Applying a method to identify legal and tax issues. Wealth management in an international context can involve several hypotheses: the mobility of assets and/or the mobility of individuals. In the case of personal mobility, the wealth reflexes to be developed follow a chronological order in three stages: firstly, the wealth situation prior to departure, then the links between the two countries and finally the impact in the country of arrival. By proceeding in this way, we can provide greater security for the assets in terms of local regulations in each country, and European regulations (conventions, regulations, directives).

Pre-departure questions. Before moving to another country, it is advisable to consider i) the existence and scope of an exit-tax scheme, ii) the appropriateness of transferring assets to one's heirs and iii) the possibility of retaining assets or legal and tax wrappers in one's current country of residence. Although this list is not exhaustive, it highlights the importance of carrying out a wealth audit in line with one's wealth objectives. This audit should also take into account the 'past' situation, in particular of a person previously resident in a country other than the country of departure, with assets potentially already subject to exit tax.

Links between countries. Where there are links between several countries, for example a person resident in one country owning a property generating rental income in another country, double taxation treaties on income, if they exist, are designed to eliminate double taxation between the other country (source country of the income) and the person's country of residence. However, attention needs to be paid to i) the residence criteria of the individual within the meaning of domestic law, ii) the choice of taxation method in the state of residence (worldwide or limited/flat rate) and iii) the residence criteria within the meaning of the tax treaty. If we take the example of Italy, which specifies its residence criteria in domestic law and its options as to the method of taxing income in the state of residence (worldwide or flat rate), the application of the tax treaty may be challenged by the other state (the country of source of the income) on the grounds that the person is not a resident of a contracting state within the meaning of the treaty (in the case of flat rate taxation, an option chosen by a new Italian resident).

As double taxation agreements on gifts and inheritance are rarer, it is advisable to apply the domestic law of each country and check the arrangements for eliminating any double taxation.

In the country of arrival. One of the steps in this third phase is to consolidate tax residence. The criteria for residence in the country of arrival cover several concepts in domestic law. If we take Italy as an example, individuals are considered to be resident in Italy for tax purposes if, for the major part of the tax period (i.e. 183 days in the year, or 184 days in the case of a leap year), they i) have their residence in Italy, ii) have their domicile in Italy, iii) are physically present in Italy, also taking into account fractions of a day, or iv) are registered as residents. It should be noted that these criteria are mutually alternative.

Once tax residence has been established, the next step is to consider how local or foreign income will be taxed if that state has several tax regimes: worldwide or limited/flat-rate. As we saw earlier, this choice may determine the application of tax treaties between the country of residence and the other country(ies) where the assets are located.

European civil and tax news. In addition to these three phases, current events in the countries concerned should be taken into account, as they are likely to call into question the wealth strategies currently in place. It is not uncommon for changes in tax legislation to undermine the way in which assets are held, and to initiate changes to make international wealth more secure.

Editor: , Head of Wealth Planning, Societe Generale Private Banking Luxembourg & Monaco.

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