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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.
Spring Budget 2024 delivered a shock to the system. Facing a ruinous election, it is almost as if the Tories were left with one option to steal Labour’s thunder and abolish the non-dom regime themselves.
I am sure they enjoyed themselves in the commons bar afterwards.
However, as the Bard once said, “these sudden joys have sudden endings. They burn up in victory like fire and gunpowder.”
Will the proposals supercharge the UK economy – or do they simply look like the actions of economic arsonists?
Regardless, recent missives from the Labour Party indicate a commitment to not only retain the Government’s proposal, but to further fortify them.
Removing the few silver linings in those original proposals.
New arrivals to the UK who qualify for the new regime will benefit from a full exemption on foreign income and gains for the first four years that they are resident for tax purposes.
In contrast to the current remittance basis, those foreign income and gains (“FIG”) can be brought to the UK without penalty at any time (as long as they arose in the four year window).
After the four year window has closed, they will be taxed like any UK resident and domiciled taxpayer.
The new regime will potentially apply to:
New arrivals must have had a continuous absence from the UK for a period of ten years.
Those who are already in the UK may benefit as well, although the window may be much narrower. This is because they will need to have been tax resident for fewer than four tax years from 6 April 2025. They can benefit until their four years are up.
The above is relatively straightforward. The issues will arise when it comes to dealing with those who have been in the UK for much longer and might also have established trusts and other entities reflecting their status.
We are told that there will be the following transitional rules:
We were told that all new foreign income and gains that arise within a trust from 6 April 2025 will be taxable.
However, where such income and gains arose in such a trust before 6 April 2025, then it will not be taxed unless:
The main connecting factor that determines a person’s exposure to IHT is domicile. So, if we are digging a hole and burying the concept for tax purposes, what is to be done here?
Under vaguer proposed rules, a new test such that a person would only be subject to IHT once they had been resident in the UK for 10 years. On the other hand, exposure to IHT would only be lost when the person had been resident outside the UK for a further 10 years.
It will be interesting to see if those who have remained domiciled in UK domiciliary can escape the scope of IHT on worldwide assets 10 years after leaving the UK, but it appears this may be the case based on the information available so far. If so, this could be seen as a major ‘sweetener’ for expats.
However, notably, we were told that the treatment of non-UK assets settled into a trust by a non-UK domiciled settlor prior to April 2025 would not change and remain excluded property (subject to existing exceptions).
Following the release of a document from Labour’s PR team, and oddly not to be located on their website, they have now formally set out their own proposals.
Labour asserts that its plans on IHT will raise an extra £430m each year in extra IHT. However, the evidence for such claims is pretty shaky.
The Tories proposals seemed like shot in the arm – for all those other jurisdictions looking to attract global wealth, anyway.
The fact that Labour wants to push the envelope even further might be politically bold – but might look like economic self-sabotage.
As Billy boy said, “All the world’s a stage, and all the men and women merely players. They have their exits and their entrances.
The question here is will there be more exits or entrances?
Let’s hope there is no Shakespearean tragedy.
If you have any queries about this article on Labour’s Further Changes to Non-Dom Regime, or UK tax matters in general, then please get in touch.
In a strategic move to bolster economic stability, the Argentine government, through Decree No. 281/2024 published on 27 March 2024, has extended an attractive incentive for the repatriation of financial assets held abroad by its citizens.
Originally set to conclude by 31 March 2024, the deadline for this initiative has now been extended to 30 April 2024, allowing taxpayers additional time to benefit from favorable Personal Assets Tax (PAT) rates.
The essence of this decree lies in its provision for equalizing the PAT rates for assets located abroad with those within Argentina.
To qualify for this benefit, taxpayers must repatriate at least 5% of their total financial assets held overseas before the new deadline.
This move is aimed at encouraging the return of capital to the country, thereby injecting liquidity into the national economy.
To enjoy the harmonized tax rates, the repatriated funds must be:
The decree ensures that assets repatriated and meeting the specified conditions will be subject to the same PAT rates as those applicable to domestically located assets, potentially leading to significant tax savings for individuals.
This is in contrast to the higher rates traditionally applied to assets located abroad, thus providing a substantial incentive for the repatriation of assets.
For assets located within Argentina, the tax rates range from 0.50% to 1.75% for assets exceeding specific thresholds, providing a graduated tax scale based on the total value of assets.
Conversely, assets held abroad are subject to rates ranging from 0.70% to 2.25%, depending on the combined value of domestic and foreign assets.
This decree represents a pivotal effort by the Argentine government to repatriate capital, promoting investment within the country.
