Tax Professional usually responds in minutes
Our tax advisers are all verified
Unlimited follow-up questions
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
The meeting takes place in an undisclosed, luxurious, but bustling hotel lobby in Tokyo.
Secret Private Client Adviser in Japan, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Japan.
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.
[Sitting comfortably in a plush leather lobby chair] So, let’s dive into the intriguing world of tax law. Can you tell us how an individual becomes taxable in Japan?
[Leans forward, eager to explain] Absolutely. In Japan, it all hinges on two things: residence and source of income.
The Income Tax Act is the main player here. If you’re domiciled in Japan or have been living there for over a year, you’re considered a resident for tax purposes.
[Nods, taking a sip of water] And what about non-residents?
Well, if you’re not a resident, you’re a non-resident. Simple, right?
They’re only taxed on income sourced in Japan.
[Chuckles] That does sound straightforward. What about permanent and non-permanent residents?
[Counts on fingers] Permanent residents, including non-Japanese who’ve been there for five out of ten years, are taxed on their worldwide income.
Non-permanent residents, who’ve been there less than five years, are taxed only on income from Japan or remitted to Japan.
[A waiter suddenly appears, offering a tray of pastries.]
[Cheerfully] Complimentary pastries for our esteemed guests!
[Surprised but delighted] Oh, how lovely! Thank you.
[A tourist approaches, map in hand, looking confused.]
Excuse me, could you direct me to the Imperial Palace?
[Pointing] Sure, it’s straight down the road, then left at the big intersection.
Tourist: [Gratefully] Thank you so much!
[Laughs] All part of the service!
[Also laughing] Is your tax advice as efficient as your directions?
Now, back to tax. What about inheritance tax?
[Nods] Inheritance tax is imposed on heirs and donees under the Inheritance Tax Act. It’s based on residence, nationality, and where the assets are.
[Intrigued] And income tax?
Apart from income tax, there’s also a special reconstruction tax and local inhabitant taxes. The total tax rate can hit up to 55.945%.
[Raises an eyebrow] That’s quite a number. Capital gains?
Capital gains get the same treatment, with a tax rate of 20.315% until 2037.
But, selling real estate held for less than five years? That’s taxed at 39.63%.
[Curious] And what about gifting?
[Nods] Gifts to individuals attract gift tax, but gifts to legal entities mean corporate income tax for the recipient and deemed capital gains tax for the donor.
[Glancing at a luxurious watch] This is fascinating. Real property taxes?
On acquiring real property, you’re looking at acquisition, registration, and license taxes. And if you hold it, there’s a fixed assets tax.
[Impressed] Wow, comprehensive indeed. What about non-cash assets?
No taxes on exports, but imports attract customs, duties, and a 10% consumption tax.
[Smiling] Thank you for this insightful chat. Japan’s tax system seems as intricate as it is interesting!
[Grinning] Happy to share. Japanese tax law is never dull!
[They both stand up, shaking hands, as the lobby bustles with guests and staff.]
If you have any queries about this top secret interview on private client tax in Japan, or Japanese tax matters in general, then please get in touch
The meeting takes place in an undisclosed – but very salubrious – hotel room in Mayfair, London.
Secret Private Client Adviser in the UK your mission, should you choose to accept it, is to educate us on the practical tax considerations in the UK.
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.
[Settling into an ornate armchair, crossing legs] We’re amidst the grandeur of Mayfair, and I’m intrigued to discuss the UK tax system’s recent developments. Could you start by explaining the overarching goal of these changes?
[Leaning back thoughtfully] Certainly. The UK has been focusing on fairness and efficiency in its tax system, targeting loopholes, maximizing collections, and combatting avoidance and evasion.
[Nods, picking up a notepad] Let’s delve into individual taxation. How does it function in the UK?
[Gesturing for emphasis] Individual taxation is administered on a self-assessment basis. Taxpayers must provide HMRC with sufficient information annually, following a unique fiscal year from April 6th to the next year’s April 5th.
[Jotting down notes, glances up] And what about the specifics of income and capital gains tax?
[Pausing as a waiter serves tea, then continues] Income tax is progressive, with a top marginal rate of 45% for high earners. Capital gains tax has evolved from a high rate with taper relief to a more simplified structure, including a flat rate for higher earners. The maximum rate is usually 20% but this might be higher for sales of residential property (28%) and some other specific assets.
[Sipping tea, intrigued] Moving to savings and dividends?
[Smiling slightly] There’s a starting rate for savings income, plus a £2,000 tax-free dividend allowance. Capital gains tax operates similarly, with a basic rate for lower earners and a higher rate for those above £50,270.
[Looking up as a gentle knock on the door indicates room service arrival] And Scotland’s unique stance?
[Nodding] Scotland has its own rates, introducing a starter rate and an intermediate rate, with the top rate at 47%.
