The UK’s impending abolition of a tax perk for rich residents has triggered a pan-European hunt for fiscal havens because the wealthy forged a large web from sunny upstart locations resembling Portugal to reliable Switzerland.
Tax advisers throughout the continent are reporting a rush of inquiries that started when the UK’s earlier Conservative authorities pledged to finish its non-domicile tax regime from 2025, and accelerated when the brand new Labour administration stated it might follow through on the plan.
Non-dom standing is accessible to UK tax residents whose everlasting residence or “domicile” is abroad. It allows beneficiaries to keep away from paying British tax on their overseas earnings or capital features for 15 years, offered they don’t deliver them to the UK.
For the wealthy whose dedication to the UK will expire with the perk, there aren’t any carbon copies of the British system however a number of international locations provide related incentives. Those that put a premium on way of life are additionally contemplating how different places match as much as London’s strengths (its social buzz) and weaknesses (its climate).
Switzerland’s fame as a haven means it’s accustomed to attracting a gentle degree of curiosity from the well-off, however Stefan Piller, head of tax and authorized at BDO’s Zurich workplace, stated: “We’re getting extra requests every week — and lots of greater than we skilled final 12 months.”
The alpine nation’s fiscal attraction centres on its low charges of earnings tax. Most cantons resembling Geneva and Zug provide a lump-sum taxation or “forfait” system, primarily based on people’ dwelling bills, for the very wealthy, which allows them to chop bespoke offers on what tax they pay. Zurich and Basel have abolished the system.
The ensuing levies are “not low-cost”, stated Justine Markovitz, head of Withers’ Swiss apply, however they do present much-desired certainty. The draw back is that folks within the forfait system can’t work in Switzerland.
Another choice is Monaco, the tiny Mediterranean principality with no earnings or capital features tax, though its extraordinarily excessive dwelling prices deter some.
Many UK non-doms are weighing their choices with April 6, 2025 in thoughts, the day when the outdated regime can be abolished. It is going to be changed with a brand new residence-based system below which new resident candidates, who’ve lived exterior the UK for a minimum of a decade, can be exempt from UK tax on overseas earnings or capital features for 4 years, not 15.
Concentrating minds is the truth that the Labour authorities has stated it’s going to additionally take away the power to completely protect overseas belongings held in a belief from the UK’s 40 per cent inheritance tax.
“It’s inheritance tax that’s inflicting many of the upset,” Markovitz stated. “I’m discovering many individuals say: ‘I can’t try this for my children, I can’t sacrifice 40 per cent of my asset base.”
Switzerland doesn’t set inheritance tax at a federal degree and its cantons sometimes cost comparatively low or no inheritance tax. Portugal, one other place attracting the rich’s consideration, doesn’t impose an inheritance tax both. Lisbon does impose a ten per cent “stamp obligation” on Portuguese belongings handed on after loss of life, nevertheless it doesn’t apply to belongings abroad.
Portugal has provided extra in addition to: prior to now decade it has courted foreigners with golden visas and a beneficiant fiscal regime for tax residents who remained domiciled elsewhere. However wealthy people are discovering a lot has modified.
Its earlier centre-left authorities scrapped the non-dom regime final 12 months and changed it with extra limited tax incentives for foreigners and returning Portuguese expatriates who’ve work contracts in sure fields, together with expertise, R&D and academia. These incentives embody a tax exemption on overseas earnings, excluding pensions, and a 20 per cent flat tax on Portuguese work or enterprise earnings from qualifying actions.
Now, crucially, a brand new centre-right authorities is drawing up laws to implement its predecessor’s coverage by year-end — and tax advisers anticipate extra individuals to change into eligible for the brand new system.
“We’ve acquired many questions,” stated Luís Nascimento, a tax adviser at consultancy Ilya. “[But] till the federal government publishes the brand new ordinance, there’s nonetheless a number of uncertainty about what the brand new regime can be.”
Nuno Cunha Barnabé, tax companion at Lisbon regulation agency Abreu Advogados, stated Portugal can be eager to promote its way of life. “When you dwell in London and what you want about it’ll fancy eating places, the nightlife and the excitement, then Portugal shouldn’t be for you,” he stated. “However if you would like a rustic that’s quieter, the place the climate is nice, the place there’s out of doors dwelling, Portugal might be for you.”
A Mediterranean way of life can be a part of Italy’s attraction, which is ready to endure regardless of Rome’s latest determination to double a flat tax on the overseas earnings of wealthy expats to €200,000 a 12 months.
“If you’re asking somebody to purchase a product and the following day it doubles, nobody is joyful,” stated Jacopo Zamboni, government director for personal shoppers at Henley & Companions. However, he added, “whenever you assess the professionals and cons, shoppers need a steady legislative framework — they do not need solely a steady tax quantity.”
Italy’s regime, which is on the market for 15 years to new tax residents who make investments a minimum of €250,000, was arrange in 2016 in a post-Brexit push to lure rich individuals away from the UK. Since 2017 it’s estimated to have attracted about 4,000 multimillionaires, together with oligarchs and personal fairness buyers. Rich people who relocated earlier than the latest enhance will proceed to pay €100,000 a 12 months.
Throughout the Ionian Sea, Greece boasts a decrease value of dwelling than Italy — although that could be of negligible significance to the very wealthy — and an identical system. Launched in 2019, its regime provides a flat annual tax of €100,000 on overseas earnings for 15 years for people who meet residency necessities and make investments a minimum of €500,000 in actual property, companies, or securities.
Up to now the regime has attracted greater than 230 millionaires to the nation.
Vassilis Vizas, chief of tax and authorized providers at PwC Greece, stated he had seen a surge in curiosity in Greece from UK non-doms in latest months, however famous that almost all of them had been wealthy people of Greek descent.
The sturdiness of Greece’s fiscal regime is one concern on the minds of potential residents.
Though Vizas sees no indicators of reforms on the horizon, he stated “one widespread query is whether or not the beneficial tax insurance policies will stay unchanged”.
Further reporting by Sérgio Aníbal in Lisbon
