Baker & McKenzie Briefs Clients on Planning for Taxation Based on Citizenship

Zurich, Switzerland, August 23, 2012 – Baker & McKenzie Zurich held a breakfast briefing on the topic of planning for a world where taxation based on citizenship is the norm rather than the rule. The speaker was Marnin Michaels, head of the Wealth Management practice of Baker & McKenzie in Zurich and a member of the Global Wealth Management Steering Committee of Baker & McKenzie. 

Mr. Michaels started the presentation by discussing the elections that occurred in France in the late spring – early summer 2012. During that discussion, it was proposed that the France tax citizens living outside of France on their worldwide taxation in quite a similar way to the approach taken by the United States.  Mr. Michaels went on to state that while there had been a few countries that have taken this approach to taxation, the only major developed country was the United States.  The proposal by the French government to tax based upon citizenship, according to Michaels, is the first major attempt by a European government to impose worldwide taxation based on citizenship. 

Michaels then pointed out in the presentation that while it is highly unlikely that this concept will move anywhere at the moment, it is equally likely that this notion will not go away.  As such, Mr. Michaels made some suggestions that Europeans or those in other places that currently do not tax based on citizenship might wish to consider in view of the fact that there may be countries that seek to implement global taxation. 

“Critical for any wealth owner living outside of their home jurisdiction is to determine whether they are eligible for any other citizenships as many often are,” said Michaels. 

If there are no other citizenships clearly available, Mr. Michaels suggested looking for other citizenship options as a backup.  Mr. Michaels also discussed the possiblity of restructuring assets, depending upon where the wealth owner lives, into a trust or other appropriate vehicle in view of the fact that those types of assets or other types of gifting may mitigate the effect of global taxation in advance of any future legislation being created.

While Mr. Michaels did acknowledge that tax based on citizenship is a real risk given the global economic environment and the need for countries to generate a tax revenue, he also acknowledged the likelihood that the proposal discussed during the French elections would be blocked.  Among other reasons, it would require the complete rewriting of all tax treaties that France has with every country around the world. 

However, Mr. Michaels said that notwithstanding this fact, it would be prudent for wealth owners to consider planning for the future in light of the fact that in future there may be more countries than just the US that move towards taxes based on citizenship.

For any questions about this press release, please contact:
Marnin Michaels ( +41 44 384 1208)