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On August 7, Italy’s government announced a significant update to its “flat tax” regime, doubling the annual tax cap to €200,000 ($218,220) for income earned abroad by wealthy individuals who relocate their tax residency to Italy.
This measure, originally introduced by a centre-left government in 2017, aims to attract affluent individuals to bolster Italy’s economy.
The scheme, which has already led to 1,186 relocations according to Economy Minister Giancarlo Giorgetti, comes under increased scrutiny following the UK’s decision to abolish its long-standing “non-domiciled” tax regime by April 2025.
Giorgetti highlighted Italy’s opposition to the global trend of countries competing to offer favourable tax conditions to the wealthy, stating:
“We’re against turning our nation into a tax haven for individuals or companies. With Italy’s limited fiscal capabilities, we cannot win such a competition.”
Italy’s revised tax regime could become an attractive option for high-net-worth British residents seeking to maintain lower taxation on offshore income.
While this move could provide a modest boost to Italy’s public finances, particularly as Prime Minister Giorgia Meloni prepares the 2025 budget, it will only apply to new entrants into the scheme, safeguarding those who have already transferred their tax residency to Italy.
The flat tax has previously benefited high-profile individuals like Portuguese football star Cristiano Ronaldo during his tenure at Juventus from 2018 to 2021.
Italy’s audit court estimates that the scheme generated €254 million in tax revenue between 2018 and 2022.
However, the European Union has criticised such regimes, calling them unfair and harmful to state finances.
The EU’s Tax Observatory, in its Global Tax Evasion Report, specifically pointed out that the high-net-worth individual regimes in Italy and Greece offer large exemptions to extremely wealthy individuals, which it views as particularly damaging.
For more information on Italy’s flat tax regime, please see our earlier article.
If you have any queries, then please get in touch.
Puerto Rico offers attractive tax incentives to lure high-net-worth individuals and businesses to the island, fostering local economic growth.
The Puerto Rico Incentives Code of 2019, known as Act 60, provides significant tax advantages for those who qualify as bona fide residents and meet certain economic contribution requirements.
Act 60 consolidates and updates previous tax incentives, including Act 20 and Act 22, targeting a variety of sectors such as individual investors, businesses, manufacturers, international financial entities, and private equity funds.
Act 20 provides tax incentives for companies based in Puerto Rico that export services to other regions.
Benefits include a fixed income tax rate of 4% on eligible export services and a complete tax exemption on dividends from earnings and profits.
Eligible businesses must maintain a bona fide office in Puerto Rico and render services to clients outside the island.
Act 22 offers a 100% tax exemption on dividends, interest, and capital gains for new Puerto Rico residents.
To qualify, individuals must be bona fide residents, meeting criteria such as spending the majority of the year in Puerto Rico, having no tax home outside Puerto Rico, and showing stronger connections to Puerto Rico than any other location.
Additional requirements include an annual $10,000 donation to local nonprofits and purchasing residential property within two years of establishing residency.
Due to the generous nature of these tax breaks, the IRS has increased its enforcement efforts to prevent abuse of Act 60 incentives.
In 2021, the IRS launched a compliance campaign targeting potentially fraudulent claims, focusing on whether individuals and businesses genuinely meet the residency and income sourcing requirements.
Puerto Rico’s tax incentives offer substantial benefits, but they come with strict compliance requirements.
Properly navigating these can avoid IRS scrutiny and potential penalties.
For those considering a move to Puerto Rico, consulting with experienced tax attorneys is crucial to optimize benefits and ensure compliance.
If you have any queries on Puerto Rico and its tax incentives then please get in touch.
The UK has long been a premier destination for internationally mobile individuals due to its stability, legal system, educational opportunities, and cosmopolitan lifestyle.
However, recent policy changes have reshaped the immigration landscape, necessitating careful planning for those considering relocating to the UK.
In February 2022, the UK closed the Tier 1 (Investor) route, significantly impacting high-net-worth migration.
The focus has shifted towards visa categories that require active engagement with UK businesses and often need endorsement from third-party organizations.
On 6 March 2024, the UK Chancellor introduced major tax regime changes affecting UK-resident, non-UK domiciled individuals.
These changes will influence decisions for those already in the UK or considering a move, highlighting the importance of integrated tax and immigration planning to achieve long-term residency or citizenship goals.
Both routes offer accelerated paths to indefinite leave to remain (ILR) after three years, unlike the standard five-year requirement.
Visas are also available for those with a family connection to the UK, including partners of British citizens or permanent residents and individuals with UK ancestry.
This newly launched program allows significant investment in approved Hong Kong assets, leading to residency and potential permanent status after seven years.
