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Q&A with Mark McMullen and Doris Sommavilla of Stonehage Fleming

Mark McMullen is CEO - Family Office, with overall responsibility for the firm’s family office business. He serves as a Senior Partner and Adviser to a number of high net worth international families.

Mark also oversees Stonehage Fleming’s Family Office businesses in Switzerland, Luxembourg, Monaco, the UK, Isle of Man, Jersey, Guernsey, South Africa, Mauritius, Israel, the US and Canada.

Doris Sommavilla, CFA, is a Director within Stonehage Fleming’s Swiss Family Office Division. She has wide experience with UHNWIs and business families, both as a 3rd generation entrepreneur and as an adviser on governance and succession matters. She is passionate about the challenges faced by families during succession.

What is the focus of your work with clients?

Mark McMullen: Although our range of services is very broad, as an International Multi-Family Office business, Stonehage Fleming has two objectives: the protection of family wealth and the management of family assets. Our service offering aligns these objectives and includes a comprehensive capability to navigate the jurisdiction-specific impact of significant family events, such as the birth of a child, a marriage, a divorce, a liquidity event for the family business, or the death of a family member.

We have almost 50 years of experience in helping clients relocate worldwide, having worked with some families for more than three generations, assisting them in relocating to a number of jurisdictions over time. We have expanded our offices internationally following our clients’ migration towards their destinations of choice. Now, with a presence in 14 jurisdictions, our clients acknowledge our significant contribution in aiding their smooth transition and peace of mind.

What are the top considerations for families considering international relocation?

Mark McMullen: A relocation destination would typically be a place where an individual or family can establish their tax residence for the mediumto longer term. That is not to say that their chosen destination will necessarily become their permanent home, since such an intention may itself have potentially adverse tax consequences.

In our work with families, we would usually reviewa jurisdiction’s ability to offer a safe place to liveand raise a family, maintain political and economic stability, sustain a fair and predictable tax regimefor residents and their investment vehicles, offer a suitable lifestyle and provide a sense of community and cultural vibrancy. Furthermore, the impact of geopolitical uncertainty and question marks around how, for example, a new incoming government might behave continue to have an impact on families and their longer-term thinking.

What are the practicalities of helping clients make this important life decision?

Mark McMullen: Following consultation witha family wanting to relocate, we draw up a listof all the potential jurisdictions that could be suitable for the family to ‘feel at home’ and havean appropriate lifestyle, bearing in mind multi- jurisdictional legal, tax and regulatory implications. We eliminate jurisdictions that do not meet certain initial qualitative factors and perform a further detailed analysis of the resulting short-list of target jurisdictions. We also interrogate the family’s ability to leave a given jurisdiction with ease, as agility is always be a key consideration.

You have chosen a destination. Now what?

Mark McMullen: Now the planning starts in earnest. Once the short-list has been narrowed down to one country, we provide comprehensive pre-immigration and post-immigration advice designed to help families avoid the adverse tax consequences often associated with a cross-border move. Many families organise their businesses and personal assets in a manner that, while beneficial to them in their home jurisdiction, may become detrimental once they become a taxpayer in another country. Often the wealth that they created and organised in perfectly legitimate structures becomes inefficient once they become taxpayers in their new jurisdictionof choice. In addition to such unintended negative consequences, a move from one country to another can create several restructuring opportunities, which cease to be available to a family the moment they become taxpayers in their new jurisdiction.

What are the top relocation destinations for your clients?

Mark McMullen: While we approach each situation with an open mind, we continue to see increasing demand for relocation to Italy, Switzerland and the UAE. We also see constant demand for families moving to the UK, Monaco, Ireland and the USA. Mauritius, Greece and Malta are also popular as they too offer attractive tax regimes. Even countries without formal citizenship by investment programmes often attract families – or their adult children – who are happy to obtain a working and/ or residence permit, with citizenship being less important in the near term.

Doris, Italy is your home country. Can you explain us why it has become so attractive?

Doris Sommavilla: First of all, Italy is a beautiful country that provides a great and very diverse lifestyle depending on the location people decide to live in - Milano being very different from the hills in Tuscany. Today, Italy ranks among the top three destinations for UHNWIs, mostly because its appealing flat tax regime coupled with a sound health-care system and access to international schools in major cities. The Italian Flat Tax regime allows for tax benefits for up to 15 years while retaining a high degree of flexibility in travelling internationally compared to other jurisdictions.

