Posts Tagged ‘Domicile’


Wednesday, October 29th, 2008

The international Firms of the Leading Edge Alliance gathered in Boston to debate the latest tax and accounting updates on their respective jurisdictions.

Mike Farra an international tax partner at Morrison, Brown, Argiz & Farra LLP , made a very good presentation on the tax position for US citizens and green card holders living and working abroad.

Mike and I spoke during lunch about the IRS voluntary disclosure program and how may US expats are not aware of the fact that they need to file a US Return, even if they have not been US residents for many years. I took good notes to advice anyone on that situation living in Spain.

The concept of citizenship, and less even the concept of a residence card holder, as the only element to determine a worldwide liability for income tax purposes is alien to most jurisdictions. The closer concept to citizenship in other jurisdictions are those of nationality, or the English based tax domicile, which mainly applies to Inheritance Tax and somehow to the resident non domiciled by exclusion.

In most jurisdictions, outside the US, it is the concept of residence what determines the liability to income tax for worldwide income. Therefore, it is not uncommon that tax advisers neglect this aspect when looking at US expats tax affairs in their new country of residence.

Having considered the above, and as a good friend of mine says, quoting his mentor, the only certain thing about reality is that if you do not face it, reality will face you. This is what US citizens and green card holders living outside the US may find, if they do not come to terms with the IRS.

The IRS requires all US Citizens and green card holders, independently on where they are tax residents, to file a US tax return and to report their worldwide income to the IRS. If a US expatriate has not filed his tax returns, I understand that the IRS Voluntary disclosure program provides a reasonable vehicle to regularize the situation.


Saturday, October 4th, 2008

Although this is not a tax matter I found it interesting to introduce the Conflicts of Laws blog, a portal for those interested in the Conflict of Laws or Private International Law. A must to read for all of us involved in international law and taxes.

The question of this posting arose in relation to the recent experiment with the Large Hadron Collider, the famous giant particle accelerator operating on the Swiss-French border near Geneva.

The plaintiff, an American retired radiation safety officer and a Spanish science writer decided to initiate proceedings in Hawaii to stop the running of fear that the Collider might create a black hole which would spell the end of the Earth. They decided to file in the Hawaii District Court and the defendants were the European Center for Nuclear Research (CERN), the U.S. Department of Energy, the U.S. National Science Foundation and the U.S. Fermi National Accelerator Laboratory (Fermilab).

The Conflict of Laws blog posed the question “Which court has jurisdiction to prevent the end of the world? Any, one would think: after all, the end of the world is likely to have serious consequences pretty much everywhere.”

The Conflict of Laws blog continues

“…In an interview to the New York Times, one of the plaintiffs revealed that his strategy focused on American parties. He did not know whether CERN would show up, but he had added it as a party to save expenses. In any case, part of the project was funded by the Department of Energy and the National Science Foundation, and the magnets of the Collider are supplied and maintained by Fermilab.

The complaint argued that the defendants had failed to comply with American legislation, namely the National Environmental Policy Act (NEPA), and also with the European precautionary principle.

As the New York Times reported, on September 26, 2008, the Hawaï District Court declined jurisdiction.

The order of the Court, which can be found here, is disappointing from a conflict’s perspective. This is because Judge Gillmor was able to dismiss the action solely on domestic grounds. In other words, she held that the court lacked jurisdiction within the American legal system, as a federal court, which is not to say that an American state court would have lacked jurisdiction….”

A good reading for a reflective weekend.


Thursday, August 14th, 2008

Since we announced in tax precision the abolition of the Wealth Tax by the Spanish government, last April, we have been getting many questions from our readers questioning if the abolition would happen and legislation will be enhanced soon.

