The UK offers an attractive tax regime for up to 15 years for individuals who are resident in the UK, but do not have a UK domicile. Individuals who are UK resident, but not UK domiciled do not have to pay UK tax on their foreign income and gains, as long as these sums remain outside of the UK. However, major reforms regarding how non-UK domiciliaries (“non-doms”) will be taxed are now confirmed, to be implemented from April 2017.
Individuals may choose to structure their tax affairs so that they cease to be UK tax resident for a certain period of time. By doing this, they can avoid being considered UK deemed domiciled, or they can lose their deemed domiciled status if this has already been acquired. If they then decide to return to being a UK tax resident, after the necessary period of time, they will have the opportunity to ‘re-set’ the year count for the deemed domiciled test
Other Jurisdictions to Consider for Non-UK Domiciles Wishing to Move Out of the UK
The jurisdictions of Cyprus, Malta and Portugal are attractive jurisdictions to consider for individuals wishing to cease being UK tax resident. They offer a number of advantages and are close to the UK. However, there are strict limits on the number of days that can be spent in the UK and special care must be taken. Additional factors affecting UK resident and non-resident status need to be carefully considered and reviewed with a specialist tax advisor.
[We will post further articles about the particular legal, financial, residency and other requirements in order to qualify for residence (and if required citizenship) in Cyprus, Malta and Portugal.]
Reasons to Consider Relocating to Cyprus
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 also a number of residence programmes available to non-EU citizens.
Non-EU Individuals Relocating to Cyprus
There are two options available to non-EU nationals seeking to relocate to Cyprus. These are the Cyprus Citizenship by Investment Programme, which is a “fast track” means of acquiring a Cypriot passport, and the Permanent Residence Programme.
Tax Advantages Available to Non-Domiciled Individuals in Cyprus
Individuals who are tax resident in Cyprus, but non-domiciled, 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; Dividends; Interest; Special Defence Tax. In addition, there are no wealth and no inheritance taxes in Cyprus.
Malta is a highly attractive island to consider for relocation. There are several different residence schemes to meet different individual circumstances and Malta is an appealing EU jurisdiction 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. 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 Schemes and, depending on the particular circumstances, one or more of these might prove attractive to a UK non-domicile seeking to leave the UK. Three schemes 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, and finally the Malta Retirement Programme is only open to EU individuals.
The Malta Individual Investor Programme (IIP) enables non-EU individuals and their families to gain Maltese citizenship by making a cash contribution 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.
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.
Since the launch of the “Golden Visa” scheme in 2012 and the “Non-Habitual Residents” tax regime, Portugal has become one of the most attractive locations in Europe for EU and non-EU nationals. 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 are able to qualify for a residency permit in Portugal for up to five years. This allows them and their family to travel freely within the majority of European countries. The visa can lead to permanent residence and Portuguese citizenship as, after six years of being a Portuguese resident, the main applicant has a right to apply for a permanent passport.
The Non-Habitual Residents Programme
EU and non-EU individuals who become resident for tax purposes in Portugal may apply for the “Non-Habitual Residents Programme”, provided that they have not been a resident in Portugal for the previous five years. The advantages from the scheme are: Tax exemption on foreign sourced income when certain conditions are met; reduced tax rate of 20% on personal income tax for certain categories of employment; non-EU individuals can apply for the Golden Visa and Non-Habitual Residents Programme simultaneously.
Please contact us if you have any questions about a move from the UK, or want to know more about ‘re-setting the clock’ if you wish to return to live in the UK at a later date. Our specialist Associate teams in London, Cyprus, Malta and Portugal will be happy to assist you in regard to all Residence, Relocation and Citizenship matters.
Article posted with kind permission of one of our Associates, Dixcart International and their specialist division, Dixcart Domiciles. Dixcart International is an independent accounting, tax and corporate services company with 10 global offices in 9 jurisdictions.