Offshore Tax with HTJ.tax

Are Offshore Dividends Taxable in Hong Kong?

Generally, no for individuals. Hong Kong's Profits Tax applies to profits arising in or derived from Hong Kong from a trade, profession, or business. A Hong Kong individual who simply receives foreign-source dividends is generally not subject to Profits Tax on those dividends.

🇭🇰 1️⃣ The General Rule for Individuals

If an individual in Hong Kong personally receives dividends from an overseas company, those dividends are generally outside the Hong Kong Profits Tax charge.

This reflects Hong Kong's territorial source principle: Hong Kong generally taxes profits arising in or derived from Hong Kong rather than imposing a general tax on worldwide income.

🌍 2️⃣ What About the FSIE Regime?

The Foreign-Sourced Income Exemption (FSIE) regime can create confusion because it covers certain foreign-sourced dividends, interest, disposal gains, and IP income received in Hong Kong.

However, the regime applies to MNE entities, not natural persons.

The Hong Kong Inland Revenue Department specifically confirms that an individual who receives foreign dividends does not fall within the FSIE regime simply because the individual controls overseas companies.

🏢 3️⃣ Companies Are Different

The analysis changes when the recipient is a company or other entity within the scope of the FSIE regime.

For an in-scope MNE entity, certain foreign-sourced dividends received in Hong Kong can be deemed Hong Kong-sourced and subject to Profits Tax unless an applicable exemption or relief applies.

Potential mechanisms include:

• Economic substance requirements
• Participation exemption
• Foreign tax credit relief in qualifying circumstances

⚠️ 4️⃣ Don't Confuse Dividends With Business Profits

The fact that an individual receives money from overseas does not automatically determine its tax treatment.

The nature of the receipt and the circumstances surrounding it matter.

For example, dividends received as genuine investment income are different from profits arising from a business carried on in Hong Kong.

🎯 Key TakeawayForeign dividends received personally by an individual in Hong Kong are generally not subject to Hong Kong Profits Tax, and the FSIE regime does not apply to individuals simply because they receive foreign dividends.

The position can be materially different where the recipient is an MNE entity within the FSIE regime or where the income is actually part of a taxable business carried on in Hong Kong.

How to Claim Foreign Tax Credits in Singapore

Singapore tax residents may claim Foreign Tax Credit (FTC) when the same income is taxed both overseas and in Singapore.

To qualify, the individual generally must:

• Be a Singapore tax resident for the relevant Year of Assessment;
• Have paid or be liable to pay foreign tax on the same income; and
• Have income that is subject to Singapore tax.

IRAS states that where taxable overseas income is also taxed in the foreign jurisdiction, the taxpayer may apply for double taxation relief.

1️⃣ The Income Must Be Taxable in Singapore

This is the critical requirement.

Singapore generally exempts foreign-sourced income received in Singapore by resident individuals, subject to specific exceptions. If the foreign income is exempt from Singapore tax, there is generally no Singapore tax against which to claim an FTC.

2️⃣ The Same Income Must Have Been Taxed Overseas

The foreign tax must relate to the same income that is being brought into the Singapore tax calculation.

For example, if foreign employment income is taxable in both jurisdictions, the Singapore taxpayer may potentially claim relief for the foreign tax paid, subject to the applicable rules and any relevant Double Taxation Agreement.

3️⃣ The Credit Is a Relief From Double Taxation

The purpose of an FTC is to prevent the same income from being taxed twice.

The available credit is generally limited by the applicable Singapore rules, so paying a higher amount of foreign tax does not necessarily mean the entire foreign tax amount can be credited against Singapore tax.

4️⃣ DTA Relief May Also Apply

Where Singapore has a Double Taxation Agreement (DTA) with the foreign jurisdiction, the treaty may provide a mechanism for relieving double taxation.

A Singapore tax resident may also need a Certificate of Residence (COR) when claiming treaty benefits from the foreign tax authority.

🎯 Key TakeawayA Singapore tax resident may generally claim Foreign Tax Credit when the same income has been taxed overseas and is also taxable in Singapore.

The important point is that foreign tax paid alone does not create an FTC. The underlying income must also be within Singapore's tax charge.

This is particularly important for individuals because Singapore generally exempts many types of foreign-sourced income received in Singapore.

What Does “Received in Singapore” Mean for Foreign Income?

