EXPAT FINANCIAL AFFAIRS 1

Transcription

1 EXPAT FINANCIAL AFFAIRS 1

2 Estate planning for expats Rutger Van Boven October 3, 2015

3 Misunderstandings about estate planning Surely, this does not concern me; I am not Belgian I have no worries about inheritance tax. I have taken up domicile in Sweden and Sweden has no inheritance tax anymore I will just leave everything to my wife, and she will leave everything to me. When I am gone, she can then decide what she does with our money. I work for the EU Commission. I joined from the UK so that my heirs will pay inheritance tax in the UK If I leave everything to my wife, we do not have to worry about Belgian inheritance tax. My wife and I made a will in Ireland to leave each other our house in Dublin. There is no inheritance tax between husband and wife there. Estate planning for expats Page 3

4 QUESTION Are you aware of the consequences of being considered as a Belgian resident? -> risk of being subject to Belgian Inheritance and matrimonial law; -> risk of being subject to Belgian Inheritance tax (and UK Inheritance tax) Estate planning for expats Page 4

5 QUESTION The answers on the following questions have an impact on the inheritance law and inheritance tax to be paid in Belgium and/or in the UK. I am a Belgian resident I am a UK resident I have left the UK within 3 years I have made a donation in the last 7 years I have made a will I am married I have children YES/NO YES/NO YES/NO YES/NO YES/NO YES/NO YES/NO Estate planning for expats Page 5

6 ESTATE PLANNING FOR UK-EXPATS Importance 1) Belgian and UK inheritance legislation differs 2) Belgian en UK Inheritance tax differs Client name - Event - Presentation title Page 6

7 Importance 1) Differences in inheritance law between UK and B Legislation UK The UK has three legal systems: (1) English law which applies in England and Wales (2) Northern Ireland law that applies in Northern Ireland (3) Scots law which applies in Scotland Belgium Civil law, including private international law, is the same throughout the Belgian territory Client name - Event - Presentation title Page 7

8 Importance 1) Differences in inheritance law between UK and B Legitimate portion UK England and Wales No compulsary inheritancy rules or forced heirship rules Complete freedom of disposition Scotland The spouse, the children or grandchildren have automatic inheritance rights irrespective of the provisions in a will (legitimate portion) Belgium The spouse, the children and, in some cases, the parents have the right to claim a legitimate portion. Not automatically They have to claim for it Client name - Event - Presentation title Page 8

9 Importance 1) Differences in inheritance law between UK and B UK Statutory rules of intestate succession England and Wales If there s no valid will, the statutory rules of intestate succession apply (1) Deceased with (grand)children The husband, wife or civil partner keeps all the assets (including property), up to 250,000, and all the personal possessions, whatever their value may be. The remainder of the estate will be shared as follows: the husband, wife or civil partner gets an absolute interest in half of the remainder the other half is then divided equally between the surviving children Belgium If there s no valid will or marriage contract, the statutory rules of intestate succession apply (1) Deceased with (grand)children The husband or wife inherits the usufruct of the entire estate. The (grand)children inherit the bare property of the entire estate. Client name - Event - Presentation title Page 9

10 Importance 1) Differences in inheritance law between UK and B Statutory rules of intestate succession UK (2) Deceased without (grand)children The husband, wife or civil partner gets all of the estate. Belgium (2) Deceased without (grand)children The husband or wife gets all of the estate (if the deceased had no brothers, sisters or parents). The surviving legal partner inherits the usufruct of the common house and its furniture. (3) A surviving partner who wasn't married or in a civil partnership with the deceased has no automatic right to inherit. (3) A surviving partner who wasn't married or in a legal partnership with the deceased has no automatic right to inherit Client name - Event - Presentation title Page 10

11 Importance 1) Differences in inheritance law between UK and B Statutory rules of intestate succession Scotland UK If there is no valid will, the statutory rules of intestate succession apply (1)Deceased with (grand)children Belgium The husband, wife or civil partner gets the house up to a value of 473,000. They ll get a lump sum of 473,000 if the house is worth more, and may have to sell off the property. Client name - Event - Presentation title Page 11

12 Importance 1) Differences in inheritance law between UK and B UK Statutory rules of intestate succession They also get: furniture and moveable household goods up to the value of 29,000 up to 50,000 in cash a third of the rest of the estate Belgium The children will get two-thirds of the rest of the estate. (2) Deceased without (grand)children The husband, wife or civil partner gets all of the estate (if the deceased left no brothers, sisters or parents) (3) A surviving partner who wasn't married or in a civil partnership with the deceased has no automatic right to inherit Client name - Event - Presentation title Page 12

13 Importance 2) Differences in matrimonial law between UK and B UK Belgium Matrimonial law No concept of matrimonial or community property The agreements established in a marriage contract take precedence over the law of intestate succession and wills Client name - Event - Presentation title Page 13

14 Importance 3) Differences in inheritance tax between UK and B UK Belgium Legislation The United Kingdom has a unified inheritance tax, Inheritance tax is a regional tax, The rates that apply depend on the region where the deceased was a tax resident for most of the last five years before death. Client name - Event - Presentation title Page 14

15 Importance 3) Differences in inheritance tax between UK and B UK Belgium Calculation Inheritance Tax is paid on a person s estate. The inheritance tax due is calculated for each of the heirs (spouse, legal partners, individuals living together under certain conditions, (grand) children) on his share of the assets. Client name - Event - Presentation title Page 15

