This article was originally published in The Times (UK) on February 11th 2020
The Duke and Duchess of Sussex could end up better off after their move to Canada if they do some creative planning, a tax and immigration expert says.
The couple face complex decisions about where to be resident for tax purposes. Despite repeated media reports suggesting that the move to Canada could lead to the couple being taxed twice-over on their income, David Lesperance said that this was not a danger.
Mr Lesperance, a Canadian immigration lawyer and tax specialist now based in Poland, said that if they spent most of their time in Canada they could apply for work permits allowing them permanent residence. “He would go for the self-employed category,” he said. “He started a fairly well-known international cultural and athletic group — the Invictus Games. And he has the means to support himself.”
Last Thursday the duke and duchess attended an investment conference hosted by JP Morgan, prompting speculation that they may have earned up to £775,000 for the appearance.
The duchess will always be taxed by the US on her worldwide income unless she renounces her American citizenship. In Canada they would be resident for tax if they spent more than 182 days a year there — which seems likely. Mr Lesperance said that this could work in their favour. “Canada is a low-tax alternative to the US and the UK, for this couple,” he said.
Canada, unlike the UK and the US, does not have estate inheritance tax and as such is “a great place to die”, Mr Lesperance said. Tax treaties between the countries meant that the couple would not be double-taxed, he added. With good planning they could pay US tax on their US income, Canadian tax on their Canadian income and UK tax on their UK income. By using legal tax avoidance, they could ensure that income from the rest of the world — from image rights, for example — “could be free of tax from any of those jurisdictions”, he said.
Matthew Pannell, an associate director at the accountants Frank Hirth, said the key would be that Harry, 35, did not spend too long in the US and thus become resident for tax purposes. The US has strict residency rules, with a threshold of an average of about 120 days a year. If the couple lived in California, they would also be liable for state taxes there. “Given Harry’s wealth and background and all the other vehicles that are likely to be out there for his benefit, and that much of the royal family’s estate is held in trust, my recommendation would be to stay as firmly outside of the US tax net as he possibly can,” Mr Pannell said.
The UK has more complex tax residency rules, which include the ties a person has to Britain, such as property and family.
Mr Pannell said that if they were resident in Canada and the UK, the competing tax authorities would have to decide their status using the “centre of vital interests” test. “A good indicator is, where do you keep your dog?” he said.
The couple have cited privacy in their decision to spend time in Canada but are still attracting unwanted interest. Miles Arsenault, who runs a taxi boat service at Vancouver Island, says that Meghan, 38, called to thank him after he turned down a CA$300 (£116) offer to take paparazzi out to sea for a view of the seaside mansion where she, Harry and their nine-month-old son, Archie, are staying. Mr Arsenault described her as “real and sincere”.
• Pitch@Palace, the mentoring network set up by the Duke of York, appears to have distanced itself from its founder. The original charitable venture has been wound up. The global business, a commercial venture, has moved out of Buckingham Palace and removed mention of the duke’s name from its website.