Amid the fiscal information exchange between India, South Korea, South Africa, Russia and other countries under the OECD standards coming into effect in 2018, high net worth individuals have started to show increased interest in changing tax residence.
They consider the jurisdictions not only of the European countries (Cyprus, the UK, Monaco, Malta and Switzerland) but also of the Caribbean countries. The latter has gained the public reputation of being tax havens.
Antigua and Barbuda is one of the island countries of the Caribbean region offering citizenship by investment. But it is not the only thing attracting wealthy business people. Antigua and Barbuda is the only country in the Caribbean where one can become a tax resident.
The country tax resident is exempt from dividend tax, inheritance tax and wealth tax. Personal income tax was canceled in June 2016.
To become the tax resident of Antigua and Barbuda one should:
NOTE: After obtaining Antigua and Barbuda’s passport, one can apply for the driver’s license and other documents required when opening a bank account.
Tax residents are the officially registered legal persons having business in the territory of Antigua and Barbuda. Income tax rate corresponds to 25%. The financial institutions licensed under the local Banking Act, get the opportunity of income tax reduction to 22.5%. It becomes possible when throughout the whole fiscal year they maintain the mortgage loan rate at 7% or less.
Real estate tax in Antigua reaches 0.1-0.5% of the object market value. The tax rate depends on whether it is housing or commercial property. No similar tax exists in Barbuda.
The Principality of Monaco is a mecca for high-income business people and a wonderful alternative for tax residence change. Monaco has not had personal income tax for over 100 years. Consequently, the individual (operating as a natural person) does not have to declare either the income or the assets. Unless you are French, no capital gains tax is imposed.
There is also no tax imposed on wealth, inheritance and gift (if the gift is made between the family members — children, parents, spouses). Brothers and sisters must pay the 8% tax, while the other gift receivers are to pay 16%. The tax is imposed only on the gift objects located in the territory of Monaco. Everything given as gift outside the Principality territory is not taxable.
The companies registered in Monaco are exempt from taxes if the major part of their business is based in the Principality. However, the companies receiving more than a quarter of their income outside Monaco must pay the tax rate corresponding 33.3%.
According to statistics, wealthy Russians prefer Cyprus. It offers a noticeable benefit, which is the opportunity of getting citizenship in exchange for the investment of at least €2,000,000. If your goal is to become a tax resident of Cyprus, you must spend at least 60 days per year on the island.
Personal income tax is not applied to the income received in the form of dividends or interest. Foreign exchange gains, gains on sale of securities received from the permanent mission abroad, one-time insurance payments are not taxable. In other cases, the tax rate will be in the range from 20% (if the income exceeds €19,500,000) to 35% (if the income exceeds €60,000).
There is no tax on inheritance. Moreover, the real estate tax was canceled a year ago.
Legal persons. Residents must pay tax on the income earned from business activities carried out both in Cyprus and outside its territory. The tax rate corresponds to 12.5%. However, there is no tax imposed on the income from dividends or interest. Gains on sale of securities, foreign exchange gains (unless you are involved in currency trading), debt restructuring gains are not taxable. There is also no tax imposed on the income received from your company’s official representative office located outside the territory of Cyprus. When calculating the tax rate, companies may take into consideration the losses incurred within the 5-year period preceding the tax year.
The VAT rate in Cyprus varies from the standard 19% to the preferential 0%. VAT payment is not applied to postal, insurance and educational services, real estate. Capital gains tax is paid only when the gains were directly or indirectly caused by the sale of real estate located in Cyprus. Gifted or inherited property is not taxable.
Preferential tax treatment is a great benefit offered by one of the most stable and expensive European countries — Switzerland. Speaking about the country favorable tax environment, one should first mention fixed tax, or lump sum tax. It is also called the tax on expenditures and is calculated based on housing rent cost and taxpayer’s lifestyle. The average amount of this tax ranges from 100,000 CHF to 200,000 CHF (from $103,858.46 to $207,716.92), depending on the canton (Geneva is obviously the most expensive canton).
Apart from the fixed sum, which would not depend on the total amount of wealth and income, there is another very important thing to mention, which is confidentiality. In fact, after the sum has been fixed, the information about wealth and income increase remains in your sole possession both in Switzerland and outside its territory.
Malta is another country which has no tax imposed on passive income. Here you can obtain second citizenship by investment.
According to the official data, more than 700 Russian business people, including Forbes personalities, have received Malta’s citizenship. Russian holders of Malta’s passport include the owners of banks, investment and development companies and holdings a top manager of a gold mining company, a minister’s brother, an assistant of Russia’s president and others.
In order to become Malta’s tax resident, one should live in the territory of the country at least 183 days per year.
As we can see, the market is full of offers. Thus, if we take high net worth individuals from Europe and Asia changing tax residence, the majority of them prefer Cyprus. The rest chooses Monaco, Malta or Switzerland. In addition, there has been observed an increased demand in Israel’s tax residence recently.