The UK non-domicile regime remains a relatively attractive option with UK non-domiciles (“non-doms”) continuing to have the opportunity to enjoy significant tax advantages for a period of up to 15 years.
Major reforms regarding how UK non-domiciles are taxed were introduced in April 2017. As detailed in the Dixcart Article: UK Tax Residence – Planning Opportunities, Case Studies and How to Get it Right, individuals are now deemed domiciled in the UK if tax resident in the UK in 15 of the previous 20 tax years.
Alternative Jurisdictions for Non-UK Domiciles to Consider
If the decision is taken to cease to be UK tax resident, the jurisdictions of Cyprus, Guernsey, Isle of Man, Malta, Portugal and Switzerland are attractive jurisdictions to consider. They offer a number of advantages and are close to the UK.
Additional details regarding the factors affecting UK resident and non-resident status can be found in Dixcart Article: The UK Resident/Non-Resident Test.
Cyprus is the largest island in the eastern Mediterranean and an attractive European country. The population of Cyprus is approximately 850,000 and the official language is Greek; however, English is widely spoken.
Cyprus is part of the EU and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK.
There are two options available to non-EU nationals seeking to relocate to Cyprus. These are the Cyprus Investment Programme, and the Permanent Residence Programme.
- The Cyprus Investment Programme
This scheme allows individuals to acquire Cyprus Citizenship and visa-free travel to over 150 countries.
- The Permanent Residence Permit
This permit simplifies travel around Europe and is particularly relevant to individuals with several business interests across several EU jurisdictions. The applicant’s passport is stamped and a certificate is provided which indicates that Cyprus is considered a permanent place of residence for that individual.
The applicant must purchase real estate property in Cyprus with a market value of €300,000 (excluding VAT). The main applicant must also have a minimum annual income of €30,000, either from pensions, overseas employment, interest on fixed deposits or rental income from abroad.
Tax Advantages Available to Non-Domiciled Individuals in Cyprus
Individuals who are tax resident in Cyprus, but non-domiciled, do not have to pay a Special Contribution for Defence Tax and can benefit from a zero rate of tax on the following sources of income:
- Capital gains
- Capital sums received from payments made by pension, provident and insurance funds
In addition, there are no wealth and no inheritance taxes in Cyprus.
Tax Advantages Available to Companies in Cyprus
- Cyprus has one of the lowest levels of corporation tax in the EU at only 12.5%.
- Cyprus has an extensive network of Double Taxation Agreements.
- Cyprus is in the EU and therefore a company established there has access to European Directives. The Parent/Subsidiary Directive reduces the withholding tax on dividends from EU investee countries to zero.
- There is no tax on dividend income.
The island of Guernsey is the second largest of the Channel Islands, which are situated in the English Channel. The Bailiwick of Guernsey comprises three separate islands: Guernsey, Alderney and Sark.
Guernsey is independent from the UK and has its own democratically elected Parliament, which controls the island’s laws, budget and levels of taxation. As the island enjoys legislative and fiscal independence, it can respond quickly to the needs of business. In addition, the continuity achieved through the democratically elected parliament, without political parties, helps deliver political and economic stability.
Daily flights from Guernsey enable individuals to be in London for 09.00, to help maximise the amount of time that can legitimately be spent in the UK.
Criteria Required to Move to Guernsey?
The following individuals do not generally need permission from the Guernsey Border Agency to move to the Bailiwick of Guernsey:
- British citizens
- Other nationals of Member States of the European Economic Area and Switzerland
- Other nationals who have permanent settlement within the terms of the Immigration Act 1971
An Individual who does not have an automatic right to live in Guernsey must fall within one of the categories below:
- Spouse/partner of a British citizen, EEA national or settled person
- Investor – requires a minimum of £1,000,000, of which a minimum of £750,000 must be invested in Guernsey
- Person intending to establish a business in Guernsey
- Writer, artist or composer – must be professionally established before applying to move to Guernsey
Tax Residence for Individuals and a Significant Tax Advantage
An individual who is resident, but not solely or principally resident, in Guernsey can elect to be taxed on Guernsey source income only, subject to a minimum charge of £30,000. In this instance, any additional income earned outside of Guernsey will not be taxed in Guernsey.