Programs in countries like Antigua and Barbuda, Grenada, and St. Kitts and Nevis offer fast-track citizenship through investment, with benefits including visa-free travel to over 145 countries.
For clients considering international relocation, it’s crucial to navigate the complex interplay of immigration laws, tax implications, and family considerations.
With expert guidance from specialized immigration and tax advisors, clients can make informed decisions about their relocation strategies, ensuring compliance and optimizing their relocation outcomes.
If you have any queries about this article on High Net Worth Immigration Options then please get in touch.
Brazil’s recent legislative update, Law No. 14.754/23, marks a significant change in the taxation of offshore assets held by individuals, including investments through offshore companies and trusts.
This law introduces the “come-cotas” regime, a mechanism for the advance payment of income tax on certain Brazilian investment funds, and extends the Controlled Foreign Corporation (CFC) rules to individuals.
The law mandates that individuals must include income from offshore entities in their tax returns as of December 31st each year, applying the CFC rules.
This means income is taxed even if not distributed as dividends, aligning with international tax practices.
Automatic taxation on December 31st applies under three conditions:
Profits are converted from USD to BRL and taxed at a 15% rate.
Specific rules allow for partial tax credits for foreign taxes paid and for offsetting losses incurred from 2024 onwards.
For entities not falling under the automatic taxation criteria, taxation occurs only when profits are distributed to Brazilian shareholders, with the tax rate applicable at the time of distribution.
Taxpayers have the option to opt-in to automatic taxation.
Profits earned before the enactment of Law 14.754/23 are not subject to automatic taxation due to constitutional restrictions against retroactive tax laws.
However, the law offers an option to voluntarily pay tax on these profits at a reduced rate of 8%, excluding exchange rate variations.
The enactment of Law No. 14.754/23 presents several challenges and opportunities:
The law’s approach to taxing unrealized gains raises concerns about the taxation of volatile assets, such as cryptocurrencies and hedge funds. This aspect may prompt judicial review in Brazil, particularly regarding the principle of income realization.
For profits earned until 2023, the option to tax these at a reduced rate before actual distribution can be financially beneficial, especially considering the historical strength of the Brazilian Real against other currencies.
Unlike corporate entities, individuals cannot offset losses from one company against gains from another within the same calendar year under this new law. This limitation could conflict with the principle of income universality and may also be subject to legal scrutiny.
Law No. 14.754/23 significantly reforms the taxation landscape for Brazilian individuals with offshore investments.
By aligning domestic policy with international standards through the implementation of CFC rules for individuals, Brazil aims to enhance tax compliance and increase transparency.
However, the introduction of these new rules is likely to be tested in courts, particularly concerning their compatibility with constitutional principles and the practicalities of taxing virtual income.
If you have any queries about this article on Brazil’s Taxation of Offshore Assets, or tax matters in Brazil more generally, then please get in touch.
The Portugal Golden Residence Permit Program, often referred to as the Portugal Golden Visa Program, offers a compelling five-year residence by investment opportunity for non-EU nationals.
This program allows investors to live, work, and study in Portugal while enjoying visa-free access to the Schengen Area.
With a minimal physical presence requirement averaging just seven days per year, this program not only facilitates ease of living but also paves the way for citizenship eligibility after five years.
The Portuguese Golden Visa is laden with benefits:
Investors can secure their Portuguese Golden Visa through several investment options:
The application process includes:
The first permit is issued for two years due to adjustments made during the Covid-19 pandemic, with subsequent renewals every two years.
The entire process to secure a residence permit through investment typically extends beyond 18 months due to administrative procedures.
The Portugal Golden Residence Permit Program stands out as a highly attractive option for investors seeking not only a European residence but also a straightforward route to citizenship.
With flexible investment options and a lenient residency requirement, the program offers a practical solution for global investors aiming to enjoy the lifestyle and benefits Portugal has to offer.
If you have any queries about Portugal’s Golden Visa, or tax or other matters in Portugal, then please get in touch.
Malta has introduced a special 12% VAT rate for yacht charters commencing in the region as of January 1, 2024, significantly lower than the standard 18% VAT rate.
This strategic move, detailed in Legal Notice 231 of 2023 under the Value Added Tax Act (Amendment of Eight Schedule) Regulations, 2023, aims to bolster the local superyacht industry.
The Malta tax authorities have published guidelines to facilitate the industry’s understanding and application of these new regulations.
Additionally, Transport Malta issued a Port Notice emphasizing exemptions for visiting yachts from the Commercial Vessels Regulations, provided they are registered for commercial use and comply with their flag state requirements.
