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Emigration
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Emigration to a tax haven or to a country offering special retirement incentives
may serve to break totally or in part the link between a taxpayer and the high tax
jurisdiction from which he or she is emigrating. Normally, it is the change in the
place of residence that is material; however, in other cases a change in domicile
or even citizenship (in the case of the United States) may be necessary. Anti-avoidance
provisions or exchange controls may delay or render extremely difficult the coming
into effect of the fiscal advantages of emigration.
In addition to countries where no relevant taxes are levied or where taxation is
levied at very low rates, certain countries offer favourable tax treatment to all
or certain categories of immigrants in respect of their foreign source income. Special
exchange control treatment may also be granted to qualifying immigrants.
The obvious way of giving up one’s residence is to emigrate. However, while the
right of any person to leave any country is generally recognised, the right to immigrate—to
choose a new country of residence—is not. Immigration is therefore the main practical
issue in emigration.
All European Union (EU) citizens can generally choose any of the member countries
as a place of residence, but those countries can and do tax.
Many expatriates, of course, want to work in their new homes, and this requires
the correct visa and/or work authorisation. An expatriate leaving home usually has
a long checklist:
- buying or renting property in a new country
- overseas removal
- pre-retirement
savings and investment
- the pension position
- social security benefits
-
private medical treatment and health care
- exchange control
- and of course,
tax.
If the expatriate returns home—and many do—the checklist is shorter. Mainly it is
tax and, particularly, estate tax. Becoming a full-scale non-resident creates a
very special opportunity. In matters of estate planning and probate, remember the
two folk adages: “Have a little trust” and “Where there’s a will, there’s a way.”
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Artists and Athletes
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Some stars may decide to emigrate, but many don’t. They just stay right where they
are and treat their own countries as tax havens, often by turning their income into
a capital appreciation in their own companies. This technique used to work so well
that companies have even been floated on the stock exchange on the basis of book
earnings generated from the performances of the stars.
For every loser there are many winners. There are people living for more than 10
months of the year in high tax countries where they are legally designated as non-residents
for tax purposes; others who are deemed residents in havens of convenience and who
barely spend more than a couple of days there from time to time. Sometimes one spouse
is a resident and the other is not; though technically separated, they manage to
live together happily ever after.
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