Under Section 10(25) of Singapore’s Income Tax Act 1947, foreign income is considered received in Singapore when it is:

• Remitted to, transmitted or brought into Singapore;
• Used to satisfy a debt incurred in respect of a trade or business carried on in Singapore; or
• Used to purchase movable property that is brought into Singapore.

These rules are particularly important when determining whether foreign-sourced income has been brought within Singapore’s tax framework.

💰 1️⃣ Remitted or Brought Into Singapore

The most straightforward situation is when foreign income is physically or electronically brought into Singapore.

For example, if foreign investment income is transferred from an overseas bank account into a Singapore bank account, it can constitute income received in Singapore under Section 10(25).

🏦 2️⃣ Used to Pay a Singapore Business Debt

Foreign income can also be treated as received in Singapore even when the money itself is not physically transferred into Singapore.

This can happen when the foreign income is used to satisfy a debt incurred in connection with a trade or business carried on in Singapore.

IRAS notes that this can include debts arising from the acquisition of business assets or loans used for a Singapore business.

📦 3️⃣ Used to Purchase Movable Property

The third situation involves using foreign income to purchase movable property that is subsequently brought into Singapore.

Examples can include:

• Equipment
• Raw materials
• Other movable business property

The amount considered received is generally the amount of foreign income applied to acquire the property, rather than the property's later market value.

⚠️ 4️⃣ The Rule Does Not Mean All Foreign Income Is Taxable

It is important to distinguish the concept of “received in Singapore” from the ultimate tax treatment.

For Singapore-resident individuals, IRAS states that foreign-sourced income received in Singapore is generally not taxable, subject to specific exceptions—for example, foreign income received through a Singapore partnership or certain overseas employment situations.

For companies and other entities, foreign income received in Singapore can generally be taxable, subject to applicable exemptions and reliefs.

🎯 Key Takeaway“Received in Singapore” is broader than simply transferring money into a Singapore bank account.

Under Section 10(25), foreign income can also be treated as received in Singapore when it is used to satisfy qualifying Singapore business debts or to acquire movable property that is brought into Singapore.

Therefore, when analysing Singapore's foreign-income rules, it is essential to examine how the income is used, not just where the money is physically deposited.

Are US Dividends Taxable in Singapore?

Generally, no. Foreign dividends received in Singapore by a Singapore-resident individual are generally not taxable in Singapore, including US-source dividends. IRAS specifically lists foreign dividends received by resident individuals as non-taxable, except where they are received through a Singapore partnership.

🇺🇸 What About US Dividends?

If a Singapore-resident individual personally receives dividends from US shares, those dividends are generally exempt from Singapore income tax.

This remains the case even if the dividend is:

• Paid into a Singapore bank account
• Received from a US company
• Remitted to Singapore

IRAS states that foreign-sourced income received in Singapore by resident individuals is generally exempt, subject to specific exceptions.

⚠️ The Important Exception

The main exception relevant here is where the foreign dividend is received through a Singapore partnership.

Foreign-sourced dividends received through a Singapore partnership can be subject to Singapore tax, although specific exemption provisions may apply if the relevant conditions are satisfied.

🎯 Key TakeawayUS dividends received personally by a Singapore-resident individual are generally not taxable in Singapore.

The key distinction is whether the dividend is received personally or through a structure such as a Singapore partnership.

This is separate from any US tax or withholding-tax consequences that may apply to the dividend before it reaches the Singapore investor.

Is Overseas Business Travel Income Taxable in Singapore?

Yes. When overseas travel is incidental to an individual's Singapore employment, the income attributable to that employment—including income for services performed overseas—can remain fully taxable in Singapore.

The Inland Revenue Authority of Singapore (IRAS) specifically gives the example of a regional sales manager employed by a Singapore company who frequently travels overseas to oversee regional operations. Because the overseas work is incidental to the Singapore employment, IRAS states that the individual's entire employment income is taxable in Singapore.

✈️ The “Incidental Overseas Travel” Principle

The key question is not simply:

“Where was the employee physically working when the income was earned?”

Instead, the analysis considers whether the overseas services are incidental to the employee's Singapore employment.

For example, a Singapore-based regional sales manager may spend substantial time travelling to other countries to manage regional operations. That overseas travel is part of the employee's Singapore role rather than a separate overseas employment.

In that situation, IRAS treats the employment income as fully taxable in Singapore.

💼 What About Overseas Allowances?

Business-travel allowances and reimbursements can have separate treatment.

