Tax Profressional usually responds in minutes

Our tax advisers are all verified

Unlimited follow-up questions

  • Sign in
  • NORMAL ARCHIVE

    Golden Handshake – Australia bids farewell to Golden Visa

    Australia Bids Farewell to Golden Visa – Introduction

    In a decisive move, Australia has terminated its “golden visa” program, initially designed to attract wealthy foreign investors by offering them residency.

    The decision, a part of a broader immigration overhaul, comes after assessments revealed the scheme was underperforming in driving desired economic outcomes.

    The program faced criticism for becoming a conduit for corrupt officials to transfer and conceal illicit funds within the country.

    A Snapshot of the Golden Visa’s Journey

    Since its inception in 2012, the significant investor visa (SIV) program has seen a predominant influx of applicants from China, representing 85% of the successful candidates.

    The program required a substantial investment of over A$5m (£2.6m; $3.3m) in Australia, positioning itself as a catalyst for foreign investment and innovation.

    However, reviews and government scrutiny exposed that the scheme fell short of its fundamental goals.

    As a result, Australia’s government has chosen to shift its focus towards nurturing a pool of “skilled migrants” who promise to make substantial contributions to the nation’s development.

    Voices of Advocacy and Concern

    Home Affairs Minister Clare O’Neil‘s statement echoed a longstanding sentiment that the visa was not aligning with Australia’s economic and societal needs.

    Transparency advocates like Clancy Moore from Transparency International Australia lauded the decision, highlighting the misuse of golden visas by corrupt elements as a channel for parking illicit wealth.

    The scheme’s integrity had been in question for years, with concerns ranging from money laundering to offering refuge to individuals with lesser business acumen than initially anticipated.

    A Global Context

    Australia’s decision is part of a growing global trend where countries are reevaluating and, in some cases, discontinuing their golden visa programs.

    The UK, for instance, terminated a similar initiative due to apprehensions about the influx of illicit funds, particularly from Russia.

    Malta’s rapid citizenship grants to wealthy non-EU nationals also faced scrutiny, sparking debates over the potential for money laundering, tax evasion, and corruption.

    Australia Bids Farewell to Golden Visa – Conclusion

    As Australia turns a new leaf in its immigration policy, the focus is now on attracting talent that aligns with the nation’s growth trajectory and values.

    While the golden visa scheme aimed to bring in investment, the shift towards skilled migration underscores a commitment to fostering genuine talent and expertise.

    This strategic pivot not only reflects Australia’s dedication to maintaining the integrity of its borders and economy but also sets a precedent for other nations navigating the complex interplay between wealth, mobility, and security.

    Final thoughts

    If you have any queries about this article called Australia Bids Farewell to Golden Visa, or Australian tax matters, then please get in touch.

    The Secret Private Client Tax Adviser: Hong Kong debriefing

    The meeting takes place in the welcoming lobby of an undisclosed hotel in Central, Hong Kong.

    Head Tax Native (“TN”):

    [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?

    Secret Private Client Adviser in Hong Kong (Secret Adviser):

    [Nods firmly, a glint of excitement in their eyes] I accept. Let’s unravel the complexities of Hong Kong’s tax landscape.

    TN:

    [Opens a notebook, intrigued] Could you start by explaining the tax system in Hong Kong, especially for individuals?

    Secret Adviser:

    [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]

    TN:

    [Nods, taking a snack] And what about the rates for this salaries tax?

    Secret Adviser:

    [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.

    TN:

    [Frowning slightly] What about other forms of income? Are they taxed differently?

    Secret Adviser:

    [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.

    TN:

    [Leans in, curious] What about businesses? How does profits tax work?

    Secret Adviser:

    [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]

    TN:

    [Glancing at the tourist, then back] And what about property tax?

    Secret Adviser:

    [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.

    TN:

    [Scratching head] Stamp duty sounds complicated. Can you break it down?

    Secret Adviser:

    [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]

    TN:

    [Smirking at the interruption] I see. What about cross-border tax issues?

    Secret Adviser:

    [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.