As Mark said, Italy is increasingly attractive as a destination. Numbers speak for themselves: more than 3000 high net worth individuals moved to Italy under the Flat Tax regime since its introduction in 2017. Numbers are increasing every year andit continues to gain in popularity due to it being relatively simple, reliable and stable. Importantly, despite many changes in political leadership, the Italian Flat Tax has received continuous political support and I believe it will continue to do so over the medium / long term.

You described the Italian flat tax regime as being relatively simple and reliable. Can you explain what you mean?

Doris Sommavilla: This regime is reliable and relatively simple provided that applicants:

1. Rely on specific advice from a trusted Italian tax adviser throughout the whole process.
2. Meet two eligibility criteria: - no relevant ties with Italy in the 9/10 years prior to the move - formal acquisition of tax residence in Italy in the relevant tax year (calendar year).
3. Start planning well ahead of the move – at least one year prior to the planneddate of relocation or 18/24 months in advance in complex cases.
4. Check the suitability of existing holding structures to the Italian Flat Tax Regime (such as holding vehicles, trusts, foundations and so on)
5. Obtain a visa if non-EU/CH passport holders.

What are the specific attractions of the Italian flat tax regime?

Doris Sommavilla: As I said above, new residents under the Italian Flat Tax can enjoy tax benefits
for up to 15 years and more flexibility to travel internationally in comparison to other jurisdictions.

New Residents under the Italian Flat Tax Regime have to pay:

• €100,000 flat per annum on their foreign sourced income and foreign held assets.
• €25,000 flat per annum to extend the tax benefit to each close family member.

Remittances are not taxed differently from the UK RnD regime.

If I were to move my whole family to Italy, how could you assist us?

Doris Sommavilla: We have a unique approach that I would describe as:

• Holistic and focused on risk mitigation. We are custodian of the bigger picture for our families
• long term orientated – we assist our families throughout the whole process and beyond the relocation date.
• Global/ local - We leverage on our global reach - being present in 14 different jurisdictions and beyond - while we tap into our local expertize/ knowledge and network.
• Practical and focused on execution.

We help families in drawing up the relocation project with a focus on risks and mitigation tools. We help them execute their plan, making sure that expectations are met, costs stay within the budget and that high privacy standards are met.

Upon request, we assist on ad hoc projects that pertain real estate or the acquisition of loans. We also help clients with their ‘passion projects’ involving assets like art or wine and introduce them to like- minded local families. In short, we aim to help families transition as smoothly as possible and to feel at home in their new country.

According to your experience, what are the favourite locations for families wanting to relocate to Italy?

Doris Sommavilla: Lake Como and Milan have gained popularity rapidly among those seeking to experience the Italian lifestyle without losing touch with the international scene.

Vibrant communities of international entrepreneurs and fast access to Switzerland, France and therest of the world have contributed to make these locations the first choice for tech and digital assets entrepreneurs.

Tuscany is an all-time-favourite, mostly for lifestyle reasons where people want to transition to another phase in life – dedicating more time to passion assets. We have many clients who bought beautiful properties and dedicate their time to restoring ancient villas, producing wine or olive oil.

Venice is another popular destination, favoured by art collectors and enthusiasts in general. It also offers great international schools.

Rome, Sardegna and Puglia are also growing in popularity among migrating multi-generational families willing to reconnect with their Italian roots.

Doris, what are the main feedbacks you receive from clients who moved to Italy?

Doris Sommavilla: At the very beginning it isnot easy. Relocation is in itself a stressful event. Cultural and language barriers add another layerof complexity. Moving to Italy can be very stressful at first especially for families who do not receive proper assistance in coordinating among the many moving parts and jurisdictions. There are a lot of top notch professionals, providers and advisors on the territory who unfortunately do not have sight on the bigger picture for the family. Lack of coordination and oversight on the whole project could leadto duplication of costs, tasks, divergent opinions and even errors in pianification with long term consequences. Our clients consider us as their main trusted advisors, their directors of the orchestra. We want to make sure that our clients enjoy a smooth transition and peace of mind during their transition to a new chapter in life.