private client tax Archives

[Scene: A bustling hotel lobby in Limassol. Soft jazz music plays in the background. Tax Native (“TN”), holding a notepad and pen, sits across from our Secret Private Client Adviser in Cyprus (“Secret Adviser”) at a small round table.

Head Tax Native (“TN”):

[Adjusts glasses, voice hushed] Secret Private Client Adviser in Cyprus, your mission, should you choose to accept it, is to educate us on the detailed tax issues in Cyprus.

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 Cyprus (“Secret Adviser”):

[Nods firmly] I accept. Let’s get stuck in.

TN

[leans forward, intrigued]: I’m eager to understand the tax framework for private clients in Cyprus. Specifically, how does an individual become taxable in your jurisdiction?

Secret Adviser

[sips coffee]: Well, it boils down to the numerical day test. A person residing in Cyprus for more than 183 days in the year of assessment is considered a tax resident. It’s worth noting that these days don’t need to be consecutive, and the year of assessment aligns with the calendar year.

TN

[frustratingly shakes pen]: Could you clarify the day counting rules?

Secret Adviser:

Of course. The day of departure is not counted as a day in Cyprus, while the day of arrival is. If you both arrive and depart on the same day, it’s counted as a day in Cyprus. Conversely, if you depart and return on the same day, it’s considered a day spent outside Cyprus.

TN:

And what about the 60-day rule I’ve heard of?

Secret Adviser:

That’s an additional test introduced in 2017.

An individual can be considered a Cyprus tax resident if they reside here for at least 60 days within the same tax year, are not tax residents in any other country, are employed or run a business in Cyprus, and maintain a permanent residence here.

[Suddenly, a cleaner approaches the table.]

Cleaner:

Excuse me, could you lift your feet? I need to vacuum under your table.

[They comply, a bit startled, as the cleaner briskly vacuums around their feet and moves on.]

Secret Adviser

[continuing]: Moreover, the tax legislation post-15 July 2015 distinguishes between domiciled and non-domiciled tax residents.

Non-domiciled individuals are exempt from Special Defence Contribution, which typically applies to passive income like rents, dividends, and interest.

TN:

Tell me more about non-doms and how they’re taxed? It’s quite an attraction for wealthy individuals isn’t it?

Secret Adviser:

[Laughs] Well, that’s kinda the idea!

It’s not quite the same as the UK non-dom framework or Ireland.

Broadly speaking, if you are non-dom, then there is no income tax on dividend and interest income generated overseas.

In addition, there is no tax on gains arising on the disposal of investments held overseas.

Unlike the Uk or Ireland… It doesn’t matter what is done with the funds. So no pesky remittances.

TN:

That sounds pretty attractive, Secret Adviser.

How does Cyprus tax its residents?

Secret Adviser:

Cyprus tax residents face taxation on their worldwide income.

However, Cyprus is fairly generous with granting credit for foreign tax paid. A comparison is made between the Cypriot tax and the foreign tax suffered, and the lower of the two is credited.

TN:

Let’s talk about individual income and other specific taxes.

Secret Adviser:

Sure. Income tax is progressive. The initial €19,500 is exempt, followed by incremental rates up to 35% for amounts above €60,000.

Capital gains tax is specific to the disposal of immovable property situated in Cyprus.

And interestingly, there are no taxes on lifetime gifts or inheritance.

TN:

What about real property?

Secret Adviser:

Capital gains tax applies only to disposals involving immovable property in Cyprus.

While Immovable Property Tax was abolished from 1 January 2017, local taxes on real estate are minimal.

TN:

And for non-cash assets brought into Cyprus?

Secret Adviser:

Since joining the EU in 2004, Cyprus follows EU customs.

No duties on goods from EU countries. Non-EU goods are subject to duties, and VAT applies to all imported goods.

TN:

What other taxes should individuals be aware of?

Secret Adviser:

VAT rates vary, and Special Defence Contribution applies to passive income for those who are both tax residents and domiciled in Cyprus.

Stamp duty is also applicable on certain documents related to property or affairs in Cyprus.

TN:

Could you touch on the taxation of trusts, charities, and any anti-avoidance provisions?

Secret Adviser:

Certainly. Trusts are not taxable entities, but trustees must adhere to tax liabilities for beneficiaries. Charities enjoy tax exemptions, especially on income and disposals.

As for anti-avoidance, Cyprus implements the EU Anti-Tax Avoidance Directive, including rules like the Interest Limitation Rule and Controlled Foreign Company rule, ensuring transactions are genuine and not solely for obtaining tax advantages.

TN

[nods, satisfied]: This has been incredibly insightful. Navigating Cyprus’s tax landscape seems complex but quite structured.

Secret Private Client Tax Adviser: Hong Kong Debriefing

3 December 2023 8:00 am Leave a Comment

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

Tag Archive: private client tax

The Secret Private Client Tax Adviser: Cyprus debriefing

Head Tax Native (“TN”):

Secret Private Client Adviser in Cyprus (“Secret Adviser”):

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Final thoughts

The Secret Private Client Tax Adviser: Hong Kong debriefing

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The Secret Private Client Tax Adviser: Ireland debriefing

Head Tax Native (“TN”):

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Tapping out

Secret Private Client Tax Adviser: Hong Kong Debriefing

Head Tax Native:

Secret Private Client Adviser in HK:

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