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    1. Secret Private Client Tax Adviser: Hong Kong Debriefing

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      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

    2. Hungary Private Client Tax Matters

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      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:

       

      • Hungarian citizens, 
      • EEA nationals spending at least 183 days in Hungary, and 
      • Third-country nationals with specific residence statuses fall under Hungarian tax residency. 

       

      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.

    3. Switzerland personal tax issues – An overview

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      Switzerland personal tax issues – Introduction

      Introduction

      Switzerland is a country that levies taxes on three levels: federal, cantonal, and municipal. The tax rates are progressive, meaning they take into account the economic capacity of a taxpayer. Each canton has a set of tax deductions that reduce the tax base and, hence, the marginal tax rate.

      Tax residency

      In terms of tax residency, individuals are liable to pay tax in Switzerland if they have their tax residency in Switzerland or if their stay in Switzerland exceeds a certain period of time. Swiss tax residents are subject to unlimited taxation on their worldwide income and worldwide assets, with some exceptions for foreign real estate and foreign business income.

      Employment income

      Swiss-sourced employment income is fully taxable in Switzerland, unless a double taxation agreement provides otherwise. The same tax rate for employment income applies also to interest and dividend income.

      Swiss-sourced interest payments and dividends are subject to Swiss withholding tax at a rate of 35%, but Swiss tax residents are entitled to a full refund provided the investment income is declared in their annual tax return.

      Dividend income

      Dividend payments from a majority shareholding are taxed to the extent of 70% at the federal level and to the extent of 50 to 80% at the cantonal level, depending on the cantonal tax provisions.

      Capital gains tax

      In terms of capital gains tax, there is no capital gains tax on the disposal of movable assets such as shares and collectibles, but in cases of excessive trading, hedging, and debt-financing, the tax administration may conclude that the individual is a professional securities trader subject to income tax on his or her gains. Gains on immovable property are taxable, and a real estate transfer tax is due in many cantons on the change of ownership of real property.

      Wealth tax

      All cantons (and all municipalities) levy a wealth tax on global net wealth, which includes all movable, immovable, and business assets, works of art, jewelry, and other collectibles.

      Spouses are exempt from gift and inheritance tax in all cantons, and lineal descendants in most cantons.

      The right to tax gifts and donations is in the canton where the donor or testator is or was domiciled, and the tax rate is determined by the amount of the gift or inheritance and the degree of kinship.

      Common Reporting Standard

      Finally, Switzerland has been a signatory to the Common Reporting Standard since 2017 and has entered into various exchange of information programs with a number of participating jurisdictions. Information on a client’s Swiss bank accounts will therefore be exchanged with the tax authorities of their home country if that country is a participating jurisdiction.

      If you have any queries about Switzerland personal tax issues, or Swiss 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.

    4. Cyprus Tax residency for individuals – an overview

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      Introduction

      This article provides a brief overview of Cyprus tax residency in relation to individuals, the implications of such a status and some of the practical considerations.

      Cyprus tax residence – the general rule

      Firstly, an individual who is present in Cyprus for 183 days will be resident for tax purposes in Cyprus.

      Cyprus tax residence – ‘the 60-day rule’

      In addition, one will also be resident for tax purposes in Cyprus under the so-called 60 day rules where each of the following is satisfied:

      • You remain in Cyprus for one or more periods totalling a minimum of 60 days;
      • You are not present in any other state for a total of over 183 days;
      • You are not resident for tax purpose in any other state for the same tax year;
      • You have some relevant activity in Cyprus, specifically that:
        • You operate a business in Cyprus;
        • are employed in Cyprus; or
        • hold a position in a company that is tax resident in Cyprus; and
      • You maintain a permanent residence in Cyprus (either owned or rented).

      Tax residency and Cyprus personal taxes

      Cyprus personal income tax is imposed on the worldwide income of individuals that are  resident for tax purposes in Cyprus.

      However, income from dividends and (most types of) interest income that is received by individuals are exempt from personal income tax

      From 16 July 2015, individuals are subject to Special Defence Contribution on dividends and interest income where the person is both both Cyprus tax resident and Cyprus domiciled.

      Capital gains are also not usually taxable in Cyprus unless they have arisen in respect of Cyprus situs immovable property

      Individuals who are not tax residents of Cyprus are taxed only on certain types of income accrued or derived from sources in Cyprus.

      Cyprus tax residency – practical considerations

      In order to obtain a certificate of tax residence, all supporting documents must be submitted to the Tax Department of Cyprus. These docs must be stamped.

      If the documents are in any other language than English or Greek then they must be translated.

      If an individual is considering relocating to Cyprus, expert advice should be taken with respect to Cypriot as well as cross-border tax implications arising from the relocation.

      If you have any queries about this article, tax residency in Cyprus, or 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