To qualify for the reduced 12% VAT rate, several conditions must be met:
The guidelines also address the concept of composite supplies in VAT applications.
If a taxable person offers mixed supplies of goods and services, these might be considered a single composite supply for VAT purposes if they are primarily related to the yacht charter.
Thus, the special 12% VAT rate applies to such composite supplies provided they are integral to the charter service.
This reduced VAT rate is expected to enhance Malta’s attractiveness as a premier yachting destination, encouraging more high-value tourism and reinforcing its maritime services sector.
Yacht charter businesses should review these conditions and guidelines to ensure compliance and optimize their operations under this new fiscal framework.
If you have any queries about the Special 12% VAT Rate for Yacht Charters in Malta then please get in touch.
Italy, a country celebrated for its picturesque landscapes, rich history, and vibrant culture, offers more than just a travel destination.
With major cities like Milan, Rome, and Venice, Italy presents a unique opportunity for investors to gain residence in a well-connected EU market.
The Italy Residence by Investment Program provides a gateway to Europe with a variety of investment options tailored to meet different needs, enabling successful applicants to obtain residence rights within three to four months.
The Italian Golden Visa comes with numerous benefits, including:
Applicants can choose from two main investment avenues to qualify for the Italian residence:
– Invest a minimum of EUR 2 million in Italian government bonds.
– Commit at least EUR 500,000 to Italian shares, reduced to EUR 250,000 for innovative start-ups.
– Make a non-refundable donation of EUR 1 million to projects of public interest in Italy, including fields like culture, education, ecology, and more.
Family members such as a spouse, children, and dependent parents can also apply for a visa under the main applicant’s investment without the need for additional funds.
– Ideal for individuals who can demonstrate a stable annual income from foreign sources.
The Italian Golden Visa is initially granted for two years and can be renewed for an additional three years as long as the investment is upheld. The application process generally takes between 90 to 120 days from submission, with the investment required to be made within three months of entering Italy.
For the Investor Visa Program, purchasing or renting residential property in Italy is necessary following approval. Applicants under the Elective Residence Program must also secure residential real estate and prove stable income.
Residency can evolve into permanent residence after five years, provided the investor relocates to Italy. Interestingly, the program does not mandate a minimum physical presence in Italy, offering flexibility for global investors.
Italy’s Residence by Investment Program not only opens the door to a life in one of the world’s most enchanting countries but also offers a strategic foothold in the European Union.
With flexible investment options and a straightforward application process, this program stands out as a premier choice for those looking to invest in Italy and enjoy the myriad benefits it offers.
If you have any queries about this article on Italy’s Golden Visa regime, or Italian tax or other matters in general, then please get in touch.
Obtaining tax residency in Monaco is appealing to many high net worth individuals due to its favorable tax regime.
Famously, Monaco does not levy personal income tax, which makes the process and requirements of obtaining tax residency an important step.
Tax residency in Monaco is officially recognized through the issuance of a tax residence certificate by the Principality’s authorities.
This certificate, known as the “certificat à des fins de formalités fiscales,” serves as proof of residency for fiscal purposes.
To qualify as a tax resident, applicants must meet specific criteria laid out in Sovereign Ordinance No. 8,372 dated November 26, 2020.
The criteria, which are controlled by the Monegasque government, include:
Applicants must hold a valid “carte de séjour,” or administrative residence permit.
Applicants should either:
Applicants need to prove their residence in Monaco by showing ownership, rental agreements, or cohabitation within the last year, supported by utility bills or other approved documents.
Depending on the case, additional documents such as bank statements or electricity bills might be required to further prove the legitimacy of the residency.
Monaco’s tax policy offers multiple benefits for residents:
These policies make Monaco an attractive destination for individuals seeking to optimize their tax liabilities.
For EU and EEA nationals, applying for residency involves submitting a valid identity card or passport, along with the necessary forms provided by the Monegasque government.
For those outside the EU/EEA, other specific requirements may apply.
For many high net worth individuals, tax residency in Monaco is seen as the holy grail. However, other nil personal tax jurisdictions, such as the UAE, also offer a similar light touch.
However, if one is looking to switch one’s tax residency to another place, then this is not a task to be taken lightly. You need to plan and plan early.
The road to becoming a tax exile is peppered with bear traps.
If you have any queries about this article on Tax Residency in Monaco, or tax matters in Monaco more generally, then please get in touch.
Cyprus has become a premier destination for creating trusts, thanks to its robust legal framework and generous tax incentives.
The concept of a trust, considered one of the most significant legal innovations in English jurisprudence, allows individuals and corporations to meet various objectives, such as asset protection, estate planning, and confidentiality.