[As room service departs, refocusing] The remittance basis seems particularly relevant for high net worth individuals.
[Leaning forward] Yes, it’s key for those moving to the UK who would be regarded as non-UK domiciled.. It taxes only UK income and gains unless foreign income is brought into the country. It’s a longstanding principle with notable changes in 2008 and later years.
What about recent developments in this area?
There have been significant changes. For instance, non-domiciled individuals in the UK for over 15 years can’t claim the remittance basis from April 2017. Essentially, there’s a long stop date beyond which there are no tax benefits of being non-UK domiciled. They’ll become taxed on worldwide income and gains.
[Nods, writing down] And residency rules?
Since 2013, residency is determined by a statutory test, considering physical presence and ties to the UK. There’s a clear day-count method now.
[Glances at watch, then back at the expert] The line between tax avoidance and evasion?
[Firmly] It’s become a highly charged moral issue in the UK and one which has seen a lot of legislative activity as the government feels that it has support in cracking down in this area. The GAAR, introduced in 2013, aims to counteract artificial arrangements and tax abuse.
However, there are a number of other important measures introduced or enhanced such as the Disclosure of Tax Avoidance Schemes (“DOTAS”) and Promoters of Tax Avoidance Schemes (“POTAS”) measures.
[Leans back] Taxation of residential property has also seen changes?
[Nodding] Indeed. SDLT rates have increased, especially for high-value properties and second homes. The top rate for individuals is now 15%. There are also special charges for non-residents with the temerity to acquire UK property!
[Slightly surprised] What about a wealth tax in the UK?
The ATED and SDLT changes are essentially a wealth tax, marking a significant policy shift. It’s targeted at high-value properties and their ownership structures. However, a formally badged ‘wealth tax’ does not seem high on the government’s agenda.
And cross-border structuring?
The UK has been proactive in recovering offshore tax liabilities. Agreements with Switzerland and others, alongside disclosure facilities, reflect this.
[Standing, extending a hand] Thank you for this enlightening conversation in such a fitting setting.
[Shaking hands] My pleasure.
If you have any queries about this top secret interview on private client tax in UK, or UK tax matters in general, then please get in touch
The meeting takes place in an undisclosed hotel room in Hong Kong…
Secret Private Client Adviser in Hong Kong, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Hong Kong.
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 the Tax Natives and shunned by your fellow private client advisers. Do you accept?
I accept.
[Leaning forward with curiosity] Could you enlighten us on how an individual becomes subject to tax in Hong Kong?
[Nods, picking up a glass and sipping thoughtfully] Of course. In Hong Kong, taxation is based on the territorial source principle. Individuals are taxed on income and profits that are derived in Hong Kong, irrespective of their domicile and nationality.
The individual’s residence is only considered when seeking relief under a double taxation arrangement.
[Pauses as room service arrives with refreshments] Whether income and profits are derived in Hong Kong is determined by the facts of each case.
[Accepting a cup of coffee] What taxes apply to an individual’s income here?
[Setting down the glass] In Hong Kong, salaries tax is applied to income arising or derived from any office, employment, profit, or pension. It encompasses all forms of benefits, including salaries, commissions, bonuses, and more.
[There is a distant crash from next door, causing a brief moment of distraction]
The tax is calculated at progressive rates up to 17% or at a standard rate of 15%, depending on which is lower. Individuals are also entitled to various allowances and can claim deductions for specific expenses.
[Glancing towards the noise, then refocusing] Are there other types of taxes that individuals should be aware of?
[Unperturbed by the noise] Yes, besides salaries tax, individuals engaged in business or owning property in Hong Kong face profits tax and property tax, respectively.
[Smiles slightly] There’s also a personal assessment option for those subject to multiple taxes. Notably, Hong Kong does not impose tax on dividends, interest, or lottery winnings.
[Leans back, intrigued] How is capital gains tax handled?
[Gestures with hands for emphasis] Hong Kong does not levy a capital gains tax. However, profits from asset disposals in Hong Kong might be subject to profits tax.
[Pensively tapping a finger on the table] What about the taxation of lifetime gifts?
[Nodding in affirmation] Lifetime gifts are not taxed, but stamp duty applies to voluntary transfers of property or stock.
[Looking up as a waiter passes by] Can you tell us about inheritance tax?
[Leans forward] There is no inheritance tax or estate duty in Hong Kong for deaths after February 11, 2006.
[Sipping coffee] What taxes are applicable to real property?
[Counts off on fingers] Property tax is charged on rental income from real property. Stamp duty is also applicable on property transfers and leases, with varying rates based on several factors.
Are there taxes on importing or exporting non-cash assets?
[With a confident tone]
Generally, Hong Kong maintains a free trade policy. Most imports are tax-free, with certain exceptions like liquors and motor vehicles.
