bermuda / multi-national PondStraddlers’ Every Day Challenges
Living the Pondstraddler Life
Means
Every Border Crossing Has A Consequence
Living the Pondstraddler Life
What does it mean to have more than one nationality, more than one citizenship, more than one residence, possibly more than one employer, more than one jurisdiction for your business, globally-situated assets and multinational family beneficiaries in more than one country?
Financial and Related Complications.
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There Are Numerous Defining Criteria (see List below) Relative in the Complexity of Globally Mobile LIfestyles, but The Top Five Matter Most.
However, every Pondstraddler should review the Entire List below for applicability to their personal financial planning along with reviewing individual circumstances that may indicate further complexity.
Home is where the heart is, but if you make your home where your heart desires, can you immigrate, reside, be domiciled, become a citizen and be subject to tax there?
It depends.
Where do you belong? How will you get there? How are you connected?
Where are your assets, family, employment or business situations, other relationships?
The Right to residency is the most critical component of global mobility (Pondstraddler) planning! Followed by domicile, citizenship, immigration, and taxation (domestic and international).
Every globally mobile individual needs to fully understand his/her country of origin and guest country tax, regulatory, legal, and immigration structures.
Why - because for most of the civilized world, where you, individually (or a business entity), are considered resident is where you are considered subject to taxation.
The Top Five Criteria!
Residency - Domicile - Citizenship - Immigration - Taxation.
RESIDENCY
The Right to Residency is the most critical component of global mobility (Pondstraddler) planning!
Followed by domicile, citizenship, immigration, and taxation (domestic and international).
Every globally mobile individual needs to fully understand his/her country of origin and guest country tax, regulatory, legal, and immigration structures.
Why - because for most of the civilized world, where you, individually (or a business entity), are considered resident is where you are considered subject to taxation.
You can have more than one citizenship, but citizenship is not the primary criteria for an individual to be subject to taxation in a country - being considered resident is.
It is much more than that, however.
Five classifications, residence, domicile citizenship, taxation, and immigration status are used by varying degrees of a country regulations to define a individual's relationship to a country’s legal, tax, property, immigration, divorce, marriage, commerce, trust, succession and other related statutes.
These regulations assist countries in the control of their borders, the taxation of their citizens and residents, the administration of government social services, the ceding of property conveyances, the establishment of financial transfer structures, marriage, legacy policies and related.
Thus, cross border financial planning is critical for future success!
Residency for Tax Purposes
Generally, tax planning takes precedence as the first component of cross border financial planning.
Within that venue, a person’s residency, or a business or trust entity’s place of central control and management (not citizenship except for the United States) is the most critical attribute of that tax planning.
Residency is open to interpretation and ambiguity, but so far and away the major criteria for the concept of residency taxation that leading immigration and taxation authorities may consider citizenship irrelevant. To further clarify residency, professionals would reference the OECD Model Treaty, jurisdiction revenue agencies definition of residency, tax treaty laws negotiated between country Customs and Immigration Services visa protocols, and various other connotations of residency (as required). See Article 4 - OECD Model Tax Convention Resident defined.
“The criteria for residence for tax purposes vary considerably from jurisdiction to jurisdiction, and "residence" can be different for other, non-tax purposes (i.e. legal, immigration, etc.). In international taxation, a physical presence test is a rule used to determine tax residence of a natural or legal person. It may rely on having a place of business in the jurisdiction (for legal persons), or remaining in or out of the jurisdiction for a certain number of days each year (for natural persons)."
THE MAIN TEST
For individuals, physical presence in a jurisdiction is the main test.
This means, in general, meeting (or not) the 183-day rule (e.g. the so-called substantial presence test in the United States). However, be forewarned. Many jurisdictions also determine residency of an individual by reference to a variety of other factors, such as the ownership of a home or availability of accommodation, family, and financial interests. In some cases, it is so difficult to define where an individual is resident that the competing taxing authorities will reference the OECD and the United Nations Model Tax Convention Resident Tie-Breaker regs in Article 4.2.
t is vitally important that an individual and family understand clearly understand how residency is defined by the jurisdiction where they chose to live (permanently, or temporarily).
