The growing prominence of family offices is driven by the active involvement and evolving priorities of younger family members. For them, diversification is not just about spreading capital across asset classes. It is about accessing opportunities across borders, sectors and currencies. However, global investing brings a new set of considerations that go well beyond identifying attractive opportunities.
Tax obligations across jurisdictions
One of the first is tax residency. Family members may reside in different jurisdictions while investments are held across multiple countries. An individual’s residential status can determine the scope of income taxable and reportable in a particular jurisdiction, while the location from which an investment entity is managed or controlled may give rise to tax obligations in another jurisdiction.
Families with globally diversified portfolios may need to navigate situations where income is taxable in more than one jurisdiction and evaluate the availability of relief under applicable tax treaties and foreign tax credit mechanisms.
Global transparency standards and enhanced exchange of information between tax authorities have changed the compliance landscape. Basis an individual’s tax residence, the nature of the interest held and the applicable local rules, overseas bank accounts, financial interests, trusts and other cross-border holdings may give rise to reporting requirements in one or more jurisdictions. For family offices, maintaining accurate records and ensuring consistency in disclosures is no longer merely a compliance obligation; it is an important aspect of governance, risk management and reputation protection.
How you hold the investments matter
As portfolios increasingly span asset classes, jurisdictions and generations, the structuring through which investments are held has become a strategic decision in itself. Decisions around whether investments should be held directly, through trusts, holding companies or other vehicles can have implications for regulatory compliance, governance, operational flexibility, tax efficiency, exchange control considerations, place of effective management and long-term wealth preservation. As portfolios become more sophisticated, the structure through which assets are owned can be almost as important as the investments themselves.
Finally, who inherits what and where?
While significant attention is paid to creating wealth, transferring wealth across generations can be equally complex, particularly when assets, beneficiaries and interests span multiple jurisdictions. Family offices are increasingly being called upon to establish governance frameworks, succession plans and ownership structures that can facilitate a smooth transition while preserving family intent and minimising disputes.
The writer is partner and leader, Family Office Advisory Services, EY India. Inputs from Garima Bangar, senior manager, Family Office Advisory Services, EY India.
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Investors should assess their financial goals, risk appetite and consult a qualified financial advisor before making investment decisions.
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