16 Importance 3) Differences in inheritance Tax between UK and B UK Belgium Inheritance Tax Threshold Inheritance Tax is paid if a person s estate (their property, money and possessions) is worth more than 325,000 when they die. Brussels The first 15,000 of the share to which each heir is entitled is exempted from inheritance tax. Flanders There s no inheritance tax threshold. Wallonia The first 12,500 of the share to which each heir in the above table is entitled is exempted from inheritance tax. Client name - Event - Presentation title Page 16

17 Importance 3) Differences in inheritance Tax between UK and B UK Belgium Tax rate The rate of inheritance tax is 40% on anything above the threshold. The rate may be reduced to 36% if 10 % or more of the estate is left to charity. The applicable tax rates vary depending on the region, the beneficiary and the taxable amount. Brussels capital region and Walloon region 3% to 30% (for spouse, legal cohabitant and direct ascendant or descendent of the deceased) Flemish region 3% to 27% (for spouse cohabitant and direct ascendant or descendent of the deceased) Client name - Event - Presentation title Page 17

18 Importance 3) Differences in inheritance Tax between UK and B UK Belgium Inheritance Tax Reliefs Surviving spouses and registered partners do not pay inheritance tax on the part of the family home they inherit (in Flanders and Brussels, in Wallonia a lower tax rate applies). Limited reductions are granted to the surviving spouses and to children under the age of 21. Transfer of family business (3% in Flanders and Wallonia, 0% in Brussels) Client name - Event - Presentation title Page 18

19 Are you a Belgian resident, a UK resident or both? The subjective link used by Belgian inheritance tax is the domicile. The Belgian concept of domicile can be compared with that of residence for tax purposes. Under Belgian law, domicile is the place where a person has their principal residence. It is the place where the center of their family and economic interests lies, and where they are normally to be found. Belgium defines domicile in terms of residence at a specific address. Anglo-Saxon countries see a person s domicile as their homeland. Belgium does not have a notion of domicile of origin. That can result in a conflict of laws. Estate planning for expats Page 19

20 Are you a Belgian resident, a UK resident or both? The subjective link used by UK inheritance tax is the domicile. The UK concept of domicile will often be established according to three factors: where you were born, if you have assets in that location and where your father was born. Changing your domicile tax status requires much more than simply showing that you now live abroad, you also have to be able to prove that you have no intention of returning to your original country of residence. You can attempt this in a number of ways, including: relinquishing UK passport, severing all links with social organizations and join new organizations in your country of residence, purchase property in your country of residence and selling all your UK based property, closing UK bank accounts, Estate planning for expats Page 20

21 Are you a Belgian resident, a UK resident or both? The subjective link used by UK inheritance tax is the domicile. For inheritance tax purposes, the concept of domicile is extended to include certain persons who have been resident in the UK in any part of 17 or more of the previous 20 UK tax years. This is known as deemed domicile. Estate planning for expats Page 21

22 Consequences of being a Belgian resident, a UK resident or both? For individuals living and domiciled in Belgium, the Belgian inheritance rules apply to their entire estate, including the real estate property outside Belgium. For individuals domiciled in the UK, the Belgian inheritance rules apply to their real estate property in Belgium. Estate planning for expats Page 22

23 Consequences of being a Belgian resident? The Belgian inheritance tax applies In some cases the UK inheritance tax will apply (see below). The double taxation is the result of two conflicting state legislations. Double taxation agreements are the appropriate way to solve this problem. Belgium concludes only two treaties to avoid double inheritance taxation: one with Sweden, one with France. Estate planning for expats Page 23

24 Consequences of being a Belgian resident? You have left the UK within the past 3 years or in the last 20 years you have lived for 17 years in the UK The Belgian and the UK inheritance tax applies to the entire estate, Since the UK does not have a double tax treaty with Belgium, unilateral rules will apply. Unilateral credit is given where inheritance tax and overseas tax are chargeable by reference to the same event and attributable to the value of the same property. The amount of tax relief given is capped at the lower of overseas tax paid and UK tax due. Estate planning for expats Page 24

25 Consequences of being a Belgian resident? And you have foreign real estate property (f.e. in the UK) The Belgian and the foreign (f.e. UK) inheritance tax applies to the foreign real estate property. Foreign estate or inheritance tax on foreign immovable property are credited against Belgian inheritance tax. The character of the property is determined according to the local legislation. Estate planning for expats Page 25

26 Consequences of being a UK resident? Even if you are an expat, UK inheritance tax will be due if you are deemed domicile in the UK. The UK inheritance rules are applicable, with exception of the real estate in Belgium (Belgian inheritance rules). Inheritance tax in the UK on the entire estate. Inheritance tax in Belgium on the real estate in Belgium. Estate planning for expats Page 26

27 with careful planning it is possible To legally avoid a significant amount of inheritance tax To transfer the ownership of your capital and real estate to whom, when and how you want. This gives you the peace of mind that you have arranged your affairs the way you want. (For some) to make sure that your business can continue when you are not there anymore. Estate planning for expats Page 27

28 RUTGER VAN BOVEN Senior Manager - Tax & Legal Services BDO Belastingconsulenten Burg. Ven. CVBA Rutger.vanboven@bdo.be BDO Ghent Office Axxes Business Park Guldensporenpark 100 blok K 9820 Merelbeke BELGIUM Tel +32 (0) Fax +32 (0) Expat Financial Affairs 03/10/2015- Estate planning for expats Page 28