Country regulatory bodies such as the US Internal Revenue Service, the US Homeland Security Customs and Immigration Service, Bermuda residency regulations under Bermuda immigration laws, Canada, United Kingdom, Australia, Azores/Portugal all have their own definition of residency that may depend upon the provenance of the individual or family, statutory presence tests, circumstantial evidence, closer connections, and various other criteria.
RESIDENCY definition for businesses, e.g. corporate entities, investment funds, trusts, partnerships, and the like, where the entity is registered, incorporated, considered a place of business under OECD Model Tax Convention Articles 1-26 figures into defining how the entity will be taxed, as well as how the income, dividends, distributions will be subject to tax by investors, shareholders, partners, and beneficiaries.
WHERE IS YOUR DOMICILE
DOMICILE. “In law, domicile is the status or attribution of being a lawful permanent resident in a particular jurisdiction. A person can remain domiciled in a jurisdiction even after he has left it, AND NO MATTER HOW LONG, if he has maintained sufficient links with that jurisdiction or has not displayed an intention to leave permanently (i.e., if that person has moved to a different state, but has not yet formed an intention to remain there indefinitely).
Traditionally, many common law jurisdictions considered a person's domicile to be a determinative factor in the conflict of laws and would, for example, only recognize a divorce conducted in another jurisdiction if at least one of the parties were domiciled there at the time it was conducted. People must be given a connection to a legal jurisdiction, like a passport, that they carry with them wherever they go. Furthermore, when a person dies, it is the law of their domicile that determines how their will is interpreted, or if the person has no valid will, how their property will pass by intestate succession.” Wikipedia.
Your domicile is the place that is:
• considered by law to be your permanent home
• usually something more than a residence.
You may have no fixed place of abode but under the law you will always have a domicile. You can only have one domicile at the one time, whereas you may be resident in two or more places.
There are three basic types of domicile, as established by common law and statutes, KEEPING IN MIND HOWEVER, THAT CIVIL LAW COUNTRIES MAY DIFFER:
Domicile by origin, which is attributed to everyone at birth. For example, a nuptial child adopts the domicile of its father, an ex-nuptial child that of its mother.
Domicile by choice, which will be inferred by law, if there is both a change of residence and an intention of making the change permanently or at least indefinitely. Any person without a legal disability can have a domicile of choice.
Domicile by operation of law, which is imposed by law. For example
an infant's domicile is that of its parents and changes when the parent's domicile changes
Domicile in marriage is not joint; a married woman can acquire her own domicile, independent of her husband.
The age of capacity to have an independent domicile is fixed at 18 years, or when the person marries. (UK)
The United States, for instance, has has three distinct sets of federal tax law factors that can conflict with domicile regulations:
Income, gift and estate tax along with correlated (or different) state residency criteria. An individual may be considered a tax resident in the US for income tax purposes, but not domiciled in the US for estate tax purposes and vice versa.
The United Kingdom, Canada, Australia and other Bermuda resident-connected countries have similar statutes whereby an individual may be considered a citizen, but not subject to income tax as the individual is non-domiciled (non-habitual residence) in country.
Keep in mind that domicile relative to estate tax is an entirely different proposition and that every country’s immigration laws have exceptions or variations on the general rule.
citizenship
Citizenship is the status of a person recognised under the custom or law as being a member of a country.
A person may have multiple citizenships while in some disruptive or tragic events, an individual may be considered stateless.
A person can obtain citizenship under various doctrines. Usually, the place of birth is automatic citizenship, although it may be obtained by naturalization, application and so on.
Each country has their own policies and regulations which determine the citizenship criteria.
