Author: the Law Agency “Absolute”
Sooner or later, tax information about the accounts and incomes of Ukrainian citizens abroad will become available for study by the tax authorities of Ukraine. And, today, the ways and opportunities to hide this information are getting smaller.
Countries that have connected to the program of automatic exchange of tax information on the CRS standard, successfully exchange it.
Therefore, if you or companies in which you are the beneficiary owner, open or already have open personal or corporate accounts in banks of countries operating under the CRS standard tax information exchange program, be sure that banks have already collected and also transferred information about these bills to the tax authority of their country.
And, if you provided the tax number of a citizen of Ukraine (taxpayer identification number), the data will be stored in the tax authority of the country of the serving bank, and will be provided to the tax authority based on the principle of tax residence.
Information about personal accounts of individuals (tax residents of Ukraine) or corporate accounts of companies with beneficiaries tax residents of Ukraine, intended for the tax authorities of Ukraine, will not be transferred automatically until Ukraine becomes a full member of the MCAA convention. However, this is the process of the near future.
To date, more than 90 participating countries have been connected to this convention. Therefore, if you did not declare your overseas income, foreign companies and did not pay the corresponding taxes in Ukraine, as a tax resident, in the future you may receive uncomfortable questions, fines, and additional taxes from the controlling Ukrainian authorities.
And this is just one of the factors leading many citizens (not only Ukraine) to the idea of obtaining tax residency in other countries of the world who are more tax loyal.
Please note that obtaining a second citizenship or permanent residence in another country does not make the recipient of a second passport or permanent residency a tax resident in another country. However, these issues can be solved in parallel and complement each other.
The status of tax resident in many cases is not associated with the presence of a passport, residence permit, permanent residence of a particular country, but with the time spent in that country.
Tax residency is the affiliation of a natural or legal person to the fiscal system of one of the jurisdictions that obliges it to pay taxes in this particular jurisdiction. Moreover, an individual may have a residence permit or have a country’s citizenship, but not be its tax resident, and vice versa.
The change of tax residency can lead not only to savings on tax payments, but also in the future to provide a more comfortable transfer of assets when donating or inheriting, to keep business confidentiality, to protect assets and much more.
Note, offshore jurisdictions with their nominal service, are increasingly losing relevance.
Banks from reputable jurisdictions serving corporate clients are required to identify the real beneficial owner of the business, indicating its tax residence in accordance with the documents provided.
A self-respecting bank will not risk a license to cover the assets of a wealthy client. Therefore, by taking actions to obtain a different tax residency, you have the full right to provide the bank with the tax exchange number of the country that you consider acceptable and comfortable for automatic exchange of tax information.
When choosing a tax residency, the basic rule of 183 days is taken into account. Therefore, when considering the country of a new tax residency country, take a closer look at those countries in which you plan to live, in which business interests already exist, and also on the countries of incorporation of companies through which you own assets.
Also, special attention should be paid specifically to the taxation of income of individuals, tax residents of the country. In some countries there are significant differences in personal income tax rates for residents and non-residents of the country with the domicile and non-domicile statuses.
For example, there are jurisdictions in which personal income tax is absent as such, but indirect taxes exist.
Although, clients do not always strive to save on taxes in this case. In my practice, there were cases when clients changed tax residency and citizenship for countries with higher taxes, based on the desire to live, work and pay taxes in a particular country.
programs However, there are tax residency programs that do not require compliance with the 183-day rule.
For example, to obtain the status of a tax resident of Cyprus, it is enough to spend at least 60 days in one calendar year in the country, but at the same time fulfilling a number of other conditions. This program was introduced in 2017 and is still relevant today.
There are other loyal countries that are ready to provide you with tax resident status, only indirectly applying the 183-day rule.
To date, many official programs have been developed by individual states that allow an individual to change or obtain a second citizenship, permanent residence, residence permit, gold visas and tax residency, offering new citizens various benefits and privileges.
Moreover, these programs are designed for a very wide range of potential applicants – representatives of large business, people with low permanent income, self-employed persons and certain narrowly focused specialists.
I note that the laws of the countries are constantly changing, which leads to changes in the programs and conditions for obtaining tax residency. Therefore, if you are thinking about changing tax citizenship or want to get a high-quality and comprehensive turnkey solution, contact professional and trusted lawyers, tax consultants, and service providers.