Mark Davies is used to flying around the world, typically visiting Geneva and Monaco every month in his work as a tax adviser for the super-wealthy.
Q1 2020 hedge fund letters, conferences and more
Now he’s sequestered at home in southwest London because of the coronavirus pandemic, which is wreaking havoc on his business and the tax plans of his clients similarly accustomed to globetrotting.
“The pandemic means we’ve now got people stuck in the U.K. who didn’t intend to be here, and people who did want to be here that couldn’t,” he said. “It’s gone both ways.”
As nations have closed borders, some individuals are confronting unexpectedly complex tax situations. These include the prospect of higher levies from spending too many days in a foreign locale or having to shelve plans to obtain tax breaks by moving abroad.
It’s not just international travel that poses tax risks. The question of tax complications also looms for the thousands of people in the U.S. who’ve crossed state lines to hunker down in vacation homes or with in-laws.
Tax Residency
Australia, the U.K. and Singapore have issued guidelines to ease concerns about tax residency for individuals trapped because of the virus, but they’re far from fail-safe guarantees. And even as the U.S. and Europe follow Asian nations in phasing out lockdown restrictions, the prospect of global travel returning to pre-pandemic levels remains well in the future.
“It’s not coming to an end any time soon,” said Simon Goldring, a London-based partner at law firm McDermott Will & Emery. “There’s going to be people stuck in different jurisdictions who inadvertently become residents there.”
Spending more than six months in a country typically makes someone a tax resident, although the location of permanent homes and family links, travel histories and income sources are also factors. Determining tax residency is complicated -- even more so when each nation applies different criteria.
Nations also have tax pacts with other countries that override domestic laws and would apply to residency disputes in the absence of pandemic provisions. Resolving tax issues from the coronavirus will be a stressful and costly process for some. Goldring said he moved one client across Italy and France this year to ensure they didn’t exceed the U.K.’s residency thresholds.
Read the full article here by Ben Stupples and Devon Pendleton, Advisor Perspectives