    TN:

    [Leaning back, satisfied] This has been incredibly enlightening. Your expertise is invaluable, Secret Adviser.

    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.]

     

    Final thoughts

    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.

    Secret Private Client Tax Adviser: Hong Kong Debriefing

    The meeting takes place in an undisclosed hotel room in Hong Kong…

    Head Tax Native:

    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?

    Secret Private Client Adviser in HK:

    I accept.

    Head Tax Native:

    [Leaning forward with curiosity] Could you enlighten us on how an individual becomes subject to tax in Hong Kong?

    Secret Private Client Adviser in HK:

    [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.

    TN:

    [Accepting a cup of coffee] What taxes apply to an individual’s income here?

    Secret Adviser:

    [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.

    TN:

    [Glancing towards the noise, then refocusing] Are there other types of taxes that individuals should be aware of?

    Secret Adviser:

    [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.

    TN:

    [Leans back, intrigued] How is capital gains tax handled?

    Secret Adviser:

    [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.

    TN:

    [Pensively tapping a finger on the table] What about the taxation of lifetime gifts?

    Secret Adviser:

    [Nodding in affirmation] Lifetime gifts are not taxed, but stamp duty applies to voluntary transfers of property or stock.

    TN:

    [Looking up as a waiter passes by] Can you tell us about inheritance tax?

    Secret Adviser:

    [Leans forward] There is no inheritance tax or estate duty in Hong Kong for deaths after February 11, 2006.

    TN:

    [Sipping coffee] What taxes are applicable to real property?

    Secret Adviser:

    [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.

    TN:

    Are there taxes on importing or exporting non-cash assets?

    Secret Adviser:

    [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.

    TN:

    [Raises an eyebrow] Any other taxes that are particularly relevant?

    Secret Adviser:

    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.

    TN:

    [Glancing briefly at a watch] What about trusts and asset-holding vehicles?

    Secret Adviser:

    [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.

    TN:

    How does taxation work for charities?

    Secret Adviser:

    [With a sense of pride] Charities recognised by the Inland Revenue Department are exempt from taxation. Donations to these charities are tax-deductible.

    TN:

    [Checks phone for a moment, then looks up] Finally, could you elaborate on anti-avoidance tax provisions?

    Secret Adviser:

    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]

     

    Mission extraction

    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

    Citizenship and Residency by Investment Programs: Striking a balance?

    Citizenship and Residency by Investment – Introduction

    In the landscape of global investment, Citizenship by Investment (CBI) and Residency by Investment (RBI) programs offer a compelling gateway for foreign investors seeking expedited citizenship or residency in other countries.

    These initiatives, while promising economic growth through substantial foreign investment, have a flip side.

    It is alleged that they’ve become a magnet for unscrupulous individuals—criminals and corrupt officials—who exploit these programs to evade justice and launder billions of dollars obtained through illicit activities.

    Who yer gonna call?

    The FATF team, of course.

    Recently, the Financial Action Task Force (FATF) teamed up with the Organisation for Economic Co-operation and Development (OECD) to delve into the risks and vulnerabilities of these programs in their joint project.

    Their findings underscored the inherent dangers associated with CBI/RBI programs, particularly in terms of money laundering, fraud, and their adverse effects on public integrity, taxation, and migration.

    FATF President T. Raja Kumar highlighted the dual nature of these investment schemes, acknowledging their potential for stimulating economic growth while underscoring the grave threats they pose when abused by criminals and corrupt entities.

    “Golden” passports and visas extended through these programs often fall prey to exploitation by individuals looking to obfuscate their identities, launder illicit gains, or perpetrate further criminal activities.

    The report

    The report illuminates how these programs offer criminals enhanced global mobility, enabling them to cloak their identities and illegal undertakings behind opaque corporate structures in foreign jurisdictions.

    Complex and multifaceted, these international investment migration programs frequently involve multiple government agencies, intermediaries, and lack proper governance, making them vulnerable to abuse by professional facilitators.