In Cyprus, the legal system supports a wide range of trust types, including fixed trusts, discretionary trusts, and charitable trusts, each designed to serve different needs.
One of the most notable trust structures in Cyprus is the “international trust.”
Following the 2012 amendments to the International Trusts Law 69(I)/92, Cyprus has become one of the most competitive jurisdictions for establishing international trusts, offering unique benefits compared to other locations.
This type of trust allows individuals to take advantage of the country’s favorable legal and tax environment while enjoying significant flexibility.
To create a Cyprus international trust, certain criteria must be met:
The term “resident” refers to someone who resides in Cyprus for more than 183 days in a tax year or a company that is managed and controlled within Cyprus.
Setting up a Cyprus international trust provides numerous benefits, including:
These trusts offer an excellent solution for high-net-worth individuals seeking strategic asset planning, particularly for those with complex family arrangements.
Settlors can reserve certain powers when establishing a Cyprus international trust.
These powers might include the ability to revoke or alter the trust, appoint or remove trustees or other key positions, or give specific instructions to the trustee.
Cyprus international trusts can continue in perpetuity, as the rule against perpetuities has been excluded.
The 2012 amendments to the Cyprus International Trusts Law have positioned Cyprus as a leading jurisdiction for setting up international trusts.
The comprehensive legal framework provides unparalleled protection and flexibility, allowing settlors, trustees, and beneficiaries to structure their family or business arrangements to meet their unique needs and objectives.
With these advantages, Cyprus stands out as an attractive destination for creating trusts with significant tax benefits and legal security.
If you have any queries about this article on Cyprus Trusts, or tax matters in Cyprus more generally, then please get in touch.
If you are a tax adviser – whether from a legal or accountancy background – then we would love to discuss how you can become one of our ranks of Tax Natives.
All you need is your local tax knowledge of Cyprus and any other regions around the world!
For more information please see here or get in touch.
In a move to revamp its fiscal approach, Canada’s Budget 2024 proposes significant changes to how capital gains are taxed under the Income Tax Act.
The budget proposes to increase the capital gains inclusion rate from one-half to two-thirds.
For individuals, this increased rate applies to capital gains exceeding $250,000 in a year. For corporations and trusts, the new rate applies universally.
The $250,000 threshold for individuals will consider net calculations, accounting for current-year capital losses, carried forward or back losses, and gains where specific exemptions like the Lifetime Capital Gains Exemption have been claimed.
Net capital losses incurred under the previous one-half inclusion rate can still offset gains after the rate change, ensuring losses retain their full offsetting value.
To align with the new inclusion rate, adjustments will be made to the stock option deduction rules.
The available deduction will remain at one-half for combined capital gains and employee stock options up to $250,000, reducing to one-third beyond this limit.
The new regime will apply to gains realized on or after 25 June 2024.
Special transitional rules will help manage gains and losses across the changeover period, particularly for taxation years that span the implementation date.
The changes challenge the principle of integration in Canada’s tax system by potentially disincentivising the use of holding corporations for investment purposes due to the lack of a $250,000 exemption for such entities.
There is no distinction between residents and non-residents in the application of these rules, suggesting potential amendments to the withholding tax rate on non-residents disposing of taxable Canadian property.
The government anticipates additional federal revenue of approximately $19.4 billion over five years, with provincial revenues potentially increasing by $11.6 billion. The bulk of this is expected soon after implementation, indicating an anticipated rush by taxpayers to realize gains before the new rules take effect.
It remains unclear if the $250,000 exemption for individuals will be indexed for inflation, which could gradually erode its real value over time.
Taxpayers should consider whether to accelerate transactions to realize gains before the June 25, 2024 effective date.
Additionally, the strategic use of loss carrybacks or reserves could be beneficial, especially if these can offset higher-taxed gains post-change.
Businesses and individuals should also re-evaluate the holding structures for their investments, potentially moving away from corporate vehicles to more tax-efficient entities like limited partnerships or direct holdings.
Budget 2024’s proposed changes to capital gains taxation represent a significant shift in Canada’s tax landscape.
While aiming to generate substantial revenue, these changes pose new challenges and planning opportunities for taxpayers.
As the government has yet to release detailed implementing legislation, ongoing vigilance and flexibility in tax planning will be crucial for all affected parties.
If you have any queries about this article on Changes to Canadian Capital Gains, or tax matters in Canada more generally, then please get in touch.
If you are a tax adviser – whether from a legal or accountancy background – then we would love to discuss how you can become one of our ranks of Tax Natives.
All you need is your local tax knowledge of Canada and any other regions!
For more information please see here or get in touch.