Complexity of Cross-Border Relocation

A major session at the Wealth & Relocation Expo organised by INTAX CONNECT and Alexander Kovtonyuk , held on 3 November 2024 in Cyprus, brought together three leading professionals to discuss cross-border tax planning, residency strategies, and the practical challenges of international mobility. The panelists were Dmitry Zapol (IFS Consultants, UK), Ana Castro Gon?alves (Caiado Guerreiro, Portugal), and Serhii Moliboh (Angles, Switzerland). They focused on a range of legal and tax considerations that arise when individuals relocate from one jurisdiction to another, the growing demands of transparency, and the disruptive influence of technologies such as AI and cryptocurrencies. The conversation also addressed how personal factors—family ties, lifestyle preferences, and cultural integration—must align with tax planning in any successful relocation.

Complexity of Cross-Border Relocation

The panel began by emphasizing that relocation involves far more than simply comparing tax rates across countries. Moving from one jurisdiction to another triggers considerations around exit taxes, ongoing obligations in the country of departure, immigration and residency rules in the new jurisdiction, and legal frameworks that vary widely from place to place. There is also the matter of dealing with different languages, court systems, and timing for filing tax returns.

One recurring theme was the importance of confirming precisely when and how individuals cease to be resident in their old country, and how to legitimately establish residence in the new one. The speakers underscored that “not leaving any complexity out” means looking at more than whether a country simply offers low tax rates. It entails verifying whether one’s family, personal lifestyle, and business operations are suited to the new location. Otherwise, any apparent tax savings may be overshadowed by dissatisfaction, unexpected bureaucracy, or complications in daily life.

The speakers highlighted an important insight: true compliance almost always involves some cost or inconvenience. If a structure or solution claims to be free of expense or paperwork, it is highly likely to fail a legal or regulatory test. Attendees were urged to note that reliable, law-abiding tax planning often requires investing in the right legal and accounting expertise, as well as committing to genuine residence or “substance” in the chosen country.

Key Topics: Complexity, Transparency, and Disruption

During the session, Dmitry Zapol introduced three core themes that shape today’s relocation strategies: complexity, transparency, and disruption. Although presented as distinct areas, these concepts are inextricably linked in modern cross-border planning.

Complexity

Complexity refers to the myriad regulations individuals face when they leave one country (with its potential exit taxes and final filing obligations) and enter another (where worldwide taxation or specific rules like a non-domiciled regime may apply). Each state imposes different tests for tax residency, often involving a mix of day counts, center-of-vital-interests criteria, or purely mechanical thresholds. The panelists agreed that no serious plan should overlook estate planning, wills, inheritance laws, or the steps needed to protect assets from business partners, spouses, or even the state itself.

Tax treaties (commonly called Double Tax Agreements, or DTAs) also introduce further layers of complexity. Although many people hope DTAs will allow them to avoid paying tax altogether, the real function is typically to avoid being taxed twice on the same income, rather than to eliminate taxation entirely. The panel observed that reading these treaties—especially their definitions of residence, beneficial ownership, and tie-breaker rules—can be intricate, often requiring local case law knowledge.

Transparency

The panel devoted significant attention to worldwide transparency initiatives that make it far more difficult to conceal assets or use opaque structures. The Common Reporting Standard (CRS) compels banks in participating jurisdictions to share client data with the tax authorities of the account holder’s home country. Beneficial ownership registers reveal who truly controls a company. Recent international frameworks even address cryptoassets, which were once seen as a tax or privacy haven but are now subject to exchange-of-information protocols.

As Dmitry Zapol noted, many professional advisors—including tax and accounting specialists—are under legal obligations to disclose suspicious or unlawful activities. Privilege is limited; in most countries, lawyers have stricter confidentiality rules than accountants or tax advisors, yet even lawyers can be forced to reveal client data in certain circumstances. The panelists stressed that individuals should assume that all their financial data might be accessed by government authorities, either through official channels or via leaks such as those that occurred in past high-profile offshore scandals.

Disruption

Disruption arises from technological advancements and changes in work habits. The spread of artificial intelligence and big-data analytics has transformed how tax administrations detect potential underreporting. Social media, real-estate registries, and online transactions can be cross-referenced to determine if a person’s declared income aligns with their apparent lifestyle. The panelists gave the example of the UK’s HM Revenue & Customs using a sophisticated tool named Connect to compile records from various sources, allowing the authorities to pinpoint inconsistencies.

The rise of remote working is another disruptive factor. Individuals can now render services online from any location, complicating definitions of permanent establishment for companies and making it harder for tax authorities to identify where income should be taxed. Cryptoassets add further complexity, as many legal systems are still refining how to classify and tax such holdings and transactions. While modern mobility and technology can facilitate more flexible lifestyles, they simultaneously elevate the risk of unintended tax consequences if individuals neglect to plan meticulously.

Residency Rules and Personal Factors

A substantial portion of the discussion focused on defining and maintaining tax residence—crucial because a country’s right to tax often hinges on whether a person qualifies as a resident. Unlike immigration status, tax residency in many places relies on day counts or subjective concepts like “center of vital interests,” which can involve where someone’s family lives, which schools their children attend, and whether they own or rent property. Panelists shared anecdotes of seemingly minor details—such as a private club membership—being used to argue that someone was actually more strongly connected to a particular jurisdiction.

In the United Kingdom, the statutory residence test offers a relatively objective framework, counting days in the UK alongside ties to accommodation or family. Nonetheless, individuals who exceed roughly 90 days of physical presence in a given tax year may be surprised to discover they need to file comprehensive returns. Portugal, as Ana Castro Gonzalves explained, has a more flexible system; it is sometimes easy to become a Portuguese tax resident by registering property or other connections, but the real challenge for newcomers is ensuring the country they are leaving acknowledges their departure.