Alternatively, an individual who is resident, but not solely or principally resident, in Guernsey can elect to be taxed on his or her worldwide income.
New residents to Guernsey, who purchase an ‘open market’ property, can enjoy a tax cap of £50,000 per annum on Guernsey source income in the year of arrival and subsequent three years, as long as the amount of Document Duty paid, in relation to the house purchase, is at least £50,000.
Tax Efficient Jurisdiction for Companies
Guernsey is a leading international financial centre with a good reputation and an attractive tax regime:
- The general rate of tax payable by Guernsey companies is zero. There are limited exceptions.
- There is no capital gains tax, no inheritance tax, no value-added tax and no withholding tax.
Isle of Man
The Isle of Man is situated in the Irish sea, centrally located between England, Ireland, Scotland and Wales. The island has no formal requirement to apply for residency and an unrestricted open property market. Tax residency is immediate and only requires completion of basic notification information.
The Isle of Man is an economically safe and politically stable jurisdiction for individuals and companies and is only a one hour flight from London.
The Isle of Man and British Citizenship
One of the key advantages of migration to the Isle of Man is that it entitles the successful applicant and his/her family to receive British Citizenship, if all the relevant conditions are met. Subsequently, an application can be made for a British passport.
Migration to the Isle of Man
EU nationals have the right to reside in the Isle of Man, although a work permit may be required in some circumstances. Non-EU nationals need to obtain a residence visa and there are two types of Isle of Man visa that are particularly attractive to high net worth individuals: Tier 1 Entrepreneur Visa and Tier 1 Investor Visa.
To qualify as an Isle of Man Entrepreneur, an applicant needs to invest a minimum of £200,000 in a new or existing business, which is registered and pays taxes in the Isle of Man.
Alternatively, an individual can obtain an initial Isle of Man Investor Visa for three years by bringing £2 million into the Isle of Man and investing these funds in permissible investments.
In either instance, as long as the provisions continue to be satisfied, after the initial three-year period the individual will be granted a further two-year visa and, following this, can apply for Indefinite Leave to Remain (ILR) in the Isle of Man. The rules allow for accelerated ILR when certain specified criteria are met.
A spouse and children under the age of 18 can accompany the holder of either type of Isle of Man visa as dependants.
Tax Advantages Available to Individuals in the Isle of Man
The Isle of Man is an attractive place to live, with low rates of income tax, no capital gains tax, no inheritance tax and no stamp duty.
The standard rate of personal income tax in the Isle of Man is 10%, with a higher rate of 20%. Annual personal income tax can be capped at £125,000 for a period of five years for Isle of Man tax residents. This annual tax cap is doubled to over £250,000 for a married couple where they choose to be jointly assessed.
Generally, individuals are taxed on their worldwide income but, this is capped at a maximum £125,000 per annum.
There are tax concessions available to “key persons” relocating to the Isle of Man and establishing a business on the island, depending on specific circumstances.
Tax Advantages Available to Companies in the Isle of Man
Isle of Man companies benefit from a zero rate of tax on trading and investment income. They are also able to register for VAT and are treated by the rest of the EU for VAT purposes as if they were in the UK.
All Isle of Man companies are treated as resident companies. Resident companies are taxed at a rate of 0% on their trading and investment income. Income derived from land and property situated in the Isle of Man is taxed at a rate of 10% and banks are taxed on their banking business at a rate of 10%.
Malta is an attractive island to consider for relocation, just a short flight from the UK. Located in the Mediterranean Sea, south of Sicily, the Maltese archipelago consists of the three islands of Malta, Gozo and Comino and has a population of approximately 375,000. There are several different residence programmes to meet a variety of individual circumstances and Malta is an appealing EU jurisdiction.