From a legal point of view, I have been always defending that abolition was already approved by the Government. Please see the postings at

However many readers were receiving conflicting advice from Tax consultants, lawyers and even Tax officials. Many of them said that the abolition was not confirmed. As a Tax lawyer I exercise extreme due diligence in terms of the information I post and I have been very confident with this particular abolition. Anyone understanding how the legislative process work in Spain should have been crystal clear with this matter and from here I would like to send a message to our readers to make sure they always check with qualified advisers and that those qualified advisers “do their homework”.

For those who still need to be 100% sure, the Government of Spain has now officially announced, by second time, the abolition of the Impuesto de Patrimonio, which you can see in the official Government page at La

Legislation has not yet been enhanced on this regard and we shall wait to see the final piece coming very soon. Meanwhile, and as usual, we welcome any comments or questions.


Monday, June 9th, 2008

Two new bilateral arrangements for the exchange of information for tax purposes, between Guernsey and the Netherlands and between the Isle of Man and Ireland have been signed, as reported by the OECD.

This bring to fourteen the number of such agreements signed since the beginning of 2007 by jurisdictions committed to work with OECD countries. Other negotiations are ongoing and are expected to lead to further new agreements shortly.

The agreement with the Netherlands is the second such agreement signed by Guernsey, which concluded an agreement with the United States in 2002. For the Isle of Man, the agreement with Ireland is its tenth tax information exchange agreement.


Wednesday, April 23rd, 2008

Zapatero’s government announced several economic measures, together with the Wealth Tax abolition we indicated last week.

Do we know how these measures may stimulate the economy and encourage more foreign investment? This is to be seen when the announcements are translated into statutes.

We believe it is encouraging, to say the less. The statutes and rules will be detailed over the next months and we should continue commenting on those:

• Abolition of the annual charge for Wealth Tax, as we announced in our last post.

• A new deduction for earned income, including pensions, equal to 0.9% of the
net family disposable income.

• Improved tax treatment for refurbishment of buildings.

• Improved system for repayment of VAT

• Greater flexibility for mortgage borrowers to renegotiate the term of the loans, and a reduction in fees and costs associated

• Improved tax treatment for non residents who invest in public debt


Saturday, March 29th, 2008

Last 9th of March, the Spanish general elections gave Prime Minister Zapatero a great opportunity to show what he can do for the Spanish Real Estate market. Can the property market be influenced by a wise tax policy? I believe so.

During Zapatero’s campaign there was a commitment to abolish some taxes, i.e. wealth and Inheritance which may have historically prevented people to relocate to Spain. There were often press releases regarding tax breaks and incentives for the developers, buy to let allowances, etc…

The government will be formed in April and we shall see the legal instruments to implement the tax changes, which we will continue monitoring.

In Costa del Sol during the last decades we have seen the rise of the residential property market and the influx of hundreds of thousand British and Irish property buyers. Originally many people came to retire to this part of the world, a trend that is still true today. During the last decade, however, a large wave of investors came, fueled by a buoyant market at home, specially in the UK and Ireland. The off-plan investment opportunities were promoted by 3-4 large real estate companies, which made very popular to invest in Spain.

Now, in 2008, the market is very different. It would be fair to say that the international demand is still high for residential properties in Costa del Sol, as well as a large offer of such properties, with may have been temperated by a bear sentimento in the international investment market.

The urban plans are not coming to terms with environmental concerns and the construction in Costa del Sol has slowed down too. A natural correction of the frenetic rhythm of construction of the last decades.

In our professional practice at Konsilia we are observing a clear trend in the last year, which involves international executives in their 40-50s with their families, moving to Spain primarily for lifestyle reasons. In Costa del Sol, primarily from Marbella to Sotogrande, they find a place to live with English professional services, several international schools and plenty of international flights from Malaga, Gibraltar, Jerez or Sevilla airports to the main international destinations.

