What do you need to know about tax residency when changing your country of residence?

Changing your country of residence is an important step that requires a deep and comprehensive understanding of the tax implications associated with changing your tax residency. International law firm Antwort Law is ready to tell you about the key aspects of this process, its complexities, and provide advice and recommendations for a successful transition to a new tax regime.

Tax residency determines in which country a person is obliged to pay taxes on their income. When changing your country of residence, a situation may arise when you become a tax resident in a new country, but at the same time retain obligations in the previous one. This can lead to double taxation if measures are not provided to prevent such a situation, for example, international agreements on the avoidance of double taxation.

What are the main difficulties you may encounter when changing your country of residence:

1. Different criteria for tax residency: each country has its own rules and criteria by which tax residency is determined. For example, in some countries the main criterion is the number of days spent in the country (usually 183 days per year), in others it is the presence of a permanent place of residence, economic or social ties.
2. Risk of double taxation: if the old and new countries have different rules for determining tax residency, it is possible that both countries may require you to pay taxes on your income. To avoid this, you need to carefully study the tax laws of both countries and, possibly, take advantage of a double taxation agreement.
3. Exit tax: some countries, such as the United States or France, have an “exit tax” that is levied when you renounce citizenship or residency. This tax can be significant and requires careful preparation.
4. Change in asset structure: moving to a new country may require you to reconsider the structure of your assets, such as real estate, investments or businesses. This may be due to differences in tax rates or tax regimes.

Recommendations from Antwort Law lawyers when changing your country of residence:

1. Analyzing your current tax status: The first step is to determine your current tax status and understand how it will change when you move, which includes reviewing any obligations that may arise in your old and new countries.
2. Planning your move: It is important to plan your transition period in advance to avoid double taxation and minimize tax risks. For example, you may want to consider becoming a tax non-resident in the country you are leaving or applying for tax residency in your new country.
3. Paperwork: Moving to another country requires a lot of paperwork, including notifying the tax authorities of both countries, revising your tax returns, and possibly applying for tax residency in the new country.

The process of changing your tax residency can take anywhere from several months to a year, depending on the complexity of the situation and the requirements of both countries.

Let's look at specific actions using examples from our clients:

Case 1: Client's relocation from Russia to the UAE and tax optimization

The client is a successful entrepreneur in Russia, owning several companies in various sectors, who decided to relocate to the UAE to take advantage of the zero income tax rate and favorable conditions for doing business. However, questions arose related to taxation in Russia and the correct execution of documents for the transition to the new tax regime.

How did we help the client?

1) developed a strategy for a smooth transition to tax residency in the UAE, having studied in detail the client's tax obligations in Russia.

2) correctly executed the renunciation of the status of a tax resident of Russia, which avoided double taxation.

3) conducted individual consultations on capital withdrawal and transfers to the UAE with minimal tax losses.

4) developed strategies for structuring the client's business and assets in the UAE for optimal use of tax benefits and capital protection.

Result: the client successfully switched to tax residency in the UAE, minimizing tax risks and preserving his assets, avoiding taxes in Russia and getting the opportunity to develop his business in the conditions of zero income tax and a stable economic environment in the UAE.

Case 2: Structuring assets when moving from the UK to Switzerland

The client, the owner of an investment company in the UK, decided to move to Switzerland to take advantage of a more favorable tax regime due to tax changes due to the abolition of the non-domicile regime. However, he needed to review the structure of his assets to avoid additional taxes on capital and income.

How did we help the client?

Antwort Law specialists conducted a detailed analysis of the client's assets and developed a restructuring strategy, taking into account the tax peculiarities of the UK and Switzerland. We suggested that the client use Swiss trusts and holding structures to minimize taxes on capital gains and dividends. In addition, we ensured full compliance with all legal requirements of both countries.

Result: the client successfully transferred his assets to Switzerland, preserving a significant part of his capital and avoiding taxation on a significant part of his income. Thanks to a properly planned asset structure, he was able to significantly reduce his tax liabilities.

To avoid future tax overpayments and errors, Antwort Law offers a full range of services that will make your transition as safe, convenient and profitable as possible.

1) We provide legal support: we have a deep understanding of international law and help our clients resolve complex issues related to changing residency, tax obligations and compliance with all legal regulations.

2) Optimize your tax burden: develop an individual strategy that allows you to legally reduce your tax liabilities, using all available benefits and international agreements, and thereby protect you from unnecessary expenses.

3) Protect your assets: create effective strategies for protecting your assets, taking into account the specifics of the legislation of different countries, in order to minimize tax consequences and protect your property.

4) Take into account cultural and legislative differences: help you comply with all legal requirements and adapt to new conditions in order to avoid mistakes that can result in additional costs or loss of time.

5) Plan for your future: help you develop a strategy that will ensure your stability for years to come, even in the face of possible changes in tax legislation.

6) Offer individual solutions: each situation is unique, and our experience allows us to offer personalized solutions that take into account your specific needs, whether it is moving with family, transferring a business or changing citizenship.

7) We simplify bureaucratic procedures: we take on all tasks related to filing applications, obtaining permits and visas, allowing you to focus on other aspects of the move without worrying about bureaucracy.

8) We support you at all stages of the move: we accompany our clients at all stages of the process - from the initial preparation of documents to the full completion of all legal and tax formalities in the new country. Our goal is to make your transition as comfortable and safe as possible.

By contacting Antwort Law, you receive not only legal support, but also a comprehensive solution to all issues related to changing your place of residence. We will help you avoid mistakes, minimize risks and optimize your resources, ensuring the most comfortable and safe transition to a new life in another country.

Lidia Ivanova

International lawyer
Antwort Law