Malta is part of the EU, and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK.
There are five Maltese residence programmes, one or more of which, depending on the circumstances, might prove attractive to a UK non-domicile seeking to leave the UK.
The first three programmes listed below are applicable to non-EU individuals, whilst the advantages available through the Highly-Qualified Persons scheme can be enjoyed by EU and non-EU individuals; however the Malta Retirement Programme is only open to EU individuals.
- Individual Investor Programme
The Individual Investor Programme (IIP) enables non-EU individuals and their families to gain Maltese citizenship by making a minimum cash contribution of €650,000 to the Maltese Government and meeting certain other criteria. A key advantage of obtaining a Maltese passport is that it provides freedom of residence anywhere in the EU and ease of travel throughout the world.
- Residence and Visa Permit Programme
The Maltese Government introduced this residence programme in August 2015. It is available to non-EU individuals and enables them to reside indefinitely in Malta. Each applicant must make a three-tier investment:
- Contribution: A €30,000 payment to the Maltese Government; AND
- Qualifying investment: An investment of at least €250,000 in Malta or Gozo, which must be maintained for a minimum of five years; AND
- Qualifying Owned or Rented Property: Purchase of a property in Malta for a minimum value of €320,000, OR rental of a property for a minimum of €12,000 per annum in Malta. The property must be owned or rented for at least five years.
Individuals taking advantage of this programme, who are not of Maltese origin and intend to stay in Malta for some considerable time, but do not intend to permanently establish themselves in Malta, will be classified as resident but not domiciled in Malta.
Such individuals will be taxed on Malta source income and certain gains arising in Malta. They will not be taxed on non-Malta source income not remitted to Malta. Capital gains will not be taxed even if they are remitted to Malta.
- Global Residence Programme
The Global Residence Programme entitles non-EU nationals to obtain a Maltese residence permit through a minimum investment of €275,000 in property in Malta.
Successful applicants can relocate to Malta if they choose to do so.
A key advantage of the Global Residence Programme is that a flat rate of 15% tax is charged on foreign income remitted to Malta, with a minimum €15,000 tax payable per annum. Foreign source income not remitted to Malta is not subject to tax in Malta. Individuals may also be able to claim double taxation relief under the regime.
- Highly-Qualified Persons Scheme and Key Employee Initiative
The Highly-Qualified Persons Scheme is directed toward professional individuals earning over €81,457 per annum, employed in Malta on a contractual basis.
This scheme is open to EU nationals for five years and to non-EU nationals for four years.
When such individuals move to Malta, income tax is set at a flat rate of 15%. No tax is payable on income earned over €5 million per annum relating to an employment contract for any single individual.
The Key Employee Initiative provides a fast-track service to highly-specialised, non-EU nationals employed in Malta. Under the scheme, work/residence permits are issued to prospective key employees within five working days of the date of the application.
The scheme is applicable to managerial and/or highly-technical professionals with relevant qualifications or adequate experience relating to a specific job. Approved applicants are issued with a residence permit valid for one year; a permit may be renewed for a maximum period of three years.
- Malta Retirement Programme
The Malta Retirement Programme is designed for EU nationals whose main source of income is their pension.
An individual must own or rent a property in Malta and his/her principal place of residence in the world. The minimum value of the property must be €275,000; alternatively, property must be leased for a minimum of €9,600 annually in Malta.
In addition, there is a requirement for an applicant to reside in Malta for a minimum of 90 days each calendar year, averaged over any five-year period. EU nationals must not reside in any other jurisdiction for more than 183 days in any calendar year during which they benefit from the Malta Retirement Programme.
An attractive flat rate of 15% tax is charged on a pension remitted to Malta. The minimum amount of tax payable is €7,500 per annum for the beneficiary and €500 per annum for each dependant.