These clients want to be genuinely residents in Spain. As a tax adviser I like to think that there are some tax elements in this move:

  1. The new Spanish expatriate regime allowing international executives to move to Spain with a 24% flat tax rate, excluding international income and wealth from been taxed in Spain during the five years following the move. Please see our article on this topic published in the Tax Journal (UK)
  2. The beneficial Spanish tax treatment of investment income, including interest, dividends and capital gains at 18% rate, which makes Spain a great place to come to live out of the hard made money.
  3. The promises of the Spanish government to abolish Wealth Tax, and possibly Inheritance Tax, at least to reduce the pressure of this last one for residents. Regarding Inheritance Tax we have seen some moves on some regions like Illes Balears, where Palma de Mallorca is located, and its government has reduced the charge for donations made to buy the first residential property (L 6/2007 27 December)
  4. The UK changes on non-dom rules, which is a very suggestive way for some British Tax non-dom to make a move to warmer lands.

Of course there are many other elements to support the continuation of this trend in Costa del Sol. It is true that the Spanish Economy , considering the many challenges in and outside Spain, continues performing at a good rate.

Another interesting data, this one from the Property Consultants CB Richard Ellis , is the investment opportunities arising from commercial property in Costa del Sol, a market that is reflecting the increase of businesses in the area.

Summarizing, we believe that these times of stabilization of the residential market in Costa del Sol are a mild correction in a sector reaching now maturity. The future of Costa del Sol, far away from what has been said by many tabloids, is still bright and we are confident that the Spanish government can influence it positively with some tax reforms, as the ones mentioned in this post.


Wednesday, March 12th, 2008

The Chancellor’s announcement in today’s budget regarding non-doms will only please two categories of UK non-dom tax payers.

1.- Any non-dom making under £36k taxable in the UK and over £75k outside the UK (non remmitted income). I believe they will be delighted to pay the flat tax of £30k per year and still keep their tax payable under the 40% income tax rate. For the group of people making over £167k outside the UK and not remmitting that income, the glorious UK will still remain as one of the lower tax jurisdictions in the EU, under OECD accepted standards.

2.- The non dom tax payers who have been in the UK for only seven years will get one extra year’s grace prior to pay the £30,000 tax charge. Today’s budget suggests that the residency test before the charge will be extended to eight out of eleven years, rather than eight out of ten.

Regarding the 90 days-a-year residence rule, a day is now only counted from arrival in the UK at midnight. The general rule is that If a UK resident goes abroad permanently, he will be treated as remaining resident and ordinarily resident if his visits to the UK average 91 days or more a year.

Over the last budgets the announcements from the Chancellor are targeting the extended non-dom population in the UK and those emigrating from the UK. The question for me is how succesful has been the HMRC in terms of financial succes for the Treasure versus the havoc that is creating among the many non doms and expats that have been and still are contributing to the UK in terms of business and financial acccumen and intellectual capital. I invite comments on this one.

As the Financial Times published today, Deepak Malhotra, who advises South Asian clients for Grant Thornton said important concessions had been made on rules for remaining non-resident, as well as the non-dom tax regime.

“Non-dom clients will be more positive about things than before,” he said. “But it would have been better to consult first, rather than issue draconian proposals that upset a lot of people.”

Mr Malhotra thought the final proposals might help lift the uncertainty that has hung over non-dom taxation for many years, with proposals repeatedly aired and then shelved. “The promise of no further change in this parliament or the next should reassure businesses and individuals.”

Please see full article at FT web page


Saturday, February 9th, 2008

UK residents, domiciled and non domiciled, owning property in Spain using an offshore or trust structure will need to look very carefully to the new domicile and residence changes in UK expected for April 2008.

As in previous years, we are expecting changes to the proposed legislation before final enactment and there may be some other issues arising, which we will try to address in our blog.

What is clear now is that anyone on that category will need to pose how those changes may affect his or her position and try to plan prior to 6 April 2008 an efficient course of action.

Some of the changes will affect the selling of property in Spain by the offshore company or trust structure if owned by UK residents and this is something to consider seriously with your UK tax adviser.

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