For example, certain genuine business expenses such as overseas accommodation and business travel expenses may not be taxable, while per diem allowances can be taxable to the extent they exceed IRAS's applicable acceptable rates.

These rules should therefore be distinguished from the taxation of the underlying employment income.

🌍 Why This Matters

A common misconception is:

“If I perform part of my work outside Singapore, that portion automatically becomes foreign-sourced income.”

That is not necessarily correct.

Where the overseas services are incidental to Singapore employment, IRAS expressly provides that the income remains fully taxable in Singapore.

🎯 Key TakeawayIf overseas travel is incidental to Singapore employment, the employment income—including income attributable to services rendered overseas—is generally fully taxable in Singapore.

The IRAS example of a Singapore-employed regional sales manager who travels frequently overseas confirms this principle.

Is Remote Work for a US Company Taxable in Singapore?

Generally speaking, yes. If an individual performs their employment duties physically in Singapore, the resulting employment income is generally taxable in Singapore.

The key principle is that Singapore looks primarily at where the employment is exercised, rather than simply where the employer is incorporated or where the salary is paid.

Therefore, salary from a US employer can generally be taxable in Singapore when the employee performs the work in Singapore.

🇸🇬 The Core Principle

The fact that:

• The employer is based in the United States
• The employment contract is with a foreign company
• The salary is paid into a foreign bank account

does not, by itself, make the employment income foreign-sourced and exempt from Singapore tax.

If the employment is exercised in Singapore, Singapore taxation generally applies, subject to the specific facts and any applicable exemption or treaty provision.

🌎 Where the Employer Is Located Is Not the Deciding Factor

A common misconception is:

“My employer is in the US, so my salary is US income.”

For Singapore tax purposes, that is not necessarily correct.

The location of the employer and the location of the bank account receiving the salary are separate from the question of where the employment is actually exercised.

🎯 Key TakeawayIncome from employment exercised in Singapore is generally taxable in Singapore, regardless of where the employer is located or where the salary is paid.

This is the core principle to remember when analysing remote work arrangements involving a foreign employer.

🎙️ PODCAST SHOWNOTES

Core Principle of Taxing Foreign Income in Singapore, Hong Kong & Malaysia

Singapore, Hong Kong, and Malaysia all operate broadly around a territorial approach to taxation, meaning the source of income is a central factor in determining whether income is taxable.

However, the practical application of territorial taxation has evolved significantly, particularly as international tax standards increasingly focus on preventing double non-taxation and ensuring that income has sufficient economic substance.

The result is that simply describing a jurisdiction as “territorial” is no longer enough. The specific rules governing foreign-sourced income must be examined carefully.

🇸🇬 1️⃣ Singapore

Singapore generally taxes income that is sourced in Singapore.

Foreign-sourced income received in Singapore by individuals is generally not taxable, subject to specific exceptions.

For companies, however, foreign-sourced income can be subject to Singapore tax when received in Singapore.

This can include:

• Foreign dividends

• Foreign branch profits

• Foreign-sourced service income

Singapore provides specific foreign-sourced income exemption mechanisms where statutory conditions are satisfied.

For certain foreign-sourced dividends, branch profits, and service income, relevant conditions can include:

• The foreign income having been subject to tax in the foreign jurisdiction

• The foreign jurisdiction's headline corporate tax rate meeting the applicable threshold

• The Singapore recipient satisfying the relevant tax exemption requirements

Economic substance and the specific exemption provision therefore need to be analysed rather than assuming that all foreign income is automatically exempt.

🇭🇰 2️⃣ Hong Kong

Hong Kong operates a strongly territorial source-based taxation system.

The fundamental principle is:

Profits arising in or derived from Hong Kong are generally taxable.

Foreign-sourced profits are generally outside the charge unless specific anti-avoidance or deeming provisions apply.

However, Hong Kong introduced its Foreign-Sourced Income Exemption (FSIE) regime in January 2023.

The regime applies principally to certain foreign-sourced income received in Hong Kong by entities within its scope, particularly multinational enterprise groups.

Relevant income categories can include:

• Interest

• Dividend income

• Disposal gains in certain circumstances

• Income from intellectual property

Depending on the category of income, exemption may require conditions relating to:

• Economic substance

• Participation exemption

• Nexus requirements for intellectual property income

Accordingly, Hong Kong's territorial system remains intact, but the FSIE regime adds important limitations to the traditional analysis.

