[Webinar] Capital Tax Liability Cross Border for Expats
ProACT Sam went live in May’s monthly Wednesday Webinar to highlight how expats have to account for capital taxes separately to income.
In the 2020’s with exchange of information and data across the internet you can’t discreetly assume that funds and investments can’t be tracked.
Every financial institution, bank, savings, investment, property, accounting, legal or currency platform must identify the tax entity they deal with.
This means every investment, be it business, financial or property is subject to a tax liability.
While income can follow the expats around the world, capital taxes remain fixed to tax in the country in which they are based.
ProACT Sam looks at how capital and Inheritance taxes in property, investments, Bitcoin and business are fixed to a country and we examine the impact this can have on the tax liability that results.
TAX RESIDENCE
Expats change their individual tax residence and for most people’s home country this frees them from an income tax liability.
Double taxation treaties ensure you don’t pay tax twice.
If you have a business that has a separate tax registration and residency for the company, vat sales taxes and social insurance liabilities.
Every property you own has its own tax registration number.
If you operate through a family or business trust this has a separate tax registration and number.
Every movement of wealth has a tax reference where the financial, property, trading, accounting or legal agents report to their local tax authorities who then share across border to the tax office in the owner’s country of tax residence.
FIXED
In law there are two types of ‘property’ that any tax entity can own - moveable and fixed.
Moveable income is taxed where you are tax resident.
So Google might have a Caribbean holding company that receives its dividends tax free rather than paying USA ( or any other country tax).
Individuals would pay tax on on savings interest or royalties where they are tax resident.
Fixed assets are always taxed in the country they are.
So UK property owned by expats is subject to UK capital gains tax. But as well any property rental income from that property is deemed fixed income to the the UK and taxed there.
If an estate of a deceased Expat includes property then that property is sold with a taxable event giving liability to capital gains taxes and inheritance taxes in the country of the property and the country of tax residence at death.
If your home country has no inheritance taxes, but the tax resident country does, you will pay capital gains and inheritance tax at the highest rate.
Hence the good reason an expat should always Make a Will.
Financial investments are always held in the country of the fund or trading manager or where the share is listed if held direct.
If you own the business this gives rise to capital taxes on disposal by sale or death.
Similarly with trading funds for Bitcoin or investments, the tax liability falls due in the country of residence of the easing platform and the investors home country.
With Bitcoin for example, the funds are held in the interweb, but the trading platform or or individual tax residency will create the taxable event.
NO GAIN
To avoid capital gains there are a number of approaches to make tax savings.
Some UK capital gains can be tax deferred by expats if Living and Working Abroad.
A offshore holding company or trust can have the capital gain or inheritance tax liability relocated.
Using a personal service company allows a contractor to split income between different jurisdictions.
ProACT Know How
We offer free reviews of your circumstances to protect your property and business and to ensure that capital gains and inheritances goes to the family and not the tax man.
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