As the world confronts the impact of COVID-19, Liam Lynch, Head of Private Clients at KPMG Ireland looks at some matters that require the attention of families balancing the health and wellbeing of their employees and family members with the impact on the family business, while the economic implications of the pandemic weigh heavily on family wealth.
Liam reviews matters related to family wealth and the impact that the pandemic can have on choices for family members.
While the absolute focus must be on the health and the wellbeing of society, the pandemic has also had a direct impact on markets and the value of assets.
Just as market uncertainty presents challenges for a family business, it also poses important questions around how it will affect the value of family wealth and assets. The safety and wellbeing of family members and employees will be paramount, but as the crisis develops and passes, it remains important to monitor and manage not just family business interests but also family wealth more generally, including non-business assets.
Liam sets out below some considerations that should be borne in mind when faced with volatile markets and reduced and uncertain asset values.
Now is the time to test governance mechanisms you have put in place for decision-making and communication, to assess the durability of the digital and human infrastructures and test the strength of your contingency plans to be best placed to preserve and protect family wealth and assets.
It is also important to assess the impact that COVID-19 may have on the tax residence position of you or your family members.
Making choices for the safety and wellbeing of your family during this time or just the practical impact of travel restrictions may take some people away from their usual location.
Each country has its own laws for determining when an individual is a resident for tax purposes. For those who are residents in more than one country, the country that has the taxation rights over specific types of income is governed primarily through double-taxation agreements and related protocols.
Individuals and families living across a number of destinations will be familiar with the need to maintain clear and ordered evidence of their taxable presence in a country. This could include the total amount of time spent in that country; how much of that time was at their home; the number of days they spent working; and several additional factors all depending on each country’s specific residency requirements.
As borders begin to close and citizens are encouraged to self-isolate, these plans may begin to feel less relevant. Liam advises that “there are several actions that are worth examining to reduce the impact of quarantines and other social-safety initiatives on your tax residency”.
Now may be the time to review such plans or consult with your advisor to consider the below possibilities:
Health, wellbeing, and safety will continue to supersede all other concerns as we navigate these days of unprecedented change and unpredictability. However, this too will pass and to help prepare for a stable future it may be worth considering some actions that you can take now to reduce the longer-term economic impact.
For further insights, read our business overview and action checklist entitled “Understanding the Implications of COVID-19 for private companies”.