An Introduction to Residence Planning

International residence planning can be a key aspect of tax planning for anyone who has residences or businesses in more than one country or jurisdiction. Individuals looking at wealth planning who currently reside in countries that offer only limited options for estate planning and tax planning may find that a legal change of residence makes a huge difference. It may also apply to people who wish to move to an area that offers more generous lifestyle choices, or where the economic or political climate of the current country of residence is unstable.

Dr Edgar Paltzer has several areas of specialisation at his law firm in Switzerland, which include all aspects of estate and tax planning. The infographic attachment introduces some top strategy tips for tax planning.

There are various important requirements that come into play when exploring residence planning. Early advice and planning ahead are therefore essential.

Top StrategyConcepts for Tax Planning

Income Tax

The amount of income tax a person is liable to pay is largely based on their place of residence. This means for some that changing residences legally can result in a lower income tax liability. Residence is used as the key criterion in most countries when calculating income tax. There are various factors that are considered when determining where a person’s place of residence is, including available accommodation, physical presence, and centre of vital interests. The exemption to this is for citizens of the United States, who are required to pay income tax regardless of their place of residence.

Inheritance Tax

Choice of residence can play a key role in estate planning, as each jurisdiction has its own laws regarding payment of inheritance tax. Changing the primary residence prior to death can result in a lower inheritance tax bill for beneficiaries of the will. It is important to access proper advice to ensure successful inheritance tax planning, as the rules can be complex and change depending on the place of residence.

Health Insurance

Changing countries of residence may require a person to take out a new health insurance policy to ensure it applies in the new jurisdiction. There are international health plans available which can be a good idea when a change of residence is a possibility. Otherwise, ensuring a new health insurance plan is taken out in the new country of residence is essential to ensure cover.

Emigration Taxes

Before committing to a change of residence, emigration taxes need to be considered. A definition of emigration can be found in the embedded short video.

Countries are increasingly applying emigration taxes to try to discourage residents from emigrating. Depending on the amount of emigration tax compared to the tax advantages of changing residence, it may or may not be a beneficial move financially.

Understanding the Situation

A change of residence can be a complex business no matter what the reasons behind it. When looking at changing residence for tax planning reasons, there are multiple factors to consider. For this reason, it is advisable to employ professional services to ensure the move is financially beneficial and that all the relevant documentation has been completed prior to moving. Professional advisers will be able to look at all the implications of the move and determine whether it is worthwhile, as well as offer advice on other aspects of financial planning and wealth management. They will also be better versed in local tax laws and able to spot potential hazards before they occur.

You can find out more about tax planning in general in the PDF attachment to this post.

Tax PlanningExplained