The conversation touched on real-world complications with dual residency. A person might become simultaneously resident under two different national laws. In that scenario, a double tax treaty typically includes a “tie-breaker” clause for determining in which country the individual is truly resident for treaty purposes. However, this does not always resolve every difficulty, since the other state may impose high source taxes or dispute the person’s claim to be more substantially present in another jurisdiction.

Examples of Attractive Tax Regimes

Ana Castro Goncalves, while acknowledging the lifestyle benefits of Portugal, illustrated the shift in the country’s Non-Habitual Resident (NHR) program. Originally, it attracted many retirees due to zero or minimal taxation on foreign pensions, but more recent changes aim at entrepreneurs, innovators, and professionals who can meaningfully contribute to the local economy. Under the new version (sometimes called NHR 2.0), foreign-sourced income can be fully exempt, and Portuguese-sourced income connected with designated “high-value” activities is subject to a flat 20 percent tax, provided the individual genuinely resides in Portugal.

Serhii Moliboh spoke about Switzerland, where lump-sum taxation (forfait fiscal) can offer individuals a fixed annual payment often based on living expenses rather than global income. Although a few cantons have abolished this system, it remains in place in many others, especially if the taxpayer has significant resources and is willing to establish a real presence. Switzerland’s exemption of many private capital gains from personal tax adds to its appeal, but it also requires attention to details such as who effectively manages a business. If decisions are made within Switzerland’s borders, the company may become Swiss tax-resident by default.

Dmitry Zapol provided insights into the UK’s non-domiciled regime, historically allowing foreigners to pay tax only on income remitted into the UK. Changes in recent years have limited the regime for long-term residents, and the complexity of the statutory residence test means that anyone planning to spend a substantial time in the UK should be prepared for in-depth analysis of their ties to the country. Additionally, individuals who own foreign companies must ensure that no unintended “management and control” is deemed to occur in the UK, which could subject the entire company to UK corporation tax.

Exit Taxes and Corporate Migration

Exit taxes, which some jurisdictions apply when an individual moves away or when a company’s place of effective management relocates, formed another pivotal part of the conversation. The speakers noted that Germany, Ireland, and the US all impose various forms of exit taxes under certain conditions. The UK does not broadly apply a personal exit tax, though it does have specific rules for individuals who own businesses as sole proprietors or as main directors. If a director ceases to manage a UK-registered company from the UK, it can be deemed that the business has emigrated, triggering a potential tax bill on the assumed disposal of assets.

Portugal does not generally impose an exit tax, except in scenarios where someone enjoyed a suspended or deferred tax advantage while resident. Once that individual departs, the deferred tax can crystallize. These rules rarely trouble newcomers unless they have engaged in specific transactions that triggered the deferral in the first place.

Double Tax Agreements and Avoiding Double Non-Taxation

Panelists emphasized the function of double tax agreements (DTAs) and explained that some clients mistakenly believe a DTA ensures no tax is paid anywhere. In reality, the aim is to prevent the same income from being taxed twice, but there is often an equal desire to prevent that same income from being taxed nowhere. DTA tie-breaker rules ascertain which country has primary taxing rights over a resident. Once a person has gained a tax-residence certificate in a particular state, that certificate can be used to request reduced withholding tax in countries where the individual has investments or receives dividends.

However, the panelists pointed out that gaining treaty relief requires meeting strict beneficial ownership tests. If a person benefits from a special tax regime that results in them paying zero tax, another jurisdiction may refuse DTA relief, considering the arrangement as contrived to avoid taxes entirely. On top of that, major jurisdictions like the US include additional “beneficial owner” provisions or require meeting specific “limitation on benefits” criteria before a treaty reduction can be granted.

Non-Residence and the “Nomad” Lifestyle

A topic that sparked considerable discussion was the possibility of not being tax resident anywhere. Though seemingly advantageous—because no country has full taxing rights over an individual—living as a perpetual traveller can be fraught with problems, from higher withholding taxes to the practical challenge of dealing with banks that insist on a certificate of tax residence. Bank compliance departments frequently will not proceed unless a person can indicate one specific country of residence for reporting.

Some participants pointed to the mismatch between different tax years as a way to harvest zero-residence windows. The UK, for instance, runs its tax year from April to April, allowing a clever planner to realize income and capital gains before or after key date thresholds and so fall outside any tax net. The speakers repeatedly cautioned that this technique demands exceptional precision and does not always stand up to scrutiny if the individual mistakenly creates ties (or “substance”) in one location.

Holistic Decision-Making and Conclusion

Throughout the session, the experts underscored that individuals should consider their full circumstances—family, personal well-being, cultural fit, and available professional advice—rather than focusing exclusively on marginal differences in tax rates. Several anecdotes demonstrated how moves undertaken solely for tax reasons can backfire if a spouse or children find it impossible to settle in the new location. The notion of “pain” was invoked as a metaphor: if a solution seems entirely painless, it probably fails to meet genuine substance or compliance requirements and is therefore unlikely to hold up under audit.

In closing, the panelists recognized that truly robust planning addresses the interplay of multiple factors: local and international laws, day-count presence, double tax agreements, beneficial ownership, corporate structures, potential exit charges, and special regimes like those in Portugal, the UK, or Switzerland. They advised anyone looking into relocation to consult knowledgeable professionals in both the sending and receiving countries, especially since many jurisdictions have begun tightening their residency rules and sharing data. As modern life becomes ever more global and digital, cross-border tax planning will only grow in complexity, heightening the need for clear strategy, transparency, and readiness to adapt to technological disruption.