🇲🇾 3️⃣ Malaysia

Malaysia also operates a source-based income tax system, but its treatment of foreign-sourced income has undergone a significant transformation.

Historically, foreign-sourced income received in Malaysia benefited from broad exemption treatment in many circumstances.

That changed on:

1 January 2022.

Malaysia technically brought foreign-sourced income received in Malaysia by residents within the scope of taxation, subject to subsequent exemption measures.

📅 4️⃣ The 2022 Malaysian Rule Change

The 2022 reform is important because it changed the starting point of the analysis.

Rather than assuming that foreign income received in Malaysia is automatically exempt, the starting position became:

Foreign-sourced income received in Malaysia is potentially taxable.

The government subsequently introduced and extended exemptions for certain categories of taxpayers and income.

Therefore, the current analysis requires distinguishing between:

the statutory tax rule

and

the exemption currently available.

👤 5️⃣ The Individual Exemption

For Malaysian resident individuals, the government has provided an exemption for certain foreign-sourced income received in Malaysia.

The exemption has been extended to:

31 December 2036.

The exemption applies to foreign-sourced income received in Malaysia by resident individuals, subject to the applicable conditions.

One important condition is that the income must generally have been subjected to tax in the country of origin.

This means the exemption should not simply be described as a blanket exemption for all foreign income.

🤝 6️⃣ Partnership Income Is Different

The individual exemption does not necessarily apply in the same way to income received through a partnership business in Malaysia.

Partnership income is subject to its own tax treatment and exemption provisions.

Consequently, advisers should distinguish between:

• Foreign income earned personally by a Malaysian resident individual

and

• Foreign income arising through a Malaysian partnership or business structure.

🌍 7️⃣ The Bigger International Tax Trend

The evolution of these regimes reflects a broader international trend.

Territorial taxation remains important, but governments increasingly focus on:

• Economic substance

• Anti-avoidance rules

• Minimum taxation

• Foreign income received locally

• Prevention of double non-taxation

• International information exchange

This means that “territorial taxation” no longer automatically means:

“Foreign income is tax-free.”

📊 8️⃣ Singapore vs. Hong Kong vs. Malaysia

JurisdictionGeneral PrincipleKey Foreign-Income Development

🇸🇬 Singapore

Source-based taxation

Specific exemption rules apply to certain foreign income

🇭🇰 Hong Kong

Territorial source principle

FSIE regime introduced in 2023

🇲🇾 Malaysia

Source-based taxation

2022 reform brought received foreign income into the tax framework, followed by exemptions

The three jurisdictions therefore remain territorial in broad principle, but the practical application differs substantially.

🎯 Key Takeaway

The core principle across Singapore, Hong Kong, and Malaysia remains territorial or source-based taxation.

But the modern rules are more nuanced:

✅ Singapore generally does not tax foreign-sourced income received by individuals, subject to exceptions, while companies face specific rules and exemption conditions.

✅ Hong Kong generally taxes Hong Kong-sourced profits, but the FSIE regime introduces additional requirements for certain foreign-sourced income received by entities within its scope.

✅ Malaysia fundamentally changed its foreign-income framework in 2022, technically bringing received foreign-sourced income into the tax net while providing exemptions—including an exemption for qualifying foreign income received by resident individuals through 31 December 2036.

The key lesson is that “territorial taxation” should be treated as a starting principle, not a conclusion. For cross-border planning, the source of the income, taxpayer type, economic substance, receipt of the income, foreign taxation, and specific exemption provisions must all be analysed before determining whether foreign income is actually taxable.

Core Principle of Taxing Foreign Income in Singapore, Hong Kong & Malaysia

Singapore, Hong Kong, and Malaysia all operate broadly around a territorial approach to taxation, meaning the source of income is a central factor in determining whether income is taxable.

However, the practical application of territorial taxation has evolved significantly, particularly as international tax standards increasingly focus on preventing double non-taxation and ensuring that income has sufficient economic substance.

The result is that simply describing a jurisdiction as “territorial” is no longer enough. The specific rules governing foreign-sourced income must be examined carefully.

🇸🇬 1️⃣ Singapore

Singapore generally taxes income that is sourced in Singapore.

Foreign-sourced income received in Singapore by individuals is generally not taxable, subject to specific exceptions.

For companies, however, foreign-sourced income can be subject to Singapore tax when received in Singapore.

This can include:

• Foreign dividends

• Foreign branch profits

• Foreign-sourced service income

Singapore provides specific foreign-sourced income exemption mechanisms where statutory conditions are satisfied.

