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The Alternative Minimum Tax (AMT) is a special tax system designed to ensure that high-income earners pay at least a minimum amount of tax, even if they qualify for a lot of tax breaks under the regular tax system.
The AMT was created to prevent people with very high incomes from using deductions and loopholes to avoid paying taxes altogether.
For 2024, the IRS has raised the AMT exemption, which is the amount of income that’s not subject to the AMT.
For 2024, the AMT exemption has been raised to £85,700 for single filers and £119,300 for married couples filing jointly.
This means that if your income is below these amounts, you won’t have to worry about paying the AMT.
The AMT exemption phases out for higher earners, starting at £578,150 for single filers and £1,156,300 for married couples.
If your income exceeds these thresholds, you may still have to pay the AMT.
The AMT typically affects high-income earners who claim a lot of deductions or have complex tax situations.
For example, if you claim a large number of deductions for state and local taxes, home mortgage interest, or investment losses, you might be subject to the AMT.
The AMT ensures that everyone pays at least a minimum level of tax, even if they qualify for a lot of deductions under the regular tax system.
The IRS adjusts the AMT exemption every year to account for inflation.
Without these adjustments, more and more people would be subject to the AMT over time, even if their real incomes haven’t increased.
By raising the exemption, the IRS ensures that the AMT continues to target only the highest-income taxpayers.
The increase in the AMT exemption for 2024 is good news for high-income taxpayers who might otherwise be subject to the AMT.
By raising the exemption, the IRS is helping to ensure that only those with very high incomes and large deductions will have to pay the AMT, while still ensuring that everyone pays their fair share of taxes.
If you have any queries about the Alternative Minimum Tax (AMT) 2024, or any other US tax matters, then please get in touch.
Every year, the IRS adjusts tax brackets to account for inflation. Inflation is the increase in the price of goods and services over time, which means that your money doesn’t stretch as far as it used to.
By adjusting the tax brackets, the IRS ensures that people don’t end up paying more taxes just because of inflation.
For 2024, the IRS has made changes to the federal income tax brackets, which could result in lower taxes for many people.
Here’s a quick look at the 2024 federal income tax brackets for single filers:
For married couples filing jointly, the brackets are doubled.
These new tax brackets reflect inflation and help ensure that people don’t pay more tax just because of the rising cost of living.
The new tax brackets mean that more of your income will be taxed at lower rates in 2024.
For example, if you earn the same amount of money in 2024 as you did in 2023, you might end up paying less tax because the income thresholds for each tax bracket have increased.
This is especially helpful for people who receive raises or cost-of-living adjustments to their wages.
Without these changes to the tax brackets, you could be pushed into a higher tax bracket and end up paying more taxes, even though your real income hasn’t increased.
The 2024 tax bracket adjustments are a positive change for most taxpayers. By accounting for inflation, the IRS ensures that you don’t pay more tax than necessary.
This helps make the tax system fairer and ensures that people aren’t unfairly penalised by the rising cost of living.
If you have any queries about this article on Changes in 2024 Tax Brackets Due to Inflation, or US tax matters in general, then please get in touch.
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.
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.
Introduced in the 2023-2024 Budget and launched on 1 March 2024, Hong Kong’s revamped Capital Investment Entrant Scheme (New CIES) is designed to attract substantial new capital and enrich the city’s talent pool.
This initiative is a part of eight policy measures to develop Family Office Businesses, as outlined by the Financial Services and Treasury Bureau in March 2023.
The New CIES is tailored for natural persons who meet specific criteria:
Applicants must invest in both of the following categories:
The application process requires that the investment assets be managed by approved financial intermediaries and kept in accounts under the applicant’s name.
Compliance with ongoing portfolio maintenance is essential, and applicants must not withdraw any capital gains if the value of their investments exceeds HK$30 million, though they are allowed to withdraw dividends, interest, and rental income.
This streamlined scheme emphasizes capital investment without the added requirements of educational background or work experience, unlike other immigration pathways such as the Top Talent Pass Scheme.
The New CIES not only raises the threshold for permissible investments to HK$30 million but also broadens the scope of acceptable investment assets.
This approach is expected to draw high-net-worth individuals to Hong Kong, bolstering its reputation as a global hub for asset and wealth management.
The New CIES has generated significant interest among financial institutions, underscoring its potential to transform Hong Kong’s economic landscape by attracting new capital and fostering the growth of strategic industries beneficial to long-term development.
As this scheme progresses, it is poised to make a marked impact on Hong Kong’s position in the global financial arena.
If you have any further queries about Hong Kong’s Capital Investment Entrant Scheme 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.
The Greece Golden Visa Program stands out as one of the most accessible and affordable residence by investment programs in Europe.