    OECD Secretary-General Cormann emphasized the alarming scale of exploitation within these citizenship and residency programs, characterizing it as a multi-billion-dollar enterprise utilized by criminals to launder the proceeds of fraud and corruption, evade accountability, or access third-party countries.

    Countering the threats

    To counter these threats, the report proposes a series of measures and best practices aimed at mitigating risks.

    It advocates for robust due diligence mechanisms, transparency, and integrity frameworks to be integrated into the fabric of these investment migration programs.

    Additionally, it stresses the importance of dissecting how criminals exploit these programs and delineates the need for clear demarcation of roles and responsibilities among involved parties to spot and prevent fraudulent activities.

    Citizenship and Residency by Investment Conclusion

    In essence, while CBI/RBI programs offer a potential gateway to economic growth, their unchecked exploitation poses a severe threat to global financial systems and integrity.

    The onus lies on policymakers and administrators of these programs to adopt stringent measures, ensuring these schemes aren’t hijacked for nefarious purposes.

    The report serves as a clarion call to establish a delicate equilibrium between economic prosperity and robust security measures within the realm of investment migration programs.

     

    If you have any queries about Citizenship and Residency by Investment programs, then please get in touch.

    Non-Habitual Residence (NHR) regime: Losing the habit?

    Non-Habitual Residence (NHR) regime – Introduction

     

    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.

     

    Practical Issues 

     

    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.

     

    The 2024 Draft State Budget Law

     

    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.

     

    Other Regimes for Tax Residents in Portugal

     

    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.

     

    Other regimes around the world

     

    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.

    Mauritius residency program

    Mauritius residency program – Introduction

    Nestled in the azure expanse of the Indian Ocean, the Republic of Mauritius, often fondly referred to as the ‘Jewel of the Indian Ocean,’ beckons with its tropical charm and dynamic opportunities.

    Situated about 800 km east of Madagascar, this collection of islands boasts stunning coral reefs and enjoys a maritime subtropical climate, setting the stage for both breathtaking vacations and a strategic haven for international investors looking to bridge continents.

    However, in addition to these charms, Mauritius has a multi-faceted economy and an attractive residency program.

    Mauritius residency programs – an overview

    Mauritius extends a warm welcome to individuals seeking residency, offering programs tailored to a range of personal requirements and budgets.

    Here’s a glimpse of the benefits you can enjoy by establishing residency in this captivating nation:

    1. The freedom to live, work, or retire in Mauritius.
    2. The opportunity to include qualifying dependents, such as spouse, common-law partner, fully dependent parents, and unmarried children.
    3. A secure and safe environment for you and your family.
    4. Quality educational institutions providing instruction in English and French.
    5. Access to world-class medical facilities.
    6. A legal system that blends common and civil law.
    7. A highly educated, skilled, and multilingual workforce.
    8. No inheritance, estate, or gift taxes.
    9. Generally tax-free capital gains.

    Residency permits reflect diverse needs

    For high-net-worth individuals (HNWIs) and retirees, Mauritius offers two primary routes to obtain a Residency Permit:

    1. Retired Non-Citizen Residence Permit: This 10-year permit is open to applicants aged 50 or above, who can demonstrate a monthly transfer of USD 1,500 or a total of USD 18,000 annually to a local Mauritian bank account. This permit is renewable upon meeting the income transfer requirements.
    2. Property Development Scheme (PDS) Permanent Residence Permit (PRP): With a minimum investment of USD 375,000 in qualifying real estate projects, this 20-year PRP is perfect for those looking to invest in integrated resort schemes, real estate schemes, social and ecological impact-focused projects, smart city schemes, invest hotel schemes, or ground + 2 apartment schemes.

    Additionally, there’s a third option for those who invest at least USD 375,000 in a qualifying business activity, allowing them and their dependents to receive a 20-year PRP.