By offering a streamlined and financially advantageous process, Argentina aims to strengthen its economic foundations and foster a more robust investment climate.
If you have any queries about this article on Tax Incentives for Repatriation of Financial Assets, or tax matters in Argentina more generally, then please get in touch.
Under Canada’s taxation system, your residency status plays a pivotal role in determining your income tax obligations and entitlements.
Whether you’re a Canadian citizen, a permanent resident, or a foreign national, understanding the factors influencing tax residency is crucial.
This article explores some of the considerations involved in determining tax residency status in Canada.
The Canadian Revenue Agency (CRA) assesses various factors, known as “residential ties,” to determine an individual’s tax residency status.
These ties can be categorized into primary and secondary ties
These include the location of a primary dwelling, spouse or common-law partner, and dependents.
Secondary ties encompass personal property in Canada, social and economic ties with Canada, immigration status, healthcare coverage, driver’s license, vehicle registration, and memberships in Canadian organizations.
While primary ties carry significant weight, secondary ties are also considered collectively to ascertain residency status accurately.
The duration of an individual’s stay in Canada within a tax year is a crucial factor in residency determination.
Spending 183 days or more in Canada during a tax year typically results in Canadian residency for tax purposes.
However, even shorter stays can impact residency status when coupled with primary and secondary residential ties.
In cases of dual residency, where an individual is considered a resident of both Canada and another country for tax purposes, treaty tie-breaker rules apply.
These rules help resolve conflicts in residency status and prevent double taxation by considering factors such as the individual’s permanent home, center of vital interests, habitual abode, and nationality.
Based on the above criteria, individuals are categorized into three residency status groups by the CRA:
Individuals with significant residential ties to Canada are subject to Canadian income tax on their worldwide income.
Those lacking significant residential ties are subject to Canadian tax solely on Canadian-source income.
Certain individuals not meeting residency criteria may be deemed residents under specific circumstances, such as establishing significant ties to Canada without residency in another country under a tax treaty.
If uncertain about residency status, individuals can seek guidance from tax professionals and utilize CRA forms like Form NR74 (Entering Canada) or NR73 (Leaving Canada) to assess ties to Canada.
Advanced income tax rulings from the Income Tax Rulings Directorate offer further assurance, although they require thorough documentation and are legally binding.
Determining one’s tax residency in Canada is no simple task and the result will have significant implications for a taxpayers tax obligations and entitlements.
If you have any queries or comments on this article, or on any other Canadian tax issues, then please get in touch.
Like any tax system, Albania’s tax rules come with critical dates for taxpayers with April 30 being one of the most significant.
This marks the deadline for the declaration and payment of Personal Income Tax through the Annual Individual Tax Declaration (DIVA) for the previous fiscal year.
Understanding the DIVA process is essential for both residents and non-residents alike, as it carries legal obligations and implications.
The DIVA declaration process for the fiscal year 2023 remains consistent with previous years, maintaining similar categories and obligations.
Despite upcoming changes with the implementation of the new “Income Tax” law in 2025, which will affect declarations for the fiscal year 2024, the current process remains unchanged.
The Albanian Tax Authorities issue reminders to both resident and non-resident individuals who meet specific criteria.
Those with an annual gross income exceeding ALL 2,000,000 in 2023 or individuals engaging in moonlighting activities for at least one tax period within the year are legally obligated to complete the “Annual Individual Income Statement” as part of the DIVA process.
It’s crucial to note exemptions for individuals classified as ‘self-employed’ and those employed by an entity, whether an individual or a legal entity, from whom they receive income in the form of wages and employment-related benefits.
These individuals are exempt from declaring the DIVA, justified by the ‘self-employed’ category’s responsibility for paying social and health insurance, with their ‘Gross Salary’ section specified as zero.
The DIVA 2023 declaration includes pre-filled data regarding annual gross income from wages or benefits derived from employment relationships for individuals.
Additionally, the calculation of Income Tax from Employment is provided.
While prefilled, these sections are editable fields, enabling declarants to review and make necessary changes.
Moreover, the amount paid during the year related to Income Tax from Employment is prefilled, streamlining the declaration process.
Beyond its legal obligation, income declaration offers individuals an additional guarantee regarding the justification of their wealth.
It fosters transparency and accountability while ensuring compliance with tax regulations.
As April 30 approaches, it is important that you ensure that you fulfill your DIVA obligations to avoid penalties and remain compliant with Albanian tax laws.
If you have any queries about Albania’s DIVA Tax Declaration, or Albanian tax matters in general, then please get in touch.