For certain foreign-sourced dividends, branch profits, and service income, relevant conditions can include:

• The foreign income having been subject to tax in the foreign jurisdiction

• The foreign jurisdiction's headline corporate tax rate meeting the applicable threshold

• The Singapore recipient satisfying the relevant tax exemption requirements

Economic substance and the specific exemption provision therefore need to be analysed rather than assuming that all foreign income is automatically exempt.

🇭🇰 2️⃣ Hong Kong

Hong Kong operates a strongly territorial source-based taxation system.

The fundamental principle is:

Profits arising in or derived from Hong Kong are generally taxable.

Foreign-sourced profits are generally outside the charge unless specific anti-avoidance or deeming provisions apply.

However, Hong Kong introduced its Foreign-Sourced Income Exemption (FSIE) regime in January 2023.

The regime applies principally to certain foreign-sourced income received in Hong Kong by entities within its scope, particularly multinational enterprise groups.

Relevant income categories can include:

• Interest

• Dividend income

• Disposal gains in certain circumstances

• Income from intellectual property

Depending on the category of income, exemption may require conditions relating to:

• Economic substance

• Participation exemption

• Nexus requirements for intellectual property income

Accordingly, Hong Kong's territorial system remains intact, but the FSIE regime adds important limitations to the traditional analysis.

🇲🇾 3️⃣ Malaysia

Malaysia also operates a source-based income tax system, but its treatment of foreign-sourced income has undergone a significant transformation.

Historically, foreign-sourced income received in Malaysia benefited from broad exemption treatment in many circumstances.

That changed on:

1 January 2022.

Malaysia technically brought foreign-sourced income received in Malaysia by residents within the scope of taxation, subject to subsequent exemption measures.

📅 4️⃣ The 2022 Malaysian Rule Change

The 2022 reform is important because it changed the starting point of the analysis.

Rather than assuming that foreign income received in Malaysia is automatically exempt, the starting position became:

Foreign-sourced income received in Malaysia is potentially taxable.

The government subsequently introduced and extended exemptions for certain categories of taxpayers and income.

Therefore, the current analysis requires distinguishing between:

the statutory tax rule

and

the exemption currently available.

👤 5️⃣ The Individual Exemption

For Malaysian resident individuals, the government has provided an exemption for certain foreign-sourced income received in Malaysia.

The exemption has been extended to:

31 December 2036.

The exemption applies to foreign-sourced income received in Malaysia by resident individuals, subject to the applicable conditions.

One important condition is that the income must generally have been subjected to tax in the country of origin.

This means the exemption should not simply be described as a blanket exemption for all foreign income.

🤝 6️⃣ Partnership Income Is Different

The individual exemption does not necessarily apply in the same way to income received through a partnership business in Malaysia.

Partnership income is subject to its own tax treatment and exemption provisions.

Consequently, advisers should distinguish between:

• Foreign income earned personally by a Malaysian resident individual

and

• Foreign income arising through a Malaysian partnership or business structure.

🌍 7️⃣ The Bigger International Tax Trend

The evolution of these regimes reflects a broader international trend.

Territorial taxation remains important, but governments increasingly focus on:

• Economic substance

• Anti-avoidance rules

• Minimum taxation

• Foreign income received locally

• Prevention of double non-taxation

• International information exchange

This means that “territorial taxation” no longer automatically means:

“Foreign income is tax-free.”

📊 8️⃣ Singapore vs. Hong Kong vs. Malaysia

JurisdictionGeneral PrincipleKey Foreign-Income Development

🇸🇬 Singapore

Source-based taxation

Specific exemption rules apply to certain foreign income

🇭🇰 Hong Kong

Territorial source principle

FSIE regime introduced in 2023

🇲🇾 Malaysia

Source-based taxation

2022 reform brought received foreign income into the tax framework, followed by exemptions

The three jurisdictions therefore remain territorial in broad principle, but the practical application differs substantially.

🎯 Key Takeaway

The core principle across Singapore, Hong Kong, and Malaysia remains territorial or source-based taxation.

But the modern rules are more nuanced:

✅ Singapore generally does not tax foreign-sourced income received by individuals, subject to exceptions, while companies face specific rules and exemption conditions.

✅ Hong Kong generally taxes Hong Kong-sourced profits, but the FSIE regime introduces additional requirements for certain foreign-sourced income received by entities within its scope.

