Tax Planning For Individuals
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Tax Planning For Individuals

TAX PLANNING FOR INDIVIDUALS

Tax planning for individuals requires many factors to be considered including:

  • Where are they ordinarily resident?
  • Where are their clients located?
  • Can they relocate?
  • Are they seeking to protect existing wealth or are they trying to protect an idea (read intellectual property) and maximise its returns in the future?
  • What is their marital status?

Tax planning for individuals, save in the case of asset, pre-nuptial and IP protection, generally requires some international or the possibility of legitimately creating international aspects to their affairs. For those who were born, live and work and do business in, for example, the UK tax planning is generally limited to what a local firm of accountants may recommend such as setting up a company, paying out dividends, employing a family member etc. to mitigate their tax exposure. However, as inferred even such individuals can be well served by setting up a structure before marriage or by selling their IP before it significantly increases in value.

US INDIVUALS ARE DIFFERENT!

US citizens and green card holders, even if living outside of the US are notoriously difficult to plan for due to the fact that the Internal Revenue Service (IRS) taxes its citizens – subject to applicable tax treaty provisions – on their worldwide income! Of course, there are many internal US tax planning incentives but generally it is almost impossible to assist US individuals with a structure. However, it should be note that US individuals can set-up international companies if trading abroad.

BETTER TO BE BRITISH OR IRISH?

Although the UK Labour Government is raising taxes to historic highs and Ireland also has high income taxes, neither country currently imposes Wealth nor Exit Taxes. In the case of Ireland, it also has a significant tax incentive for non-domiciled individuals residing there as they – if properly advised – need only pay income tax on a remittance basis. In the case of the UK, the tax benefits for non-domiciled individuals already resident in the UK has been severely restricted. However, it is often possible for wealthy people intending to take up UK residence to separate their wealth before becoming ordinarily residence by, for example, establishing a self-owing private interest foundation.

GERMANY, FRANCE AND NORTH-WEST EUROPE

Unlike the UK and Ireland, Germany, France and most North-West European countries make it difficult for wealthy individuals to leave without paying an exit tax. Normally such a tax applies at a relatively high threshold but if it does the extrication period can be up to 5 years! Wealth taxes are also quite difficult but not impossible to avoid however they will require local and not just international tax planning advice.

SPAIN & WEALTH TAXES

Moving to Spain is increasingly popular for many reasons. However, the fiscal environment can be complex, particularly for foreign nationals owning local property and those subject to wealth taxes once resident in the country. With the right advice and planning, it is often possible to mitigate these tax exposures and structure your affairs more efficiently.