The Sostegni Ter (Dl 4/2022) has brought changes to the flat tax rules for new resident retirees in Italy.
Let’s have a closer look at these changes.
Italian law offers a privileged tax regime to individuals receiving foreign pensions who wish to transfer their tax residence to Italy, specifically to municipalities with a population not exceeding 20,000 inhabitants in certain regions.
These regions include Sicily, Calabria, Sardinia, Campania, Basilicata, Abruzzo, Molise, Puglia, among others.
Under this regime, foreign retirees can benefit from an optional tax rate of 7%, regardless of the type of income generated abroad, for each of the nine tax periods during which the option is valid.
This favourable tax treatment also extends to individuals relocating to municipalities affected by serious seismic events, such as L’Aquila, as well as smaller municipalities like Camerino, Matelica, Tolentino, and Norcia.
To aid in identifying eligible municipalities, the “Annual municipal survey of population movement and calculation” is published on the Istat website on January 1st of the preceding year.
Operational procedures for the flat tax, including exercise methods, revocation, and cessation of effects, are outlined by the Revenue Agency.
The flat tax is formalised through the submission of the income tax return for the tax period in which the individual transfers their tax residence.
The taxpayer must meet five requirements, including non-resident status in Italy for at least five tax periods prior to the start of the option’s validity and reporting foreign source income subject to the substitute tax.
The favourable effects of the flat tax cease after five years following the tax period in which the option was exercised.
However, taxpayers can revoke the choice made in subsequent tax periods directly in the income tax return.
Clarifications from the Italian Revenue Agency confirm that the 7% flat tax applies to all retirees, regardless of nationality, receiving a foreign pension, including those receiving an INPS pension.
Loss of eligibility for the regime may occur due to failure to meet requirements, omission of tax payment, transfer to a non-eligible municipality or abroad, or emergence of Italian tax residence in the preceding five years.
No doubt the Italian flat tax regime for foreign pensioners will prove attractive to those who are looking to retire overseas.
If you have any queries about the Italian Flat Tax for New Resident Retirees, or Italian tax matters more generally, then please get in touch.
A year after Hong Kong lifted its final COVID-19 restrictions, the city continues grappling with economic recovery challenges, exacerbated by global geopolitical tensions and high interest rates.
Despite these hurdles, the Financial Secretary, Mr. Paul Chan, unveiled several tax-related measures in the 2024-25 Budget Speech on 28 February2024, aimed at revitalising the economy.
This article delves into the key measures affecting high net worth individuals, fund managers, and property investors.
In an effort to increase public revenue, the government proposes a two-tiered standard rate for salaries tax and personal assessment.
The new regime maintains the standard 15 percent rate on the first HK$5 million of net income, while income above HK$5 million will incur a 16 percent rate.
Targeting the city’s wealthiest, this adjustment is expected to affect approximately 12,000 taxpayers, or 0.6 percent of the taxable population.
Despite these changes, Hong Kong’s tax rates remain competitive globally, with rates significantly lower than those in Australia, the United Kingdom, the United States, and Singapore.
This strategic move aims to preserve Hong Kong’s appeal as a low-tax haven for affluent professionals and talents.
In a decisive move to stimulate the stagnant property market, all existing cooling measures were abolished as of February 28, 2024.
This sweeping reform followed a partial relaxation last October, including a 50 percent reduction in Buyer’s Stamp Duty (BSD) and New Residential Stamp Duty (NRSD).
Now, both sellers and buyers face only the Ad Valorem Stamp Duty (AVD) at Scale 2 rates, which are significantly more favorable and do not discriminate based on buyer type or residency status.
This policy shift is anticipated to rejuvenate market confidence and transaction volume.
It also opens new doors for using corporate vehicles or trust structures for property purchases and succession planning, a tactic previously deterred by high Stamp Duty costs.
Aiming to solidify Hong Kong’s status as a leading asset and wealth management hub, the Budget proposes to refine tax concession regimes for investment funds, single family offices, and entities receiving carried interest.
Plans include broadening the scope of tax-exempt transactions and easing limitations on incidental transaction income, which has been tightly capped until now.
These adjustments are designed to attract more fund managers and family offices by offering tax incentives on a wider array of financial transactions.
Although specifics are pending, the commitment to expand these tax advantages underscores a clear strategy to bolster investment and reinforce Hong Kong’s competitive edge in global finance.
The 2024-25 Budget reflects Hong Kong’s strategic approach to economic recovery, with significant tax reforms and regulatory easements designed to attract high net worth individuals, enhance the property market, and cement the city’s role as a global financial hub.
