This week on The View From The Top we met Emanuela Boccagni, Commercial Director, EMEA at ECA International, where her role involves coordinating client support and new business initiatives, liaising with the Marketing, Production and Client Services teams.
Emanuela has been working in the field of Global Mobility for over 11 years, supporting and advising companies who move their Talent across the globe. Previously, Emanuela has worked as Head of Business Development and Software Solutions Consultant at ECA. She regularly presents at ECA courses and webinars, as well as speaking at industry events.
Ema found her way to mobility through unconventional means having studied German literature and working as a translator. She started with translating a work by Walter Benjamin, Berliner Chronik, from German to Italian. From here she became a translator in the commercial world in Hamburg, translating clothing catalog descriptions. She then discovered the niche field of mobility and the need for translators and found it of great interest to her.
Ema discussed the pandemic and what ECA has learned from their clients. She notes that in the industry, their clients in certain parts of the world have been opening and seeing recovery at different rates. One of the positives she sees is that there was a spotlight on mobility through shining by necessity and a new way of working with clients in an advisory role. Also, there was an increase in the adjustment in the use of technology and the trend of technology as an enabler.
ECA also recently released a survey, Managing Mobility, that looks into how their clients are handling their programs in a changing landscape containing information on staffing ratios, the need for tracking employees, cost and ROI, and Global Mobility’s role in recruitment.
To learn more about Ema and her career, and the survey results from ECA International, check out the video of the full episode. You can find the ECA here.
By Pat Jurgens of AIRINC
Tax Implications of Dual Citizenship
- Let’s review the basics of individual taxation. Generally there are 3 ways individuals are taxed:
- As a non-resident taxpayer based on the source of the income in that country. Passive income like interest on bank deposits, dividends from local companies, local capital gains are taxed on the source of the account or the asset. Non-resident wages are ‘sourced’ and taxable based on where the services are performed.
- Second, you can be taxed based on your residence status. Definition of tax residence varies but it typically is where you regularly live and work. Tax residents typically are taxed on worldwide income and can claim double tax relief for income tax paid in source countries. If you move away, severing ties to that country and are no longer a tax resident, generally you cease to be taxed on worldwide income in that country.
- Third, there is citizenship-based taxation. Citizens are taxed on worldwide income no matter where they live or work. They are even subject to worldwide taxation if a non-resident. Taxpayers subject to citizenship-based taxation can claim double tax relief. Only two countries apply citizenship-based taxation – The United States and Eritrea.
- The concept of citizenship-based taxation in the U.S. was the result of the Civil War in the 1860’s. It was intended to penalize a few very wealthy individuals who left the country during the Civil War and were considered draft dodgers.
- U.S. citizens can renounce their citizenship. This can be expensive, with a fee and a formal filing to renounce citizenship. Wealthy individuals may need to pay a U.S. exit tax. The number of individuals renouncing their citizenship has dropped during the pandemic.
- What happens if you are a dual national? First, look at the local tax law to determine the scope of taxation. With the exception of the U.S. and Eritrea, this is likely a residency-based test. If both countries tax income on a worldwide basis , you are potentially subject to double taxation. For U.S. citizen expatriates, this happens routinely. Double tax relief is available, typically as a Foreign Tax Credit, or Exemption with Progression.
- It may be possible to claim tax treaty relief in some cases. Most tax treaties include a ‘residency tie-breaker’ article that is used to decide which country has the right to claim residency and thus tax on a worldwide basis. Factors used in a residency tie-breaker analysis include location of residence, family, investments, etc. Residency tie-breaker articles don’t work for U.S. citizens unfortunately. U.S. tax treaties have a ‘savings clause’ that allows the U.S. to still apply citizenship-based worldwide taxation.
- Many of the investment-based citizenship and permanent residence programs discussed by Julia have explicit requirements for investments in the country and residency requirements. Generally, obtaining dual citizenship itself doesn’t automatically result in income tax on a worldwide basis (except the U.S. and Eritrea). But the requirements for obtaining citizenship will in many cases trigger tax residency status due to time spent in the country. For some investment-based citizenship programs that require sizable local investments you can at least expect a non-resident tax on locally-sourced investment income.
- Tax planning items to consider if thinking about dual citizenship or permanent residence:
- Potential liability to wealth taxes
- Potential liability to estate or inheritance taxes
- Some countries restrict land ownership to citizens only. This may result in real estate transfer taxes, annual assessments, and potential taxable gains.
- Besides the tax on employment income, consider the taxation of investments, pension income, and social security coverage.