Generally, a person’s citizenship is not a deciding criteria as to whether, whenever, and wherever an individual is subject to taxation in a particular jurisdiction.
See residency above.
The US tax regime, however, while categorised as a residency-based tax system is, in reality, the only jurisdiction (Eritrea is similar but excluded from this definition) with a citizenship-based tax system.
Meaning every US citizen and lawful permanent resident (US green card holder) residing within or without the United States in other jurisdictions is subject to US taxation from whatever, whenever, and wherever income sources (and estates) are derived, regardless of whether these same individuals (and entities) are also subject to taxation in their permanent home country.
immigration + customs
HOW WILL YOU ENTER/EXIT A COUNTRY: VISAS, CITIZENSHIP, SPONSORSHIP, WORK PERMITS, ASYLUM, REFUGEE STATUS?
Where residency, domicile, citizenship ascertains an individual’s status, immigration/emigration is the physical act of crossing borders to re-establish one’s home in a different jurisdiction.
Immigration may be temporary or permanent, but is always confirmed by legal permission of customs and immigration authorities through the venue of visas, work permits, asylum, refugee, citizenship/residency rights, conditional resident, temporary protected status, and others.
Immigration and customs is strictly controlled by entrance portals at country borders.
Security officials have relied upon paper documentation, e.g. visas, permits, passports, and the like.
However, these items can be faked, transposed, altered, lost, or stolen.
Recent identification procedures for population border crossings have moved to eye scanning techniques, with even more rigorous and very specific screenings contemplated with the insertion of digital body chips.
Complex Taxation Liabilities of International / Multi-National Citizens
International citizens and their multinational families often feel that they are serving many Tax Masters, with an Equalizer of Tax Liabilities from none.
he quagmire of double taxation is ever present for them due to their significant tax compliance burdens relative to a single domestically-based family (in Bermuda, for example).
The complexity of multiple countries’ tax laws along with focused harmonization across borders and increased pressure from OECD/other jurisdictional governmental revenue agencies makes planning cumbersome and time consuming.
Tax, legal, immigration, financial, regulatory, constitutional laws are subject to change without notice - in any country.
When contemplating any cross border travel, relocation under emigration, or immigration, it is highly recommended to obtain financial planning advice from credible credentialed professionals in your new (and old) home jurisdictions – before you execute your plan.
Yes, it costs, but consider the consequences of lengthy, sometimes irrevocable, costly financial/tax planning mistakes and/or dealing with some country's taxing authority down the road.
The CrossBorder Financial Planning Criteria
Summary Checklist
Pondstraddler Life™ (cross border) pre- and post-financial planning (after emigration) involves most, if not all depending upon the individual, of the following precepts:
CAUTION. This list is not all inclusive and is subject to change without notice.
1. Residency. Determining where you are resident is where you will probably be subject to taxation.
2. Domicile. Country Connections and Familial Relationships: Social, Emotional, Cultural and Physical Ties to Two or more countries. Can domicile rights over-ride residency requirements?
3. Citizenship(s). How did you (can you) obtain citizenship? What does each country require from you? Have you renounced or expatriated a citizenship?
4. Immigration and Customs. How did you enter the country? What are your rights and obligations? How long can you stay?
5. International and Domestic Tax Compliance. Balancing the tax compliance between more than one country while managing assets for tax efficiency.
6. Dueling Economies, Trade & Business
7. Cash Management and Personal Net Worth
8. Investments. Foreign and domestic, tax efficient and tax compliant
9. Insurance and Risk Management
10. Retirement and Pensions jurisdictional complexity and constraints
11. Estate Planning for Multinational Families in more than one Jurisdiction
12. Regulatory Quagmires, Conflicts of Laws, and Inadvertent Planning Traps
“Always keep in mind”
Always keep in mind that every country may have multiple sets of regulations for any of these criteria, details of which compound the multinational family compliance challenges for more than one jurisdiction