How will my cryptoassets be affected?

Many internationally mobile clients hold cryptoassets, sometimes in great quantity, and a number of issues can arise when they move from one country to another.

Holders of cryptoassets are frequently anxious about the regulatory treatment of tokens they hold, or trading platforms which they have used. They often worry, for example, about their personal position if they have invested through an exchange or other platform that has subsequently been sanctioned. This issue arose for those who used the decentralised ‘mixer’ platform Tornado Cash, which was sanctioned by the US Office of Foreign Assets Control (OFAC) in August 2022, making it illegal for US persons, residents and entities to use the platform. This would deter some crypto holders from relocating to the US if they were associated with a sanctioned blockchain address that had utilised Tornado Cash. Whilst Tornado Cash has been used for unlawful laundering purposes, many investors will have used Tornado Cash for entirely legitimate reasons such as airdrops.

Regulations (both international and domestic) should also be considered before relocation. For example, many jurisdictions in the world – especially with the OECD – are committed to implementing the OECD’s Crypto-Asset Reporting Framework (‘CARF’), which will facilitate automatic information exchange between tax authorities of certain cryptoasset platforms (including centralised exchanges, but generally not custodians). Clients need to appreciate that, by relocating to a different jurisdiction, they will be exposed to the CARF rules as implemented by that jurisdiction. Cross-border crypto transparency is coming.

Clients should also be aware that not all jurisdictions around the world have accepted cryptoassets as property. Whilst the courts of many jurisdictions (such as UK, Hong Kong, Singapore) have recognised cryptoassets as property, it should not be assumed that all jurisdictions will do so. If not, this could have considerable implications in terms of succession law, tax (including double tax treaties) and proprietary and enforcement rights. Cryptoassets have in a number of jurisdictions (most notably China) been declared illegal, and there is a question over how cryptoassets will be treated by Sharia scholars – could the activity be considered gambling, for example, and therefore be haram?

One solution, if there are concerns over the recognition of cryptoassets as property in the new jurisdiction, is to settle the cryptoassets in a trust or foundation in a jurisdiction which properly recognises them as property.

In jurisdictions where cryptoassets are recognised as property, but where a trust is not viable for any reason, then the cryptoassets should be covered by a Will (typically drawn up under the laws of the jurisdiction where the individual is domiciled, under lex domicilii).

For those relocating to a new jurisdiction, trusts may also be a solution if there is uncertainty surrounding the tax treatment of cryptoassets in the new jurisdiction. A good example is in the UK, where cryptoassets are treated by HMRC as UK situs if the holder is also UK resident. For UK resident non-domiciliaries, the suggested solution to this is to structure through a trust in a tax neutral jurisdiction. Uncertainties on situs will arise in other high tax jurisdictions.

Senior Executives: thinking of relocating to the UK?

Moving on from the UK

• I have Indefinite Leave to Remain (ILR) in the UK having permanently resided here to work as a C-suite executive for a number of years. I’m considering a new employment opportunity abroad. What’s the impact on my ILR if I leave the UK for this new role?
• Your employer has indicated that they no longer require you to work in the UK – what should you think about?
• By becoming a non-resident in the UK, do I escape the tax net?
• I bought a property in the UK in my name while I was here. I am undecided whether to sell it or keep it – what UK tax considerations should I bear in mind?

Please do contact any member of our Sen Ex Advisory Group to suggest a question or to find out more about how we can help.

Senior Executives: thinking of relocating to the UK?

We answer common questions raised at key stages of the relocation process.

Tax advice more generally should be taken before relocating to a high tax jurisdiction. Most notably, there are wide disparities over how profits realised on decentralised platforms are taxed (for example, is staking a disposal for tax purposes?).