tax exemption for foreign-source income produced or accrued outside Israel or income stemming from assets located outside Israel and (ii) an exemption for all tax reporting requirements related to exempt income. Over the years, the Israeli tax authorities applied strict rules in determining (i) whether a specific item of income should be considered to be foreign source income and (ii) the portion that is properly treated as foreign in circumstances of mixed income – part foreign and part domestic. Now, eleven years after the New Immigrant Benefits rules became effective, the first case addressing these open questions has been decided, Talmi v. Kfar Saba Tax Assessor. Daniel Paserman and Inbar Barak-Bilu of Gorntizky & Co., Tel Aviv, report on the holding. In brief, the taxpayer won on principles but lost on the basis of his facts.

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Pancake Day – End to Permanent Non-Domicile Status and Charging Non-Doms I.H.T. on U.K. Residential Property

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Pancake Day – End to Permanent Non-Domicile Status and Charging Non-Doms I.H.T. on U.K. Residential Property

 In July, the U.K. government announced that proposals removed from the Finance Bill that was announced in March would be reproposed with a retroactive effective date, as if adopted when originally proposed.  This is bad news for non-domiciled individuals (“Non-Doms”) in general and for the estates of Non-Doms who died between March and the ultimate date of enactment.  If retroactive effective dates remain in the bill, rights granted by the European Convention for the Protection of Human Rights and Fundamental Freedoms, which were incorporated into U.K. law by the Human Rights Act 1998, could be violated.  William Hancock and Daniel Simon of Collyer Bristow L.L.P. explain that Non-Doms should expect “too little jam and too little cream” on their pancakes if the provisions are enacted retroactively.

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Circular Letter No. 17/E Clarifies Special Tax Regime for Italian “New Residents”

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Circular Letter No. 17/E Clarifies Special Tax Regime for Italian “New Residents”

Late last year, the Italian government enacted a new regime designed to entice wealthy individuals into becoming tax residents.  In late May, operating rules for the new tax regime were announced.  In broad terms, the regime imposes an annual tax charge of €100,000 in lieu of tax imposed at standard rates and an exclusion from inheritance and gift tax on foreign assets.  Andrea Tavecchio and Riccardo Barone of Tavecchio Caldara & Associati in Milan, Italy explain the details of the new regime.

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U.K. Drops Changes to Non-Domicile Regime, But Likely Not for Long

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U.K. Drops Changes to Non-Domicile Regime, But Likely Not for Long

After months of H.M.R.C. consultation, a new regime was put in place for non-domiciled U.K.-resident individuals (“Non-Doms”) on April 6, 2017, only to see the legislation pulled from Finance Bill 2017 on April 25.  The snap election in the U.K. put consideration of Non-Dom taxation on hold when 72 of the 135 clauses were removed from the bill.  This allowed Parliament to approve the legislation in two hours.  Gary Ashford of Harbottle Lewis, London, summarizes the short-lived provisions and those that failed to be enacted on April 6.  The proposed regime remains a work in process, and enacting legislation could be back on the table as early as this fall.

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Italy Introduces a 15-Year Preferential Tax Regime for Wealthy Individuals Taking Up Tax Residence in Italy

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Italy Introduces a 15-Year Preferential Tax Regime for Wealthy Individuals Taking Up Tax Residence in Italy

As non-domiciled (“Non-Dom”) residents of the U.K. scramble to restructure in light of the new rules for persons holding Non-Dom status for more than 15 years, Italy has adopted new measures to attract high net worth individuals.  The rules are clearly derived from the Non-Dom rules in the U.K., but the weather is better.  Fabio Chiarenza of Gianni, Origoni, Grippo, Cappelli & Partners explains the new provisions.

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A Year of Guest Features

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A Year of Guest Features

This month, we reminisce on the best of 2016, with articles contributed by guest authors from around the world.

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Further Developments for U.K. Non-Dom Individuals

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Further Developments for U.K. Non-Dom Individuals

A significant claw back of benefits for individuals with Non-Dom status was first announced in the Summer Budget of 2015.  In August, H.M.R.C. proposed implementing legislation in a follow-up consultation document.  Specific benefits covered included inheritance tax for shares of envelope companies owning U.K. residential real property, deemed domicile rules for long-term U.K. residents, and several provisions to lessen the impact of these changes.  Gary Ashford of Harbottle & Lewis, London explains.

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Portugal: A Race Towards Tax Competitiveness – The Non-Habitual Tax Resident Regime

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As part of our series addressing favorable tax rules for non-domiciled resident individuals in various countries, Alexandra Courela and Susana A. Duarte of Abreu Advogados in Lisbon explain the Portuguese approach in extending tax benefits to new arrivals holding “Golden Visas” or who otherwise qualify for work-related visas for the performance of designated high value activities. Employment income from services performed in Portugal is taxed at a low rate and foreign source service income may be exempt from tax if certain conditions apply. Foreign-source plain vanilla investment income and gains may be exempt, too.

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What is the Future for New Immigrant Benefits?

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Continuing our series on favorable tax rules for non-domiciled resident individuals, Guy Katz and Danielle Halimi of Herzog Fox and Neeman in Tel Aviv explain the Israeli tax benefits for those individuals who are categorized as “New Immigrants.” Benefits begin with a ten-year exemption for foreign-source income and gains – the exemption applies to both tax and information reporting. Regular returning residents receive generous but scaled back benefits. Remittances from abroad are not penalized with tax.

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Spanish Tax Regime for Incoming Professionals

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Heard of the “Beckham Law” that limits income tax in Spain for certain non-domiciled individuals? Think of European football (soccer) players. Pablo Alarcón Espinosa of Alarcón-Espinosa, Abogados in Madrid explains how persons migrating to Spain for work purposes can avail themselves of a reduced tax regime for domestic income and an exemption for foreign income and gains. Like Switzerland, remittances from abroad are not penalized with tax.

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The Forfait Tax Regime in Switzerland – A Venerable Alternative

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The Swiss forfait tax regime is discussed by Michael Fischer of Froriep in Zurich. The forfait is battle-tested and has beaten back a referendum in 2014 that would have repealed the benefit. Beware – the forfait is not available in all cantons and the minimum tax rate varies widely. In comparison to the U.K. and Ireland, remittances from abroad are not penalized with tax.

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Non-Dom Taxation: Ireland as an Alternative to the U.K.

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The benefits and possible pitfall of Ireland’s non-domiciled taxation rules are explained by Lisa Cantillon and Jane Florides of Kennelly Tax Advisers in Dublin. Remittance based taxation remains strong in Ireland, but planning is required to steer clear of deemed remittance traps and to minimize inheritance tax exposure.

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U.K. Non-Dom Taxation – Where it is and Where it is Going

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With the 15-year limit enacted to remittance based tax rules for non-domiciled individuals resident in the U.K., we offer a series of articles this month addressing favorable tax rules for non-domiciled resident individuals in several countries. Gary Ashford of Harbottle and Lewis L.L.P. in London is the lead-off author, explaining the U.K. tax and immigration rules and suggesting strategies for the long-term non-domiciled resident who faces the 15-year ceiling. The ceiling becomes effective in 2017.

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2015 Summer Budget Announced in U.K.

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The first Conservative budget in almost 20 years was announced in July. Large corporations are the winners. Non-domiciled individuals and hedge fund partners holding carried interests are the losers. More funds were appropriated for tax shelter witch-hunts. Martin Mann, Paul Howard, and John Hood of Gabelle L.L.P., London tell all.

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