    Flexible options for occupations

    Mauritius offers three categories of Occupation Permits, catering to individuals who may not meet the USD 375,000 investment threshold:

    1. Investor: This category caters to shareholders and directors of Mauritian companies, with options like the Standard (10-year permit) and the Net Asset Value (10-year permit), among others.
    2. Professional: Foreign professionals with a minimum basic monthly salary of MUR 60,000 (c. USD 1,300) (MUR 30,000 for specific sectors) can apply for this permit.
    3. Self-Employed: Non-citizens engaged in professional business activities can apply for this permit with an initial transfer of USD 35,000.

    These Occupation Permits, ranging from three to ten years, can be converted into a 20-year Permanent Residency Permit (PRP) after three years of meeting specific criteria.

    Conclusion

    As you will now appreciate, Mauritius isn’t just a vacation destination; it’s a gateway to an enriching life experience, both personally and professionally.

    If you would like more information about a Mauritius residency program or other residency programmes then please get in touch.

    The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article..

    Malta’s Tax Benefits for Investment Services and Insurance Expatriates

    Malta’s new tax benefits for expatriates – Introduction

    Malta, a strategic hub within the European Union, continues to attract highly skilled professionals from around the world.

    On June 19th, the Commissioner for Revenue unveiled new guidelines under Article 6 of the Income Tax Act, aimed at providing compelling tax benefits to “investment services and insurance expatriates.”

    The goal is to bolster these sectors, which have experienced substantial growth since Malta’s EU accession in 2004, by enticing top-tier talent to contribute their expertise.

    Who Qualifies?

    For those looking to make a significant impact in Malta’s investment services or insurance sectors, the criteria are well-defined.

    An ‘Investment Services Expatriate’ is someone employed by or providing services to a company holding an investment services license or recognized by the relevant competent authority.

    This includes activities like management, administration, safekeeping, and investment advice to collective investment schemes.

    Similarly, an ‘Insurance Expatriate’ works for an entity authorized under the Insurance Business Act, an insurance manager under the Insurance Distribution Act, or engaged in the business of insurance broking.

    To be eligible, these expatriates must not be ordinarily resident or domiciled in Malta, nor have resided there for a minimum of three years preceding their employment or service provision in Malta.

    The Generous Benefits

    Qualifying Investment Services or Insurance Expatriates will enjoy a range of exemptions, which makes this opportunity even more attractive.

    The tax benefits cover personal expenses paid by the employing company, such as removal costs, accommodation expenses in Malta, travel costs for the expatriate and immediate family, provision of a car in Malta, medical expenses, medical insurance, and school fees for children.

    These benefits, which are typically taxed as fringe benefits, are exempt from taxation for a remarkable period of ten years, starting from the first taxable year in Malta.

    Additionally, these expatriates will be treated as not resident in Malta for specific income tax purposes, leading to exemptions on various types of income, including interest, royalties, profits from transfers of units in collective investment schemes, shares, securities, and more. These benefits remain in effect throughout the duration of the individual’s employment as an Investment Services or Insurance Expatriate.

    It’s essential to note that individuals who qualify for these tax benefits cannot simultaneously benefit from Malta’s Highly Qualified Persons Rules. The two registration options are mutually exclusive.

    Malta’s new tax benefits for expatriates – Conclusion

    Malta’s progressive tax benefits for Investment Services and Insurance Expatriates paint an attractive landscape for skilled professionals seeking a dynamic and rewarding career within these thriving sectors.

    The generous exemptions, combined with Malta’s strategic position in the EU, make this opportunity a compelling proposition for those looking to make a significant impact while enjoying a supportive environment

    If you have any queries regarding this article on Malta’s new tax benefits for expatriates or Malta tax in general, then please get in touch.

    The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

    Hungary Private Client Tax Matters

    Hungary Private Client Tax – Introduction

     

    As Hungary continues its journey towards modernization, private clients must grapple with intricate tax considerations outlined in the Act of CXVII of 1995 on Personal Income Tax.

     

    This is the main legislation dealing with personal income tax.

     

    Hungary Tax Residence

     

    Like in many jurisdictions, determining tax residency in Hungary involves some care. 

     

    The following are likely to be resident for tax purposes in Hungary:

     

     

    The definition extends to individuals with a permanent home, vital interests, or habitual abode in Hungary.

