Why Residence Planning Is So Important

Over the course of your working life you may have had the opportunity to work in one or more countries, to have experienced different cultures and possibly even found a place that has captivated you to such an extent that you have decided to build your life there. Whatever your unique personal circumstances may be, knowing your residence status is vitally important as it largely determines where you pay your taxes.

Most countries have a worldwide taxation system, so if you are resident in that country, you will pay tax in that country on your worldwide income and gains and, if that country has a wealth tax, on your worldwide assets too. This is not always the case, however. Some countries will only tax income or gains arising in that country, meaning that overseas income and gains may be taxed on a ‘remittance basis’, and certain countries offer favourable tax regimes for expats coming there to work, or to stay for a temporary period.

It is important to remember that you cannot choose where you pay your taxes. This is determined by your country of residence and the country in which your income and gains arise. Double tax treaties are then put in place to ensure you are not taxed twice, although these don’t exist in every country.

In certain circumstances, it may be possible to plan your affairs so that you fall into the tax system of one country and not another. This may be achieved by carefully controlling the amount of time you spend in a particular country and your connections with that country.

Statutory UK Residence Test

The UK has a statutory residence test which is a complex set of rules to determine whether you are resident in the UK or not. Forth Capital advisers can guide you through the rules and assess their impact on your particular situation. If your objective is to become or remain non-UK resident, we can also tell you how to achieve this.

Your intended country of residence will have different residency rules, and some countries may offer favourable tax regimes for new arrivals. If you are moving to a country where we have specialist expertise (e.g. France, Spain, Portugal), we can advise you on your residence position in that country and the tax implications.