As these measures unfold, they promise to reshape Hong Kong’s economic landscape, offering new opportunities for growth and investment in the post-pandemic era.
If you have any queries about the Hong Kong 2024-25 Budget, or Hong Kong tax matters in general, then please get in touch.
“No one has become poor by giving” so that saying goes.
Indeed, charitable giving is a worthy pursuit. However, when it comes to getting it right for US / UK taxpayers, a failure to navigate the tax rules on both side of the pond might result in one becoming poorer than one needs!
This is particularly the case for UK residents who are also US citizens.
Here, understanding the tax implications and opportunities for relief is crucial.
The remainder of this short article sets out some of the considerations for such taxpayers when it comes to tax-efficient giving.
For donors aiming to optimize their contributions, the UK offers several tax reliefs, including for:
These reliefs encourage donations by reducing the tax impact on the donor. However, there’s no such thing as a free lunch – so each of them comes with specific requirements, particularly concerning the recipient charity’s eligibility.
A key consideration for UK taxpayers is ensuring donations are made to entities recognised as charities under UK law.
This recognition is crucial for accessing tax reliefs, and recent clarifications have emphasized that only donations to UK charities qualify, excluding those to charities based in the EU, EEA, or beyond.
For US taxpayers, the criteria for charitable tax relief differ, posing challenges for those looking to donate to UK charities.
Given the discrepancies between US and UK definitions of charitable entities, a direct donation to a UK charity may not be eligible for US tax relief.
This discrepancy necessitates exploring alternative giving options that satisfy both jurisdictions’ requirements.
A DAF serves as a flexible option, allowing donors to contribute to a fund recognized for tax purposes in both the US and UK.
This approach offers the convenience of less administrative burden, as the DAF provider handles compliance and reporting requirements.
While it provides a streamlined way to support charitable causes, it may offer less control over the exact use of the funds compared to more direct involvement in a charity.
For donors seeking a more hands-on role or aiming to support activities beyond grant-making, establishing a dual resident charitable structure may be preferable.
This setup involves a US charity that wholly owns a UK charitable entity, enabling tax-efficient grants that are eligible for relief in both countries.
This structure is ideal for those looking to actively engage in charitable operations or governance.
Another option for one-off donations is to contribute to a ‘friends of’ entity within the donor’s home jurisdiction, which then forwards the funds to the main charity abroad.
This method ensures tax reliefs are applicable, though it’s dependent on the existence of such ‘friends of’ branches.
Charitable giving for US-UK taxpayers involves navigating a maze of tax regulations to ensure donations are both impactful and tax-efficient.
Whether opting for a DAF, a dual resident charity, or a ‘friends of’ charity, the goal is to maximize the benefit to both the donor and the recipient charity.
Given the potential for tax pitfalls, seeking expert advice is paramount to ensuring that charitable gestures do not inadvertently lead to tax liabilities, thereby preserving the spirit of giving in a financially savvy manner.
If you have any queries on this article on Charitable donations and US / UK taxpayers, or US tax matters in general, then please get in touch.
The meeting takes place in the welcoming lobby of an undisclosed hotel in Central, Hong Kong.
[Adjusts glasses, voice hushed] Secret Private Client Adviser in Hong Kong, your mission, should you choose to accept it, is to educate us on the detailed tax considerations in Hong Kong.
This task requires in-depth knowledge and utmost discretion.
Should your identity be compromised, you will be disavowed.
Are you ready to embark on this mission?
[Nods firmly, a glint of excitement in their eyes] I accept. Let’s unravel the complexities of Hong Kong’s tax landscape.
[Opens a notebook, intrigued] Could you start by explaining the tax system in Hong Kong, especially for individuals?
[Leans forward, speaking earnestly] Certainly. Hong Kong operates on a territorial basis for taxation.
This means only income and profits arising in or derived from Hong Kong are taxed. There are two main legislations: the Inland Revenue Ordinance (IRO) and the Stamp Duty Ordinance (SDO).
For individuals, the primary tax is the salaries tax. It’s unique because it’s imposed on income earned within Hong Kong, regardless of the individual’s tax residency. [Pauses as a waiter passes by offering snacks]
[Nods, taking a snack] And what about the rates for this salaries tax?
[Sips coffee, then responds] Salaries tax is interesting.
Individuals can be taxed at progressive rates from 2% to 17%, or a flat rate of 15%, depending on which method yields lower tax.
Deductions and allowances, like contributions to the mandatory pension scheme or donations to charities, play a crucial role in determining the taxable income.
