Many Hong Kong residents choose to move abroad upon retirement or at the end of their work contract. The most popular destinations have been the United States, Canada, Australia and the UK. To varying degrees, all these have been affected by the credit crisis and either have or will raise taxes to levels that many think are confiscatory.
A recent survey of world property prices found that prices had fallen dramatically in most onshore countries but had actually risen in some of the offshore centres. The reason is not hard to understand. As onshore countries increase taxes, more of their rich residents move away to escape them. So where is it possible to live tax-free? One of the most popular places is Monaco, which has a reputation of being the home of choice for the fabulously wealthy. It is, but the entry criteria do not require you to be a millionaire. A one-year residency will be issued as long as you can show that you have purchased or leased a property and have sufficient means to support yourself. The latter requirement is normally met by depositing Euro400,000 (HK$4.43 million) in a bank and have the bank produce a statement saying you have sufficient money to live in Monaco for the duration of your permit.
The one-year permit can be renewed twice. You can then apply for a three-year permit and have that renewed once, and then apply for a 10-year permit and citizenship. There are no personal taxes in Monaco.
It is necessary to spend at least 90 days in Monaco for legal residency to be maintained. Such famous individuals as Michael Schumacher have been caught out by this, so beware of the minimum stay requirement. There are services available which go into your apartment/house and switch on the lights, make telephone calls and generally make it appear as though you are there. That appears to be tax evasion and isn't recommended.
Another popular destination is Gibraltar, a British colony on the southern tip of Spain. It is just five square kilometres, but it has a fabulous climate and all locations are within 10 minutes of the airport.
Gibraltar has created a special Category 2 residency permit that allows the holder to pay tax only on the first GBP70,000 (HK$885,000) of their income, subject to a minimum annual tax payment of GBP20,000. At current rates, this works out as a maximum annual tax of GBP25,880.
To qualify, you must have approved accommodation available for your use throughout the tax year - you can rent or buy - and must prove a net worth of Euro2 million. There is no minimum stay requirement, and you may choose to maintain residence in Gibraltar but live across the border in Spain - particularly in the rather fabulous environment of Sotogrande. Stay in Gibraltar for five years and you can apply for a UK passport.