With its cumbersome and costly tax policies, the US in particular has seen a record number of individuals renouncing their US citizenship or terminating their long-term US residency in 2013. According to a recent report from the US Treasury Department, 2,369 individuals have given up their US identities in the first three quarters of 2013 – already eclipsing the previous annual record of 1,781 in 2011.
Experts cite frustrations over the US’s complex and draconian tax system – which taxes citizens’ income no matter where in the world they are residing and requires US taxpayers to disclose information about their foreign bank accounts and assets – as one of the primary causes of this mass migration.
Numerous high-profile ultra high net worth (UHNW) Americans – including Facebook co-founder Eduardo Saverin, songwriter and socialite Denise Rich and 20-year-old oil fortune heiress Isabel Getty – have ditched their US passports in the past year.
But the US is not the only country experiencing an exodus of notable UHNW individuals.
The Oscar nominee Gerard Depardieu reportedly left France to avoid the proposed millionaire’s tax.
LVMH boss Bernard Arnault, France’s wealthiest man with a US$28.3-billion net worth according to Wealth-X, reportedly applied for Belgian nationality which he subsequently withdrew after outcry in his home country.
Caroline Garnham, a lawyer and chief executive of family office advisor Family Bhive, said that ease of mobility combined with growing wealth is making nationality swapping more common. “The wealthy are mobile and when taxation becomes more onerous than their affection for a country, they can move,” she commented.
Tax havens such as Switzerland, Singapore, the Cayman Islands, Luxembourg, and Hong Kong continue to attract flocks of migrating UHNW individuals.
In fact, 70 percent of UHNW individuals based in Hong Kong were raised in a different country, while this figure stands at 44 percent and 42 percent in Singapore and Switzerland, respectively – according to Wealth-X data.
Garnham added that some moves are more successful than others: “The most successful emigrations are by those moving from a country where their ties are not strong to begin with. Clients may have moved to that country initially for work or marriage and now the irritation with the tax system simply overcomes inertia in making them take a step which they have been putting off for years.”
She cautioned: “My first advice is never to let the tax tail wag the dog. Saving tax does not make up for missing friends and family. Émigrés like Gerard Depardieu may find that, on reflection, they soon begin pining for the liberté, égalité and fraternité of their friends and motherland.”
Others agree that jumping ship is not always the answer. Micha Emmett, managing director of London-based consultant CS Global, said for many it makes more sense to find a solution that does not oblige them to physically move, but simply take on a secondary citizenship that gives them all the benefits. “Becoming a global player is important for businessmen and entrepreneurs. But ultimately businessmen understand their local markets where they have made their money. So to uproot their families, livelihood and lifestyles to adapt to a new locale is challenging and obstructive.”
She added that besides wealth protection, there are many other reasons that individuals change jurisdiction including a desire for greater privacy and anonymity, reduced administration and increased global mobility. In this case, opting for citizenship through investment may be optimal. This practice is becoming increasingly popular with the wealthy, said Emmett, as many governments looking to boost their coffers have launched citizenship-by-investment schemes, granting citizenship to foreigners in exchange for investment. This usually enables the applicant to then travel more freely and settle within a preferred country.
Source: Wealth-X
Experts cite frustrations over the US’s complex and draconian tax system – which taxes citizens’ income no matter where in the world they are residing and requires US taxpayers to disclose information about their foreign bank accounts and assets – as one of the primary causes of this mass migration.
Numerous high-profile ultra high net worth (UHNW) Americans – including Facebook co-founder Eduardo Saverin, songwriter and socialite Denise Rich and 20-year-old oil fortune heiress Isabel Getty – have ditched their US passports in the past year.
But the US is not the only country experiencing an exodus of notable UHNW individuals.
The Oscar nominee Gerard Depardieu reportedly left France to avoid the proposed millionaire’s tax.
LVMH boss Bernard Arnault, France’s wealthiest man with a US$28.3-billion net worth according to Wealth-X, reportedly applied for Belgian nationality which he subsequently withdrew after outcry in his home country.
Caroline Garnham, a lawyer and chief executive of family office advisor Family Bhive, said that ease of mobility combined with growing wealth is making nationality swapping more common. “The wealthy are mobile and when taxation becomes more onerous than their affection for a country, they can move,” she commented.
Tax havens such as Switzerland, Singapore, the Cayman Islands, Luxembourg, and Hong Kong continue to attract flocks of migrating UHNW individuals.
In fact, 70 percent of UHNW individuals based in Hong Kong were raised in a different country, while this figure stands at 44 percent and 42 percent in Singapore and Switzerland, respectively – according to Wealth-X data.
Garnham added that some moves are more successful than others: “The most successful emigrations are by those moving from a country where their ties are not strong to begin with. Clients may have moved to that country initially for work or marriage and now the irritation with the tax system simply overcomes inertia in making them take a step which they have been putting off for years.”
She cautioned: “My first advice is never to let the tax tail wag the dog. Saving tax does not make up for missing friends and family. Émigrés like Gerard Depardieu may find that, on reflection, they soon begin pining for the liberté, égalité and fraternité of their friends and motherland.”
Others agree that jumping ship is not always the answer. Micha Emmett, managing director of London-based consultant CS Global, said for many it makes more sense to find a solution that does not oblige them to physically move, but simply take on a secondary citizenship that gives them all the benefits. “Becoming a global player is important for businessmen and entrepreneurs. But ultimately businessmen understand their local markets where they have made their money. So to uproot their families, livelihood and lifestyles to adapt to a new locale is challenging and obstructive.”
She added that besides wealth protection, there are many other reasons that individuals change jurisdiction including a desire for greater privacy and anonymity, reduced administration and increased global mobility. In this case, opting for citizenship through investment may be optimal. This practice is becoming increasingly popular with the wealthy, said Emmett, as many governments looking to boost their coffers have launched citizenship-by-investment schemes, granting citizenship to foreigners in exchange for investment. This usually enables the applicant to then travel more freely and settle within a preferred country.
Source: Wealth-X