     

    Hungarian tax residents are globally taxed, contrasting with non-residents taxed solely on income from Hungarian sources.

     

    Hungarian Personal Income Tax (“PIT”) and Passive Income

     

    Interest Income

     

    Hungarian-resident individuals face a 15% PIT rate on worldwide interest income. 

     

    PIT covers various scenarios, including publicly offered debt securities, where capital gains are deemed interest income.

     

    To eliminate double taxation, Hungary provides tax credits or follows relevant double tax treaty rules. 

     

    Notably, interest income received in valuable assets triggers tax based on fair market value if withholding isn’t feasible.

    Dividend Income

     

    Dividend income for Hungarian-resident private individuals is subject to a 15% PIT rate, along with a 13% social tax in 2023. 

     

    Distribution from entities in low-tax jurisdictions attracts additional taxes.

    Capital Gains

     

    Capital gains, including those from the sale of shares, are subject to a 15% PIT rate and a 13% social tax in 2023. 

     

    Preferential PIT rules may apply to controlled capital market transactions.

    Qualified Long-Term Investments

     

    Favorable tax treatment applies to qualified long-term investments, potentially leading to a zero percent tax rate after five years.

    Inheritance and Gift Tax

     

    Hungary imposes an 18% tax rate on the net value of inherited or gifted properties. 

     

    Residential properties benefit from a preferential 9% rate. 

     

    Several exemptions exist, such as lineal relatives being exempt from tax, and exemptions for scientific, artistic, or educational purposes.

    Transfer Tax

     

    Transfer tax applies to real estate, movable property, rights of pecuniary value, and securities acquired through inheritance. 

     

    Shares in real estate holding companies may also incur real estate transfer tax.

    Property Taxes

    Building Tax

     

    Local municipalities may levy building tax, capped at 1,100 forints per square meter or 3.6% of the adjusted fair market value.

     

    Land Tax

     

    Land tax, imposed annually or based on adjusted fair market value, allows municipalities to charge up to 200 forints per square meter or a maximum of 3%.

     

    Hungary Private Client Tax – Conclusion

     

    Like their equivalents in other jurisdictions, private clients navigating Hungary’s tax landscape face a myriad of considerations. 

     

    Hopefully, our high level article underscores the importance of understanding the nuances to ensure compliance and optimize tax outcomes in this dynamic environment.

     

    If you have any queries about this article on Hungary Private Client Tax Matters, or Hungarian tax matters in general, then please get in touch.

    Hedge your bets: Spain’s new Ruling on Non-resident hedge funds

    Spain non-resident hedge funds – Introduction

    A recent court judgment has held that non resident hedge funds should be treated like residents in Spain if they meet certain requirements.

    Under the Non-resident Income Tax Law, hedge funds resident in Spain are taxed at a lower rate of 1%, while those resident in other countries are taxed at a higher rate of 19%, unless there is a relevant double tax treaty.

    The Supreme Court ruled that this different treatment is discriminatory and goes against the free movement of capital regulated in article 63 of the Treaty on the Functioning of the European Union.

    More detail on the Supreme Court’s decision

    The court held that non-resident hedge funds should be treated like residents if they can prove that they are open-ended entities, that they have relevant authorization, and that they are managed by an authorized management company pursuant to the terms of Directive 2011/61/EU.

    The nonresident hedge fund has the burden to prove these requirements, but a certain flexibility should be allowed due to the lack of specific regulations in Spain in this regard. If the Spanish authorities have reservations about the documentation provided by the fund, they must initiate an exchange of information procedure with its State of residence.

    The Court also concluded that the restriction on the free movement of capital could only be considered neutralized by the provisions of a double tax treaty if the treaty permits the hedge fund (not its members) to deduct the total amount of Spanish tax withheld in excess. However, given the way hedge funds operate and are taxed, that neutralization is impossible in practice.

    What is the significance of the decision?

    This judgment is significant as it removes discrimination against nonresident hedge funds and brings Spain in line with the free movement of capital provisions of the Treaty on the Functioning of the European Union.