[Raises an eyebrow] Any other taxes that are particularly relevant?
Profits tax is significant for individuals running a business in Hong Kong, with rates depending on the amount of assessable profits.
Additionally, there’s a 2023 tax concession scheme for family-owned investment vehicles managed by single-family offices.
[Glancing briefly at a watch] What about trusts and asset-holding vehicles?
[Nods affirmatively] Trusts in Hong Kong are taxed as separate entities. They are liable for profits tax and property tax based on their activities and holdings. Stamp duty also applies to their transactions involving properties or stock.
How does taxation work for charities?
[With a sense of pride] Charities recognised by the Inland Revenue Department are exempt from taxation. Donations to these charities are tax-deductible.
[Checks phone for a moment, then looks up] Finally, could you elaborate on anti-avoidance tax provisions?
The Inland Revenue Ordinance contains provisions to address artificial or fictitious transactions and transactions designed primarily for tax benefits. These can be disregarded or recharacterized by the IRD to prevent tax avoidance.
[The interview concludes as the sounds of the bustling city filter in from outside]
If you have any queries about this top secret interview on private client tax in Hong Kong, or HK tax matters in general, then please get in touch
The meeting takes place in an undisclosed, luxurious, but bustling hotel lobby in Rome
Secret Private Client Adviser in Italy, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Italy.
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 plush chair in the bustling hotel lobby, notebook ready] So, let’s dive straight into Italy’s tax residency rules.
What makes someone a tax resident here?
[leans forward, glasses reflecting the lobby’s chandeliers] It’s about presence and connection.
If you’re registered at an Italian municipality, have your domicile or main center of interests in Italy for over 183 days a year, you’re a tax resident.
Interestingly, even if you leave the registry and move to a low-tax country, you might still be deemed a resident unless proven otherwise.
[animatedly to a guest] “No, the gondola ride isn’t included with your room, this is Rome, not Venice!”
[smiles, then refocuses] And for these residents, how does Italy tax their income?
[sips espresso] Residents face worldwide income taxation, meaning they’re taxed on income earned both in and outside Italy.
The IRPEF system classifies income into categories like employment, business, and capital, applying progressive rates from 23% to 43%.
[interrupts, brandishing a map] Could you point me to the Leaning Tower of Pisa?
[points gently] That’s a bit of a journey from here. Head to the train station… and get a train to Pisa.
Now, regarding non-residents…
[jots down notes, intrigued] Yes, how are non-residents taxed?
Non-residents are taxed only on their Italian-sourced income.
But there’s an appealing flat tax option for new residents, like a €100,000 substitute tax on foreign income.
[nods] That’s the famous ‘non-dom’ regime we hear so much about?
Go on… tell us a bit more. Don’t be shy!
[Laughs] OK, you twist my arm!
As I say, one of the most advantageous aspects of the regime is that Italy now offers a flat tax rate for high-net-worth individuals.
[Takes another sip of Espresso for extra fortitude]
As a high-net-worth individual, you have the option to pay €100,000 per annum on any foreign income you generate as an Italian tax resident.
The rate is fixed – it doesn’t matter how much foreign income you have.
[Leans back]
There is an exemption from paying wealth tax in Italy on your foreign investments, including paying tax on the value of foreign real estate investments.
In addition, there is an exemption from inheritance and gift tax payable in Italy.
[starts unconsciously twiddling with spoon]
But don’t get carried away. Any income you generate in Italy will not fall under the flat tax and will be taxed at standard Italian rates.
The scheme is likely to be most beneficial if most of your income is – and will continue to be – generated outside Italy.
Intriguing. How long does this regime apply to taxpayer?
The flat tax rate is applicable for a period of fifteen years, which is counted from the first year that you benefit from Italian tax residency.
And all that great food and wine. What is there not to love?
Indeed!
What about capital gains?
Capital gains, typically from financial assets like stocks or bonds, are taxed at 26%.
But there are lower rates, like 12.5% for government securities.
There is no tax on real estate sales if held for more than five years.
And the approach to lifetime gifts and inheritances?
Gifts are subject to indirect tax, with rates depending on the relationship between donor and donee.
Inheritance tax also varies but offers some exemptions, especially for direct relatives.
[returns, cheerfully] Got my ticket to Pisa, thanks!
[stands up] Just a quick one on real property taxes before we wrap up?
[standing too] Sure.
The key ones are IMU and TARI, but your primary residence is typically exempt, barring luxury properties.
[extends a hand] Thanks for your insights. I’ve learned a lot about Italian tax laws today.
[shakes hand warmly] Happy to help. Enjoy your time in Italy!
[They part ways, the Tax Natives heading towards the bustling hotel exit, amused and enlightened by the day’s interactions.]
The meeting takes place in an undisclosed, luxurious, but bustling hotel lobby in Kuala Lumpur.