Launched in 2013, this program offers non-EU nationals and their families the opportunity to obtain permanent residence permits in Greece, providing a straightforward path to living and traveling throughout Europe.
Key Features of the Greece Golden Visa Program
The Greece Golden Visa offers several compelling benefits:
The Greece Golden Visa Program requires a qualifying investment in one of several categories:
Purchase property worth a minimum of EUR 250,000, with higher values required in prime location’s like Mykonos and Santorini.
Deposit at least EUR 400,000 into a Greek credit institution for a minimum of one year, with a standing order for renewal.
Invest a minimum of EUR 400,000 in a Greek company for share capital increase or bonds.
Contribute to a real estate or closed-end investment company with the intention to invest exclusively in Greece.
Purchase Greek government bonds, corporate bonds, or shares with minimum specified values, ensuring investment in regulated markets within Greece.
The application process for obtaining a Greece Golden Visa is streamlined into several clear steps:
The entire process, from choosing the investment to receiving the permit, is designed to be completed within three to four months, making it one of the fastest and most efficient programs of its kind.
The Greece Golden Visa Program offers a lucrative opportunity for non-EU nationals seeking a permanent residence in Greece with the added benefit of visa-free travel across the Schengen Area.
With its flexible investment options, minimal residency requirements, and quick processing times, the program is an excellent choice for investors looking to expand their global mobility and access the European lifestyle.
The cost of the Visa Program will increase from the current EUR 250k minimum investment to a new minimum of EUR 400k.
Investors may still apply under the current threshold as long as they pay a 10% deposit by 31 August 2024. They will also need to finalise the investment by 31 December 2024.
If you have any queries about Greece’s Golden Visa, or tax matters in Greece, then please 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.
Bustling hotel lobby in the heart of Amsterdam
[Leans forward with a notepad in hand] Good morning, Secret Adviser. Let’s dive into the intricacies of tax residency. How does one become taxable in the Netherlands?
[Sips coffee] Good morning, Tax Natives. Well, in the Netherlands, you become taxable either by being a Dutch resident or a non-resident taxpayer. It primarily depends on your main residence and other factual circumstances—like where your family lives or where your main economic interests lie.
[Frustratingly shakes their pen] I see. So, what determines a Dutch resident taxpayer exactly?
[Leans back, relaxing] For a Dutch resident taxpayer, it’s about having your main residence here in the Netherlands. This includes where your permanent home is maintained, where you work, where your family resides, where you’re registered with local authorities, and where your main bank accounts and assets are.
Now, what about non-resident taxpayers? How are they handled?
Non-resident taxpayers are those who have their main residence outside the Netherlands but earn income from Dutch sources. There’s also something called a ‘qualifying non-resident taxpayer’ status for those in the EU, EEA, Switzerland, or the BES islands, earning at least 90% of their worldwide income here. They get similar tax deductions and credits as resident taxpayers.
[A tourist interrupts, holding a map upside down, looking puzzled]
Excuse me, could you tell me how to get to the Van Gogh Museum?
[Points in the right direction with a smile] Just keep heading straight down this road, you can’t miss it!
[Laughs] Always busy around here! Let’s talk about the 30% ruling. How does that affect tax status?
[Nods] Yes, it’s a major shift. The 30% ruling allows some taxpayers to receive 30% of their income tax-free, and they can choose to be treated as partial non-residents. Meaning, they’re considered residents for personal income like salary but non-residents for income from investments.
[A waiter comes by, accidentally spills a small amount of water]
Oh dear, I’m terribly sorry!
No problem at all. [To Tax Natives] As I was saying, the classification affects how different types of income are taxed under various ‘boxes’ of income categories.
Speaking of which, could you elaborate on these ‘boxes’ of income?
Certainly. There are three boxes. Box 1 includes income from employment and home ownership, taxed up to 49.50%. Box 2 deals with income from substantial interest, like owning 5% or more in a company, taxed at 26.9%. Lastly, Box 3 covers income from savings and investments, which is sort of a net wealth tax.
Fascinating! And what about capital gains?
Capital gains are usually taxed either as business income in Box 1 or as substantial interest in Box 2, depending on the asset involved. The Dutch system doesn’t typically tax capital gains separately, except under certain conditions.
[Writes down notes…or makes a doodle] That’s quite comprehensive. Thanks for breaking it down, Secret Adviser.
[Laughs] Happy to share. Enjoy the rest of your day, and watch out for more spilled water!
[Grinning] Will do. Thanks for your insights!
[Both stand up, shake hands, and Secret Adviser heads towards the conference area of the hotel]
If you have any queries about private client tax in the Netherlands, or tax matters in Holland more generally, then please get in touch