    The decision clarifies the requirements that nonresident hedge funds must meet to be treated like residents and offers some flexibility in terms of providing documentation. It also highlights the difficulty in neutralizing restrictions on the free movement of capital through double tax treaties in practice.

    Spain non-resident hedge funds – Conclusion

    In conclusion, the recent Supreme Court judgment in Spain has removed discrimination against nonresident hedge funds and clarified the requirements for them to be treated like residents.

    This decision is in line with the free movement of capital provisions of the Treaty on the Functioning of the European Union and offers some flexibility in terms of providing documentation.

    However, the decision also highlights the difficulty in neutralizing restrictions on the free movement of capital through double tax treaties in practice.

    If you have any queries about issues around Spain non-resident hedge funds, or Spanish tax matters in general, then please do get in touch.

    The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article.

    UAE tax residency: where are we now?

    UAE tax residency – An introduction

    The United Arab Emirates (UAE) has taken a significant step towards modernizing its tax system with the recent introduction of new criteria for determining tax residency status.

    The UAE Cabinet of Ministers, through Decision No. 85 of 2022, announced these changes on 9 September 2022.

    The new rules apply to both individuals and legal entities for the purpose of UAE tax law or bilateral tax agreements, starting from 1 March 2023.

    Ministerial Decision No. 27 of 2023, published on 1 March 2023, provided further clarity on some definitions related to tax residency for individuals, as outlined in Cabinet Decision No. 85 of 2022. These new tax residency criteria replace the previous system that relied solely on the number of days an individual spent in the UAE.

    UAE tax residency – what do the new rules say?

    Under the new rules, an individual will be considered a tax resident if they fulfill any one of the following conditions:

    1. They spend at least 183 days in the UAE in a calendar year, whether consecutive or not.
    2. Their place of habitual residence is in the UAE, meaning they have a permanent home in the country that they regularly use for personal or family purposes. This criterion acknowledges that many individuals may have strong ties to the UAE, even if they don’t physically reside there for an extended period.
    3. They have an active UAE residence visa, which allows them to reside in the UAE for at least six months in a year.

    These criteria, which came into effect on 1 January 2023, apply to all individuals, including UAE nationals and expatriates. This decision has significant implications for individuals who were previously classified as non-residents for tax purposes but will now be considered residents.

    The introduction of the new tax residency criteria is part of the UAE’s ongoing efforts to diversify its economy, broaden its tax base, and generate more revenue to support economic growth and development.

    An individual might still be considered a tax resident of the UAE, even if they don’t meet any of the three criteria mentioned above, if they aren’t considered a tax resident in any other jurisdiction and they spend at least 90 days in the UAE in the calendar year. This means that an individual who spends less than 183 days in the UAE in a calendar year and doesn’t have a permanent home or active residence visa in the UAE could still be considered a tax resident if they spend at least 90 days in the country and aren’t tax residents of any other country.

    This 90-day criterion is designed to capture individuals who may not be physically present in the UAE for an extended period but who have strong connections to the country, such as those who frequently travel to the UAE for business or have family ties in the country.

    Never forget where you’ve come from…

    It’s crucial to note that this criterion isn’t an automatic exemption from tax residency in other countries. Individuals must still consider the tax residency rules in any other countries where they may have tax obligations to determine their overall tax residency status and obligations.

    UAE tax residency

    In conclusion, the introduction of the new tax residency criteria is a positive move towards modernizing the UAE’s tax system and aligning it with international best practices.

    The decision ensures that the UAE’s tax system remains competitive and attractive for individuals and businesses.

    The introduction of the 90-day criterion offers more flexibility in determining tax residency in the UAE and acknowledges the diverse ways individuals may have ties to the country.

    If you have any queries about the UAE tax residency or UAE tax matters more generally, then please do not hesitate to get in touch.

    The content of this article is provided for educational and information purposes only. It is not intended, and should not be construed, as tax or legal advice. We recommend you seek formal tax and legal advice before taking, or refraining from, any action based on the contents of this article