More On Tax Planningfrom The Advisor's Professional Library
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A growing number of ultrawealthy people are “jurisdiction shopping,” often seeking greener tax pastures, according to a recent article on Wealth-X News.
Singapore, Switzerland and Hong Kong are currently the hot landing spots for billionaires wishing to take up a new residence, according to the new UBS and Wealth-X Billionaire census.
Only 36% of Singapore’s billionaire population, 34% of Switzerland’s and 25% of Hong Kong’s grew up locally.
So far in 2013, a record 2,369 individuals have either renounced their U.S. citizenship or terminated their long-term residency, the article said, citing Treasury Department statistics. The previous annual record was 1,781 in 2011.
The chief reasons for these departures were the long arm of the IRS’ taxing authority and strict disclosure requirements about foreign bank accounts and assets, according to the article.
Among high-profile individuals who gave up their U.S. passports in recent years were Eduardo Saverin, a Facebook co-founder; songwriter Denise Rich; and oil heiress Isabel Getty.
They had lots of company from other countries. Last year, for example, the French actor Gérard Depardieu made headlines when he decamped to Russia to avoid his country’s proposed millionaire’s tax.
Arton Capital, a global financial advisor, estimates that 20,000 families look for migration solutions every year, according to Wealth-X. The firm predicts that some 20 countries will compete for their business in coming years.
Caroline Garnham, the chief executive of family office advisor Family Bhive, told Wealth-X that ease of mobility combined with expanding wealth was making nationality swapping more common.
Tax havens, including Luxembourg and the Cayman Islands, welcome them.
Garnham said the most successful migrations were those from countries where people’s ties were not strong to begin with, initially drawn by jobs or marriage. She warned that those with close ties to family and friends might come to regret leaving their country of residence.
“My first advice is never to let the tax tail wag the dog,” she said.
Micha-Rose Emmett, a managing director at CS Global in London, told Wealth-X that rich people had many reasons besides tax considerations to change jurisdictions, including a desire for more privacy and anonymity, reduced administration and increased global mobility.
This, in turn, has led to an increasingly popular trend of citizenship-through-investment. Some governments, she said, are offering citizenship to foreigners in exchange for investment as a way to boost their treasuries.
Malta has just begun offering citizenship and EU access to investors who contribute a minimum euro-equivalent of $882,000—provided they satisfy regulatory requirements and pass background checks.
The article noted that the main nationality shoppers today were old-money wealthy, residents in developed markets and rich retirees.
High-net-worth people in emerging markets tend to stay put, at least so far. Eighty-six percent of Chinese billionaires and 95% of their Indian counterparts who have their primary business in China and India grew up there.
Check out Want to Retire on Less Than $1,200 a Month? Try Living Abroad on ThinkAdvisor.