✅ Malaysia fundamentally changed its foreign-income framework in 2022, technically bringing received foreign-sourced income into the tax net while providing exemptions—including an exemption for qualifying foreign income received by resident individuals through 31 December 2036.

The key lesson is that “territorial taxation” should be treated as a starting principle, not a conclusion. For cross-border planning, the source of the income, taxpayer type, economic substance, receipt of the income, foreign taxation, and specific exemption provisions must all be analysed before determining whether foreign income is actually taxable.

Singapore: General Rule for Foreign-Sourced Income

Singapore has a distinctive approach to foreign-sourced income for individuals.

As a general rule, foreign income received in Singapore by an individual is not taxable in Singapore and generally does not need to be declared.

This can make Singapore particularly relevant when considering the tax treatment of internationally generated income.

However, the general rule is subject to important exceptions.

🌏 1️⃣ Foreign Income Is Generally Not Taxable

For individuals, overseas income received in Singapore—including amounts deposited into a Singapore bank account—is generally not subject to Singapore income tax.

This means that simply receiving foreign income in Singapore does not, by itself, generally make that income taxable.

However, the source and nature of the income still matter.

⚠️ 2️⃣ Important Exceptions

Certain categories of foreign income can fall within Singapore's tax rules.

These include:

💼 Overseas Employment Incidental to Singapore Employment

Income from overseas employment that is incidental to Singapore employment may be taxable.

The key issue is the connection between the overseas employment and the individual's Singapore employment.

🤝 Income Through a Singapore Partnership

Income received through a Singapore partnership can be subject to Singapore tax rules.

The fact that the underlying activity or income has an international element does not automatically place it outside Singapore taxation.

🇸🇬 Employment With the Singapore Government

Income from employment exercised on behalf of the Singapore Government is subject to specific tax treatment.

The general foreign-income exemption therefore does not necessarily apply.

🏢 Foreign Income From a Singapore Trade or Business

Foreign-sourced income derived from a trade or business carried on in Singapore may be taxable.

This is an important distinction for business owners because the location and nature of the underlying activity can determine whether the general foreign-income treatment applies.

💻 Working in Singapore for a Foreign Employer

An individual physically working in Singapore for a foreign employer can also fall within Singapore's tax rules.

The fact that the employer is located outside Singapore does not automatically make the individual's employment income foreign income for Singapore tax purposes.

📊 3️⃣ The Key Distinction

The important question is not simply:

“Did the money come from overseas?”

Instead, the analysis should consider:

• Where the income arises

• What type of income it is

• Where the underlying work or business activity occurs

• Whether a Singapore partnership is involved

• Whether the income is connected with a Singapore trade or business

• The individual's specific circumstances

🎯 Key Takeaway

Singapore generally provides favourable treatment for foreign-sourced income received by individuals, but the rule is not absolute.

Foreign income can fall within Singapore taxation where it relates to:

✅ Overseas employment incidental to Singapore employment

✅ A Singapore partnership

✅ Employment with the Singapore Government

✅ A trade or business carried on in Singapore

✅ Employment performed in Singapore for a foreign employer

The key planning principle is that the source, nature, and circumstances of the income matter more than simply where the payment is deposited. Before relying on Singapore's foreign-income treatment, individuals should determine whether one of the specific exceptions applies to their circumstances.

Client Suitability and Minimum Thresholds for Offshore Planning Structures

These structures are not designed for the average investor. They are intended for ultra-high-net-worth clients with sufficiently significant assets and sufficiently complex cross-border considerations to justify the legal, tax, governance, and compliance work involved.

The starting point is therefore not:

“Can this structure be implemented?”

It is:

“Is this structure appropriate for this particular client?”

👤 1️⃣ Who Is the Structure Designed For?

The intended client profile generally includes individuals who:

• Have substantial UK commercial real estate or mixed investment portfolios

• Have complex international tax or estate-planning considerations

• Are non-UK domiciled under the relevant historical framework or, under the current regime, are not within the applicable long-term UK residence rules

• Require sophisticated succession and estate planning

• Are prepared to maintain rigorous compliance across every relevant jurisdiction

The economic scale of the client's assets must also justify the significant professional, governance, and administrative costs involved.

🏢 2️⃣ Commercial vs. Residential Property

The first substantive question for advisers is:

What type of UK property does the client own?

This distinction is critical.

