Switzerland once again becoming haven for wealthy American expatriates: why Tina Turner now finds the U.S. the wrong place to live.
Tina Turner made headlines when she was granted Swiss citizenship, but she was already a long time gone from her roots in Tennessee.
She’d moved to Zurich in 1994 and really never looked back. In theory, she could have applied for a Swiss passport in 2006 – it takes 12 years residence in that notoriously tough country – but didn’t actually start the process until late last year.
Clearly, if Tina just wanted to avoid the threat of rising U.S. income taxes, her advisors should have gotten her moving years ago.
Like all Americans living abroad, she’s been paying tax to both the United States and Switzerland all this time as it is.
At age 73, the diva is mostly retired. She hasn’t been in a movie since 1993, hasn’t toured since 2000 and has only released a handful of new tracks in the last decade.
As a result, she’s owed the IRS something like 15% on royalties, investments and other passive streams and the Swiss what amounts to a flat wealth tax on assets held in that country.
Compared to other countries like Sweden or France, the double burden hasn’t been that terrible except in terms of bookkeeping. So why did Tina turn in her passport?
FATCA a nightmare for the Swiss
Thanks to the 2010 Foreign Account Tax Compliance Act (FATCA), which went into effect on January 1, every bank in the world now has to open up all accounts held by U.S. citizens.
The goal is to catch expats who hide their wealth or income. But in practice, it’s already making it more expensive for their local bankers to work with Americans abroad.
The institutions can absorb the cost, pass it on to their clients in the form of special fees or simply make it harder for U.S. citizens to open accounts.
Either way, the IRS may benefit, but the policy raises the friction for everyone else.
Tina may not have anything to hide, but the timing here makes me think one or more of her local advisors may have suggested dropping her U.S. citizenship to make life easier on everyone.
If so, it’s ironic, because she’s apparently been happy to keep paying U.S. taxes all this time. Now her next tax return will be her last.
Free from the IRS at last?
Tina almost certainly still loves her American fans, but she seems extremely happy in Switzerland.
She speaks fluent German, keeps a gated house right on Lake Zurich and has lived with her German record executive boyfriend since the mid-1980s.
And with back-of-the-napkin estimates of her personal net worth starting at $200 million, she’s both a rare prize for a Swiss banker and a potential nightmare in terms of keeping the IRS in the loop.
Most working expats might have an apartment, a checking account, a job and some miscellaneous investments.
Tina has houses in at least five countries, complicated residuals and according to Forbes has raked in at least $31 million in her decade of semi-retirement.
Breaking up with the IRS liberates her advisors from having to report to anyone on what she owns and how much it’s worth. In famously disclosure-wary Switzerland, that goes a long way right there.
Instead, she can just estimate her “income” at about five times what it would cost to rent the lake house – maybe as little as $12,000 a month – and the Swiss government will call it even.
A lot of celebrities reside in Switzerland for exactly that reason, and depending on the sources of their income, cutting the U.S. connection can save them millions of dollars a year.
So between the incentive to avoid FATCA complications and substantial wealth preservation numbers on the table, Tina’s people must have argued compellingly enough to overcome whatever resistance she still had to dropping her citizenship.
The fact that the Swiss are talking about changing the system to eliminate the “five times rent” option was probably only the icing on the cake.
A little pain, a huge estate tax gain
It’s not easy to become Swiss. Unless you marry in or are born in the country, an adult has to live there 12 years and pass various residency exams before even getting the chance to apply.
It probably wasn’t easy, but at age 73, she’s probably looking beyond the pain.
Ex-husband Ike’s estate is a mess, going to probate court now a full five years after his death, so she’d probably like to avoid his example.
She has two sons in their early 50s and is a devout Buddhist, so she’d probably like to leave as much of her money to family and favorite causes as she can.
As a U.S. citizen, her property would have been subject to full federal estate tax liability, probably reducing her eventual bequests by tens or even hundreds of millions of dollars.
In Switzerland, some local inheritance taxes may apply here and there, but on the whole, she’ll probably be able to pass on her money to whomever she wants, no questions asked.
With her peak earning years behind her and posterity to think about, that’s probably the real prize right there.
Scott Martin, senior editor, The Trust Advisor
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