Tax Advantages Available to Companies in Malta
Companies operating in Malta are subject to a corporate tax rate of 35%. However, shareholders enjoy low effective rates of Maltese tax as Malta’s full imputation system of taxation allows generous unilateral relief and tax refunds:
- Active income – in most instances, shareholders can apply for a tax refund of 6/7ths of the tax paid by the company on the active profits used to pay a dividend. This results in an effective Maltese tax rate of 5% on active income.
- Passive income – in the case of passive interest and royalties, shareholders can apply for a tax refund of 5/7ths of the tax paid by the company on the passive income used to pay a dividend. This results in an effective Maltese tax rate of 10% on passive income.
- Holding companies – dividends and capital gains derived from participating holdings are not subject to corporate tax in Malta.
- There is no withholding tax payable on dividends.
- Advance tax rulings can be obtained.
Since the launch of the “Golden Visa” scheme in 2012 and the “Non-Habitual Residents” tax regime, Portugal has become one of the most popular locations in Europe for EU and non-EU nationals to consider moving to.
Portugal is a beautiful country, bordering Spain and the Atlantic Ocean. With only a two-and-a-half-hour direct flight time, individuals can travel to the UK relatively quickly from Portugal.
Portugal is part of the EU, and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK. The Golden Visa is a residence programme available to non-EU citizens.
The Golden Visa Programme for Non-EU Individuals
By obtaining a Golden Visa, individuals can qualify for a residency permit in Portugal for up to five years. This allows them and their family to travel freely within most European countries. The visa can lead to permanent residence and Portuguese citizenship. At the end of the fifth year of being a Portuguese resident, the main applicant has a right to apply for a passport.
To be eligible for a Golden Visa the applicant must fulfil ONE of the following financial criteria:
- A minimum investment of €1 million in Portugal (deposit in a bank account, or shares or quotas in a company or companies); OR
- An investment of €500,000 in real estate; OR
- The creation of at least 10 jobs (temporary work contracts are eligible and the worker does not have to live in Portugal if social security is paid) OR
- Investment of a minimum €350,000 in a project relating to cultural or scientific research; OR
- The purchase of a property built at least 30 years ago, or located in an area designated for urban renewal. The property, including the costs of rebuilding and/or renewal, must equal a minimum of €350,000; OR
- Investment of a minimum €250,000 to support artistic productions and/or national heritage projects organised through the central or local Portuguese authorities; OR
- Investment of a minimum €500,000 to purchase shares in investment funds or venture capital companies that are being used to support small and/or medium size companies in Portugal that have generated viable business development plans.
In addition, individuals investing in a region with a low population density (less than 100 habitants per km2), or with a GDP 75% or less than the national average, benefit from a 20% reduction in the specified investment criteria. The two exceptions are the capital transfer of at least €1 million to a Portuguese bank account or a Portuguese company and the investment of a minimum €500,000 to purchase shares in investment funds or venture capital which is being used to support small and/or medium size companies.
The Non-Habitual Residents Programme
EU and non-EU individuals who become resident in Portugal for tax purposes, may apply for the “Non-Habitual Residents Programme”, provided they have not been resident in Portugal for the previous five years.
NHR Programme – Tax Advantages:
- Tax exemption on foreign source income when certain conditions are met.
- Reduced tax rate of 20% on personal income tax for certain categories of employment.
It is possible for non-EU individuals to apply for the Golden Visa and Non-Habitual Residents Programme simultaneously.
Tax Advantages Available to Companies in Portugal
Portuguese companies are subject to tax on their worldwide income. Branches of non-resident companies are only taxed on Portuguese-source profits.
The Portuguese corporate income tax rate is 21% on the mainland and 5% on the island of Madeira.
Corporate tax is charged on a company’s profit, although some exemptions may apply in relation to passive income under the Participation Exemption Method.