Secret Private Client Adviser in Malaysia, your mission, should you choose to accept it, is to educate us on the practical tax considerations in Malaysia.
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.
[sits comfortably in a bustling hotel lobby, opens a notebook] Let’s look at some of the tax considerations for private clients in Malaysia.
How does one become a tax resident there?
[leans forward, adjusts glasses] It’s quite straightforward under the Income Tax Act.
Since 2004, Malaysia’s taxation is based on territoriality, not residency.
Essentially, if you derive income from Malaysia, you’re taxable, irrespective of your residency status.
[argues with a guest in the background] “No, sir, the breakfast buffet doesn’t include unlimited lobster!”
[smiles, then refocuses] What about personal tax rates for residents?
[glances at a chart in a folder] For residents, the tax rates are graduated.
For instance, the first 5,000 ringgit is taxed at 0%, and it scales up to 30% for amounts exceeding 2 million ringgit.
Non-residents, on the other hand, are taxed at a flat 30% rate on their Malaysian income, regardless of the amount.
[approaches, vacuum in tow] Sorry to disturb, could you lift your feet? [They comply as the diligent cleaner vacuums under the table]
[chuckles, then continues] I guess Corporate tax seems crucial too. Can you elaborate on that?
Certainly. A company managed and controlled in Malaysia is deemed tax resident.
The general tax rate is 24%, but it’s reduced to 17% on the first 600,000 ringgit for smaller companies.
[Bellhop walks by, accidentally drops a stack of towels, causing a small commotion.]
[helps pick up towels] What a lively place! Now, what about the taxation of gifts and inheritances?
[nods approvingly] Gifts are usually not taxed.
However, if the gift is in the form of real property, it’s subject to stamp duty. As for inheritance, Malaysia scrapped the inheritance tax in 1991.
[returns, still lost] Is the museum this way?
[corrects them with a smile] It’s the other way. And regarding capital gains…
[glances at the clock] I see we’re running short on time. Your insights have been invaluable. Shall we continue this over lunch?
[stands, extends a hand] That would be great. Let’s discuss over some Malaysian cuisine!
[over the noise of the vacuum] Enjoy your meal!
[They leave the lobby, weaving through the lively chaos of tourists, staff, and the ever-busy cleaner.]
If you have any queries about this top secret interview on private client tax in Malaysia or Malaysian tax matters in general, then please get in touch
The Portuguese Prime Minister announced an intention to terminate the “Non-Habitual Resident” taxation regime (‘NHR Regime’).
This has been an attractive and popular tax regime that provided tax benefits to non-residents moving to Portugal.
On 10 October 2023, the Draft State Budget Law proposed the end of the NHR Regime from 1 January 2024.
This means that individuals acquiring tax residency in Portugal or holding a Portuguese residence permit until 31 December 2023, can still apply for the NHR Program.
The final draft law is expected to be available by the end of November 2023.
The practical issues are perhaps, refreshingly simple.
Those individuals wishing to benefit from the NHR Regime must establish tax residency in Portugal before December 31st, 2023, and submit the NHR application promptly.
As such, there is a feel of an ‘Everything Must Go’ style fiscal sale in the offing.
Under the 2024 Draft State Budget Law, individuals relocating to Portugal between 1 January 2024, and 31 December 2026, who haven’t resided in Portugal in the previous 5 years, are eligible for a 50% deduction on taxable income, up to a maximum of €250,000 for 5 consecutive years.
Standard progressive tax rates apply to the remaining taxable income, and foreign-source income may be taxable in Portugal. Contractors and freelancers may have additional deductions during the first and second years.
In addition, a new taxation regime, available for 10 years, will apply to individuals who have not resided in Portugal for the past 5 years.
It’s limited to university professionals, scientific research, income from companies with contractual tax benefits for productive investment projects, and income from companies under the R&D tax incentives system (SIFIDE) paid to individuals with a PhD.
Under this regime, foreign-source income (except pensions) will be exempt, and a flat 20% tax rate will apply to employment and self-employment income. Those benefiting from the NHR or the 50% exclusion regime are not eligible.
The Portuguese Personal Income Tax Code offers an attractive regime for income generated through life insurance or pension funds.
Regular investment income is taxed at a flat rate of 28%, with portions of income from life insurance or pension funds being exempt under certain conditions.
Other efficient taxation arrangements can be considered on a case-by-case basis.
Please note that this information is subject to change based on the final draft law.
Of course, there are other jurisdictions around the world happy to accommodate mobile, wealthy, and tax savvy individuals.
Cyprus and Italy both offer attractive ‘non-dom’ regimes for individuals.
Jurisdictions like the UAE continue to offer welcoming low or nil personal tax rates.
If you have any queries about the Non-Habitual Residence (NHR) regime, Portuguese tax, or tax matters in general, then please get in touch.