case study

Legal

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As an international boutique firm, we serve a lot of international clients including expats that have come from different places around the globe. Some of them are new arrivals to Hong Kong whilst others have already been living in Hong Kong for more than a decade. Interestingly, although many expats did not plan to stay long in Hong Kong in the first place, often they end up staying much longer. When it however comes to managing their tax affairs, most expats tend to focus only on the annual income tax filing obligations thereby ignoring any succession and inheritance tax planning.

For example, one of our expatriate clients are Dutch. He and his wife have been living in Hong Kong for more than two decades. They have three grown-up children and all of them live outside of Hong Kong. In addition to a dwelling house in Hong Kong, they own properties, shares and bank deposits in different countries. Upon approaching retirement age, they question themselves on whether they would continue to live in Hong Kong, return back to the Netherlands or eventually even move to other places as long as they do not live too far away from their children after their retirement.

Inheritance Tax

Whilst Hong Kong does not have any inheritance tax (the estate duty was abolished in 2004), clients’ decision to move to other countries after their retirement would potentially create an exposure to inheritance tax although inheritance tax laws vary from country to country. 

 Whether and if so, the inheritance tax laws of a jurisdiction do apply will depend on different factors including the client’s place of domicile / residence, the location of estate assets and the residency place of the heirs of the estate.

In addition, one should be mindful of whether any forced heirship rules do apply in the country of where the clients are moving to and / or where their assets are located. Forced heirship rules generally refer to restrictions imposed on one’s freedom of testation, i.e. one cannot freely distribute their asset as they wish upon death but such rules stipulates a compulsory share of the estate to specified heirs. 

Furthermore, the testamentary laws and probate processes also vary in different countries. Therefore, the succession / estate planning in certain circumstances also require the set-up of a trust or a foundation.

Estate Planning across Jurisdictions

In view of the diverse locations of our client’s assets, the possibilities of moving to other jurisdictions and the different places where their children reside, the client engaged us for an estate planning exercise. In that assignment, we went through the different succession implications and inheritance tax exposure in each relevant jurisdiction with the client and provided them with recommendations on the possible holding structures of their estate for the purposes of achieving efficient succession and mitigating any inheritance tax exposure. 

In addition, we also assisted the client with organising their Wills as part of a estate planning, putting the enduring powers of attorney and medical directives in place for protection. We at HKWJ Group are able to support our clients with all the above under one roof.

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