[Frowning slightly] What about other forms of income? Are they taxed differently?
[Smiles reassuringly] Indeed. For instance, rental income is subject to property tax, but individuals can opt for personal assessment, which allows them to be taxed on their aggregate income. But remember, dividends, interest, and trust distributions are generally not taxed.
[Leans in, curious] What about businesses? How does profits tax work?
[Gestures with hands for emphasis] Profits tax is levied on profits arising in Hong Kong from any trade, profession, or business.
It’s similar to corporate tax but with a territorial twist. The place of incorporation or the tax residency of the company doesn’t matter as much as where the profits are made.
The rates are 8.25% for the first HK$2 million and 16.5% thereafter for corporations.
For unincorporated businesses, it’s 7.5% and 15%, respectively.
[A tourist nearby loudly inquires about local attractions, causing a brief distraction]
[Glancing at the tourist, then back] And what about property tax?
[Nods] Property tax is charged on rental income from land and buildings at 15%.
However, if a corporation owns the property and the income is subject to profits tax, they can apply for an exemption from property tax.
[Scratching head] Stamp duty sounds complicated. Can you break it down?
[Laughs lightly] Stamp duty in Hong Kong is indeed multi-faceted. It’s imposed on leases, transfer of immovable property, and Hong Kong stocks.
The rates vary, and there have been additional duties in recent years to cool the property market.
[Suddenly, a cleaner bumps into a table nearby, apologising profusely before scurrying away]
[Smirking at the interruption] I see. What about cross-border tax issues?
[Nods seriously] Ah, that’s a critical aspect. Hong Kong’s tax treaties and agreements, especially for automatic exchange of financial information, are key.
The IRD issues certificates of resident status for international tax matters, but the concept of tax residency is less defined in Hong Kong law.
[Leaning back, satisfied] This has been incredibly enlightening. Your expertise is invaluable, Secret Adviser.
[Standing up, discreetly] The world of taxation is ever-evolving, especially in a dynamic city like Hong Kong. Remember, discretion is the soul of our profession.
[They exchange a knowing look before the Adviser blends into the bustling hotel lobby.]
If you have any queries about private client taxation in Hong Kong, or tax matters in Hong Kong more generally, then please get in touch.
The meeting takes place in the welcoming lobby of an undisclosed hotel just off of O’Connell St in Dublin, Ireland.
Secret Private Client Adviser in Ireland, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Ireland.
This task requires a delicate balance of expertise and discretion.
Be warned, should your real identity be revealed during this covert operation, you will be disavowed by Tax Natives and shunned by your fellow private client advisers.
Do you accept?
I accept.
[settles into a cozy armchair in the hotel lobby] Let’s delve into the tax considerations for private clients in Ireland.
Can you explain how an individual becomes taxable?
[leans forward, tapping a pen thoughtfully] Sure. In Ireland, tax liability hinges on domicile, residence, and ordinary residence.
For instance, if you’re in Ireland for 183 days or more in a tax year, you’re considered a resident.
[arguing with a guest] “No, Mr Bono, we didn’t want your free album drop on Apple… and we don’t want you to do a free concert in the lobby. People are trying to relax.
[suppresses a chuckle, then continues] Interesting. What about individual income taxes?
[sips coffee] Irish residents are taxed on worldwide income, with standard rates at 20% and higher rates up to 40%.
There’s also the universal social charge and pay-related social insurance.
Now, regarding capital gains…
[nods] Yes, how are they taxed?
[adjusts glasses] Capital gains tax is 33% on personal gains above €1,270.
But for non-domiciled residents, only gains remitted into Ireland are taxed.
[glancing at notes] And what about lifetime gifts?
Gifts may be subject to capital acquisitions tax with various tax-free thresholds.
For instance, you can receive €335,000 tax-free from a parent.
[to another guest] “No, we don’t offer tours to find the end of the rainbow!”
[smiles, then asks] What about taxes after death?
[leans back] Similar to gifts, inheritance comes under capital acquisitions tax, with the same tax-free thresholds.
[checking time] Lastly, any other taxes we should know about?
[stands up] Well, there’s local property tax, stamp duty, and VAT on various goods and services.
And no wealth tax in Ireland.
[extends hand] Thank you for these insights!
[shakes hand] Happy to help. Enjoy your stay in Ireland!
[They part ways, Tax Natives heading towards the bustling hotel exit, amused by the unique interactions of the day.]
If you have any queries about this top secret interview on private client tax in Ireland, or Irish tax matters in general, then please get in touch