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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
The Antigua and Barbuda Citizenship by Investment Program offers a pathway to citizenship for high-net-worth individuals and their families, providing access to the European and Caribbean markets and key Asian financial centers.
Holders of an Antigua and Barbuda passport enjoy visa-free or visa-on-arrival access to over 150 destinations, including major hubs like Hong Kong, Singapore, the UK, and Europe’s Schengen Area.
The program allows the inclusion of a spouse, dependent children under 31, parents and grandparents over 55, and unmarried siblings of any age of the main applicant or their spouse. Dependents can also be added post-citizenship grant. Commonwealth Membership
Citizenship includes privileges in the UK and other Commonwealth countries.
The nation offers excellent air links and is an appealing location for residence or owning a second home.
To qualify, applicants must choose from one of the following:
The minimum investment required will rise to USD 200,000 by June 30, 2024. This provides a limited window under current, more favorable investment conditions.
This program not only facilitates global travel and business opportunities but also requires minimal physical presence, making it an attractive option for investors seeking flexible citizenship solutions.
If you have any queries about the Antigua and Barbuda Citizenship by Investment Program then please get in touch.
The scene is set in a bustling hotel lobby in Mumbai. The crowd is excited as it is just hours before Mumbai Indians crucial game in the Indian Premier League (“IPL”).
The interviewer, Our Chief Tax Native, and the interviewee, Secret Adviser in India, are seated on a comfortable sofa, sipping coffee.
There’s a background hum of activity—guests checking in, a receptionist arguing with a new guest, and a cleaner fussing over something nearby. Secret Adviser seems relaxed, while Tax Natives appears focused on their questions.
[Leaning forward with a notepad in hand]
Good morning, Secret Adviser. Let’s talk about taxes in India. What are the basic principles of taxation there?
[Sips coffee]
Good morning, Tax Natives. In India, the Income-tax Act, 1961, governs personal taxation. Generally, Indian residents are taxed on their worldwide income, while non-residents are taxed only on income that originates in India.
[Frustratingly shakes their pen] I see. So, how is a person’s residential status determined for tax purposes?
[Leans back, relaxing]
It depends on their physical presence in India. You’re considered a resident if you’re in India for at least 182 days during a financial year, or 60 days during a financial year and 365 days in the previous four years.
But there are exceptions, especially for those who leave India for work or visit India from abroad.
Now, what’s this about the new income tax regime in India? I heard it’s quite different from the old one.
[Nods] Yes, it’s a major shift. The new regime offers lower tax rates if you give up certain tax deductions and exemptions.
From April 2023, it’s the default regime, but taxpayers can choose the older one if they prefer.
It’s aimed at simplifying the tax structure and is particularly beneficial for high-net-worth individuals due to lower surcharge rates.
[Meanwhile, the receptionist is in a heated argument with a new guest about a booking mix-up.]
Busy morning here! Let’s talk about the recent changes in tax rates. I heard there’s a reduction in the surcharge for the super-rich?
Yes, from April 2023, the surcharge rate was reduced from 37% to 25% for those earning over 50 million rupees.
This has lowered the effective tax rate from 42.74% to 39%, which is significant for high-income individuals.
[Writes down notes…or makes a doodle]
That’s quite a relief for them. What about capital gains? Any new changes there?
[Nods]
There’s a cap on the exemption for long-term capital gains from the sale of residential property. If the gains exceed 100 million rupees, they are now taxable. This cap was introduced from April 2023 to prevent excessive tax breaks.
[The tourist returns, holding a map upside down, clearly still lost. Tax Natives and Secret Adviser point him in the right direction, and he leaves with a smile.]
[Smiling] He’ll get there eventually. Now, what about gift and succession taxes? Are those coming back?
[Shakes her head]
Not quite. India doesn’t have succession or inheritance tax, and gift tax was abolished in 1998.
However, there’s a deemed gift tax in the income tax regime. It applies to money or property received without consideration or at an undervalue.
Recent amendments made it clear that gifts received by non-residents or RNOR from Indian residents are taxable in India.
[The receptionist’s argument with the guest reaches a resolution, and there’s a round of applause from the lobby staff.]
[Grinning] Looks like things are calming down. One last question: how does India deal with cross-border structuring and regulatory issues for HNIs?
[Leans in] India has an extensive network of tax treaties with various jurisdictions. There’s also the Black Money Act, which addresses undisclosed foreign income and assets.
It’s been a big tool in tackling tax evasion, granting authorities wide-ranging powers to investigate.
In terms of entrepreneurs and private trusts, the abolition of the dividend distribution tax in 2020 changed things, and the ‘angel tax’ now applies to share premiums exceeding fair market value, even for non-residents.
[Nods] Thanks for the detailed explanation, Secret Adviser. Enjoy your coffee, and watch out for that tourist!
[Laughs] Thanks, Tax Natives. I’ll keep my eyes peeled!
If you have any queries about this article on private client tax in India, or Indian tax matters more generally, then please get in touch.
In a time of increasing financial strain due to the European Central Bank’s (ECB) continuous interest rate hikes, families are feeling the pinch.
So many people will be turning to that even more esteemed bank. The Bank of Mum and Dad!
In some scenarios, this doesn’t just mean cash hand outs. It might also mean gifting properties to children (or indeed other family members).
But how can property be gifted in Spain without attracting high taxes?
Gifting property in Spain is becoming a popular way for parents, spouses, and family members to support their loved ones without incurring excessive taxes.
This practice has gained traction as several regions in Spain, including Andalucia, Madrid, and Galicia, have implemented tax laws that significantly reduce or eliminate inheritance and gift taxes.
Gifting property or money occurs in various scenarios:
The Donor and the donee should be aware of the potential tax liabilities involved:
This tax applies if the property’s value has increased since you acquired it.
The capital gain is calculated by subtracting the purchase price and related costs from the property’s value at the time of gifting.
You will be taxed on this gain at a rate of 19% (or 24% if you’re a non-resident donor from outside the EU).
This is a local tax levied by the municipality on the increase in the land value of the property since it was last acquired.
The rate and rules for calculating Plusvalía Tax can vary depending on the specific location of the property.
Spain has a national gift tax, but rates are set by individual regions (Autonomous Communities).
In some regions, there can be significant exemptions for gifts to close relatives, such as children or spouses.
For instance, some regions offer a nearly zero tax rate for gifts between parents and children.
It’s important to research the specific tax rates that apply in the region where the property is located.
Besides taxes, there are additional expenses to consider, including lawyer’s fees, notary fees, and land registry fees.
To ensure a smooth and tax-efficient transfer, it’s crucial to retain a lawyer from the beginning. The gift deed must be prepared and witnessed by a Spanish notary.
Proper planning is essential, as failing to follow the correct legal procedures can lead to a significant tax burden.
For joint property owners seeking to re-arrange their holdings, a DJPO can be an effective alternative, reducing taxes by up to 86%.
It applies in situations like divorce, re-arranging inheritances, and property re-organization among family and friends.
Gifting property can be an excellent way to help loved ones while minimizing tax obligations.
To avoid high taxes and ensure a smooth legal process we would certainly recommend tapping into local expertise
If you have any queries about this article on gifting property in Spain and tax, or other Spanish tax matters, then please get in touch.