Citizenship based taxation triggered by moving to tax haven

[Alonzo]

Italy - Individual - Residence

Detailed description of individual residence rules in Italy

taxsummaries.pwc.com

"An anti-abuse rule provides that Italian citizens who transfer residence to countries considered as ‘tax havens’ (these are determined through a Decree of the Ministry of Finance), are deemed to be resident in Italy even if they are no longer registered in the Records of the Italian Resident Population, unless otherwise proven by the individuals."

Italy takes Switzerland off list of tax havens

Switzerland’s southern neighbour has removed it from a “black list” on which it has figured since 1999.

www.swissinfo.ch

Anyone who knows other EU countries that have citizenship based taxation when moving to tax havens?

 

[JohnnyDoe]

This is not citizenship based taxation but inversion of the burden of proof for residents in tax havens, it always existed and the same provision is present in most countries.

 

[Sols]

As @JohnnyDoe says, this is not new and I'd add it's not even particularly problematic. It just means a bit more paperwork when leaving your home country. Every case I've seen, you won't run into problems so long as your departure and new place of tax residence are genuine.

A lot of other countries have this rule or rules like it, where tax residency is assumed to continue (indefinitely or for a period of years) until proven otherwise. Sometimes it doesn't even matter if you move to a tax haven or even just anywhere.

 

[Larin]

Here is the helpful wikipedia summary: International taxation - Wikipedia If you scroll down you will find which countries have this provision.

 

[Marzio]

If you scroll down you will find which countries have this provision.

 

[Sols]

The topic isn't taxation by citizenship the way US and other shave it. The topic is presumed continued tax residence after leaving country, until proven otherwise and/or until enough time has passed.

 

[Larin]

The topic isn't taxation by citizenship the way US and other shave it. The topic is presumed continued tax residence after leaving country, until proven otherwise and/or until enough time has passed.

Which that page also contains if you scroll down far enough.

 

[kkein]

Which that page also contains if you scroll down far enough.View attachment 4836

Note that, for the nordic countries, those rule in this screen do not actually apply in case of a DTA in place (basically the majority of the cases unless one is moving to a tax heaven).
They are very slimy for basically almost not specifying this at all in public documentation.

 

[Larin]

Note that, for the nordic countries, those rule in this screen do not actually apply in case of a DTA in place (basically the majority of the cases unless one is moving to a tax heaven).

Thats what DTAs are exactly designed to prevent (overwrite domestic legislation to prevent double taxation). They absolutely couldn't apply those citizenship-based rules to someone who moves to a country that has a DTA with one of the nordic countries. That is why the most common recommendation when leaving your country of tax residence is to move to a different country with which your country has a DTA, at least for a year, to definitively break with your home country and then go forth from there to whereever you want.
One thing to note is for the above to work you should move to a country where the DTA covers residents and citizens, because not all DTAs do. The most common example is the DTA between the UAE and Canada. Although one exists, Canadians moving to the UAE are not covered by it and therefore cannot rely on the treaty.

 

[Alonzo]

Guys c'mon.

I said if they were countries that will still tax you based on citizenship when moving to a tax haven.

I didn't say anywhere in the world... I said tax havens.

Nevermind then if I mistook the use of "Italian citizens" on pwc as citizenship based

 

[Marzio]

countries that will still tax you based on citizenship when moving to a tax haven

There are none and i don't see why a country would enact citizenship taxation only when moving to a tax haven.

The exit tax is a proof of that, the exit tax is there regardless of moving to a tax haven.

 

[luap]

There are none and i don't see why a country would enact citizenship taxation only when moving to a tax haven.

The exit tax is a proof of that, the exit tax is there regardless of moving to a tax haven.

Plenty of these exist. Spain will 100% tax it's citizens that move to a country they define as a (paraiso fiscal) tax haven. I've met people who were effected by it. Some have a way out, if you can prove you cut all ties to your home country and actually spend +183 days in the tax haven, whilst others don't care and tax you regardless.

This is in addition to the exit tax. This is for future income, for a period, ie in the example of Spain, for 5 years.

 

[Konstanz]

Plenty of these exist. Spain will 100% tax it's citizens that move to a country they define as a (paraiso fiscal) tax haven. I've met people who were effected by it. Some have a way out, if you can prove you cut all ties to your home country and actually spend +183 days in the tax haven, whilst others don't care and tax you regardless.

This is in addition to the exit tax. This is for future income, for a period, ie in the example of Spain, for 5 years.

Sometimes there is workaround around that. You can move to some high tax country, with DTA and live there for 1 year and then move to tax haven.
Not all high tax coutries have these limitations. Let's say UK, Netherlands etc

 

[Marzio]

Plenty of these exist

Really?

Name a few then.

Name a few that will tax citizens upon moving to tax haven AND there is no workaround where workaround is:

1. Demonstrate that you are bonafide tax resident of tax haven and you cut all ties with home country
2. Move to tax haven country X after moving first to intermediate country Z

What you are talking about is not citizenship taxation becase the only way to avoid being taxed is losing your citizenship.

If there's workaround then it's not citizenship taxation.

 

[luap]

I agree there are workarounds, like with many other things in life, but otherwise, they'll tax you because you're a citizen and move to a country they don't like, or don't follow specific rules they set. I'm not sure if OP's description is "citizenship taxation" like the US is, but it has some parts of it, unless you follow a workaround.

Taken from the Spanish tax authority:
"Además, las personas físicas de nacionalidad española que acrediten su nueva residencia en un paraíso fiscal, seguirán teniendo la condición de contribuyentes por el Impuesto sobre la Renta de las Personas Físicas, tanto en el período impositivo en el que efectúen el cambio de residencia como en los cuatro períodos impositivos siguientes."

"In addition, individuals of Spanish nationality who prove their new residence in a tax haven, will continue to have the status of taxpayer for Personal Income Tax, both in the tax period in which they make the change of residence as well as in the four following tax years."

 

[Alonzo]

Which that page also contains if you scroll down far enough.View attachment 4836

Thanks Larin. This is what I actually wanted

Kinda weird that they all mention "citizens" instead of residents... or both

Very confused but anyways

 

[Alonzo]

 

[Marzio]

He is just romancing the exit tax to sell his "get a second passport" service.

 

[manukahoney]

Only applies to the citizens I assume? Not residents, even with long residencies?

 

[Cloudbanck]

Really?

Name a few then.

Name a few that will tax citizens upon moving to tax haven AND there is no workaround where workaround is:

1. Demonstrate that you are bonafide tax resident of tax haven and you cut all ties with home country
2. Move to tax haven country X after moving first to intermediate country Z

What you are talking about is not citizenship taxation becase the only way to avoid being taxed is losing your citizenship.

If there's workaround then it's not citizenship taxation.

There are not plenty, maybe not even two, but there is one such clear cut taxation by citizenship case when moving to a tax haven with no workaround. And that is French citizens moving to Monaco - they are still taxed as tax residents in France for life, even if they move to a third country first, and even if they also have citizenship of a third country beside the french citizenship.

There are exceptions, but I wouldnt call them workarounds:

-A French citizen who had been a resident for at least 5 years as of October 13th, 1962 when the Franco - Monegasque treaty took effect, and has retained residency in Monaco since then, would not pay tax to France, and would be a so called privileged French citizen.

-A French citizen who marries a privileged French citizen, a Monegasque citizen or a third party citizen would also not pay tax to France.

-A French citizen born in Monaco who has consistently lived in Monaco since birth does not pay tax to France.

-A French citizen who gets Monegasque citizenship will not pay tax in France as Monegasque citizenship takes precedence.