UK commercial property held through an offshore company can produce a materially different inheritance tax analysis from UK residential property because the anti-enveloping provisions applying to residential property can significantly restrict the availability of excluded-property treatment.

Accordingly, the structure should not be evaluated without first identifying the underlying asset class.

🇬🇧 3️⃣ The Settlor's Residence Status

The second major variable is the settlor's UK residence history.

Under the post-April 2025 inheritance tax framework, the concept of long-term UK residence is central to determining the treatment of foreign property for IHT purposes.

The adviser therefore needs to establish:

• The settlor's historical UK residence

• The relevant tax years

• Whether the statutory long-term residence test is satisfied

• Whether transitional or tail provisions apply

Only after this analysis can the excluded-property position be properly assessed.

⚖️ 4️⃣ What the Structure Does—and Does Not—Achieve

The distinction between probate visibility and ownership transparency is fundamental.

A properly structured offshore ownership arrangement may change the way assets pass on death and potentially avoid a conventional UK probate process involving the deceased's direct ownership of the underlying property.

But that does not mean the ownership chain is invisible.

UK transparency regimes—including the Register of Overseas Entities—can require disclosure concerning overseas entities holding UK land.

The appropriate description is therefore:

Potential probate visibility reduction—not ownership invisibility.

🔍 5️⃣ EOIR Is a Separate Question

The same distinction applies to Exchange of Information on Request (EOIR).

The fact that a particular structure may not fall within a particular automatic reporting pathway does not mean that information can never be obtained by a tax authority.

Advisers must separately consider:

• Domestic information powers

• International exchange-of-information agreements

• CRS and FATCA classification

• UK professional intermediaries

• Beneficiary and settlor reporting

• Corporate and property transparency regimes

The analysis must therefore distinguish between automatic reporting, information available on request, and direct domestic information-gathering powers.

💷 6️⃣ UK Tax Compliance Is Non-Negotiable

This structure is not intended to eliminate the normal UK tax obligations associated with UK real estate.

Depending on the property and structure, these may include:

• ATED for qualifying enveloped residential property

• UK taxation of gains on UK land

• Corporation tax on rental profits of non-UK companies carrying on a UK property business

• SDLT and other property transaction taxes on acquisition

A client seeking to avoid these obligations is not an appropriate candidate.

The structure must be built around compliance, not concealment.

📋 7️⃣ Minimum Technical Review

Before proceeding, advisers should establish at least:

1. Property classification

Is the underlying asset commercial or residential?

2. Residence analysis

Does the settlor fall within the current long-term UK residence rules?

3. IHT analysis

Can excluded-property treatment potentially apply?

4. Corporate structure

Who legally owns the UK property?

5. Trust analysis

What law governs the trust and where are the trustees resident?

6. CRS/FATCA classification

How does each entity classify under the applicable reporting regimes?

7. EOIR analysis

What information-exchange mechanisms could apply?

8. UK compliance

Which UK tax and reporting obligations remain fully applicable?

Only after those questions have been answered should the structure be considered from a planning perspective.

🎯 8️⃣ Who Should Not Use the Structure?

The structure is inappropriate for a client whose primary objective is to:

❌ Conceal beneficial ownership

❌ Avoid mandatory UK tax filings

❌ Evade ATED or other property taxes

❌ Conceal rental income or gains

❌ Prevent legitimate information requests

❌ Rely on the absence of automatic reporting as a substitute for legal compliance

Sophisticated international planning requires the opposite approach: full transparency where required, combined with careful use of the distinctions that the law actually provides.

🏛️ 9️⃣ London Presentation

The full framework will be presented at The Connaught in London on 15 September 2026, covering the interaction between:

• Offshore trusts

• UK commercial property

• IHT excluded property

• CRS and FATCA

• EOIR

• ROE

• Probate and succession

• Cross-border compliance

Further information is available through the project website.

🔑 Key Takeaway

The appropriate client is not simply someone who owns a large amount of UK property.

The structure requires a combination of:

✅ Significant asset value

✅ Suitable property characteristics

✅ Appropriate UK residence status

✅ A genuine estate-planning objective

✅ Capacity to meet ongoing UK tax obligations

✅ Willingness to undergo detailed CRS, FATCA, and EOIR analysis

The objective is not to make ownership invisible. It is to determine whether the law permits a particular ownership and succession structure to achieve legitimate IHT and estate-planning outcomes while remaining fully compliant with every applicable UK tax, transparency, and reporting obligation.