Other Tax Benefits
Portuguese companies registered in the Madeira Free Trade Zone, known as MIBCs, enjoy several tax benefits, in particular the reduced rate of 5% corporate tax, guaranteed until 2027, and:
- No capital duty in most circumstances.
- An 80% reduction in stamp duty costs.
- No withholding tax on dividend, interest, royalty and service payments.
- No withholding tax on dividends distributed to individuals by Madeira companies.
- The total tax benefit available to MIBC entities is capped at the highest of:
- 1% of annual gross added value OR
- 1% of annual staff costs OR
- 1% of annual turnover.
In addition, companies licensed to operate in Madeira have access to most of the Double Taxation Agreements.
Switzerland is an attractive location for individuals seeking to redomicile as it offers political, economic and social stability in addition to a very pleasant lifestyle, a healthy environment and an excellent education system.
Situated in the centre of Europe with five bordering countries, Switzerland is a popular and easily accessible jurisdiction to consider as an alternative place of residence. There are twenty-six cantons in Switzerland and currently each has the autonomy to impose its own cantonal tax.
Although not an EU member, Switzerland has strong relations with European countries through bilateral agreements. It is a member of the European Free Trade Association (EFTA), the Financial Action Task Force (FATF), and the Organisation for Economic Co-operation and Development (OECD).
Migration to Switzerland
No restrictions are imposed by Swiss immigration law on permanent residence for financially independent EU citizens. All EU citizens who can show sufficient financial means are entitled to become resident in Switzerland.
Non-EU and Non-EFTA nationals can obtain a residence permit as employed individuals in Switzerland, as pensioners with close ties to Switzerland or as financially independent persons who pay annual taxes. A swiss residence permit provides full Schengen travel rights.
The Lump Sum System of Taxation for Individuals
Switzerland offers an attractive tax regime for individuals who choose to live there. The key features of the Swiss Lump Sum System of Taxation are:
- Income and wealth taxes are levied based on the taxpayers’ living expenses in Switzerland, rather than on their worldwide income and assets.
- For federal tax purposes, a taxpayer’s living expenses are assessed as at least seven times the annual rental cost or the deemed annual rental income of the taxpayer’s dwelling in Switzerland. In Geneva, the minimum acceptable taxable income is CHF 300,000 per annum. The specific tax rate applied depends on the circumstances of each individual.
The Lump Sum System of Taxation applies to individuals taking up residence in Switzerland for the first time, or returning to Switzerland after an absence of at least ten years. They must not engage in any gainful employment in Switzerland.
This system is not available in three of the twenty-six Swiss cantons: Appenzell, Schaffhausen and Zurich.
Taxation on Swiss Companies
Tax advantages available to companies include:
- An effective tax rate for pure holding companies of 0% when clearly defined conditions are met.
- The effective tax rate for international trading companies administered in Switzerland, but whose business is conducted abroad, varies from 8% to 12%.
- The effective tax rate for local, ordinarily taxed, companies varies between 12% and 24.5%.
- Tax rulings are available.
- There are no Controlled Foreign Company Rules.
- Withholding tax:
- Taxation of Savings and Income Agreement: the agreement between Switzerland and the EU generally exempts dividend distributions from Swiss companies to companies in EU member states from tax. The Swiss company can file a request for confirmation that the zero tax will apply.
- Double Taxation Agreements (DTAs): the rate of Swiss withholding tax is 35%. Switzerland, however, has DTAs with over 100 countries, which, in many instances, can reduce the withholding tax to between 5% and 15%.
- Royalties and Interest: there is no withholding tax on royalties and interest on intercompany loans.
How Can Dixcart Help?
- Dixcart offers advice and assistance to individuals seeking to relocate to Cyprus, Guernsey, Isle of Man, Malta, Portugal and Switzerland. There are staff in place to help make each move as simple as possible.
- Dixcart offers specialist advice regarding residence and citizenship and has extensive experience of the various residence programmes.
- Dixcart can provide advice on the best way to plan a move from the UK.