As the dust starts to settle following a landslide victory in the general election for Labour, businesses and UHNW (Ultra High Net Worth) clients linger in uncertainty, waiting to understand how the change in government might affect them. With the expected scrapping of the non-dom regime, UHNW clients are considering moving their wealth elsewhere. So where are the new non-dom hubs?
Leading advisers tell Spear’s that Italy, Dubai and Switzerland remain popular choices for UHNWs — but other jurisdictions are rising in popularity too as UK-based non-doms ready themselves for an exit.
What is the non-dom regime?
This is a category for people in the UK who have their permanent home, ‘domicile’, outside the UK.
Typically, these people don’t need to stay in London to maintain their wealth and with the threat of a 40% inheritance tax on all worldwide assets, many are now considering an exit.
Where might the super-wealthy non-doms go?
Italy, Dubai and Switzerland remain popular non-dom hubs, with Italy’s 100,000 euro lump-sum regime being simple to understand and comply with. However, it is less suitable for those looking to crystallise capital gains.
Switzerland
When it comes to world-class skiing, quality education, and a prosperous lifestyle, Switzerland could easily claim a top spot. But beyond these appealing factors, the country also offers an attractive tax regime for incoming High Net-Worth Individuals (HNWs).
For inbound HNWs, Switzerland’s non-resident tax programme is an irresistible offer. This scheme allows new residents to pay a flat-rate fee beginning at CHF 200,000, with the potential to rise to CHF 600,000 per year depending on the Canton. It’s worth noting, following the UK’s exit from the EEA, that the rules for Brits wishing to take advantage of this scheme are different from other EU nationals.
One of the biggest perks of Switzerland’s tax regime is that it allows non-domiciled HNW individuals to avoid local taxes on their foreign income and gains. However, this silver lining comes with a cloud – residents who opt for this scheme are not allowed to work in the country.
For entrepreneurial HNWs, Switzerland’s business investment programme is an attractive proposition. It’s a perfect deal for individuals who can establish an office in the country. To qualify, clients must set up a Swiss company and invest business capital of at least CHF 1 million. Participation in this scheme can ultimately lead to a Swiss passport.
In conclusion, Switzerland’s tax regime presents a unique opportunity for HNWs looking to relocate or expand their business. Whether you’re looking for personal financial advantage or a wider European opportunity for your business.
Portugal
Portugal’s newly formed centre-right government has declared its intention to reintroduce its non-habitual residence (NHR) scheme.
Speaking to the Financial Times, Joaquim Miranda Sarmento, the Finance Minister of Portugal, expressed his desire to ‘attract some people’ to the country. Sarmento also highlighted that the reintroduced scheme will entail a 20 per cent flat tax rate, much like the old scheme introduced back in 2009. However, unlike the previous programme, the new one will ‘exclude dividends, capital gains and pensions’.
For years, Portugal’s NHR scheme was a magnet for UK expats who sought to retire under the sunny skies of the Algarve. This influx of retirees was linked to an unsustainable escalation in house prices, which caused significant difficulties for local buyers. The scheme was so popular that more than 30,000 non-EU nationals were granted Golden Visas until it was eventually discontinued. Critics of the scheme argue that it was primarily responsible for a marked 60 per cent increase in house prices over a ten-year period.
As the Portuguese government reintroduces the NHR scheme, it’s clear that their focus has shifted. Now, the country seeks to tap into a different set of potential expats – skilled workers who can contribute more to the economy, giving Portugal a fresh start in a new direction.
Malta
As the UK sets to revoke its longstanding remittance basis rules, numerous Ultra High Net Worth (UHNW) non-domiciles are shifting their gaze towards an appealing alternative – Malta’s remittance regime. In fact, legal firm Irwin Mitchell anticipates a net inflow of 250 millionaires into the country this year. Over the decade, Malta has seen a stunning 74% increase in its millionaire population.
Malta’s remittance regime offers a strategic advantage for clients as it allows them to enjoy tax-free income that is not remitted to the country. Should they decide to bring their earnings into Malta, they are offered the option to either pay a special 15% rate or a flat fee of €15,000. This makes the country a natural choice for those seeking tax efficiency alongside an attractive lifestyle.
Moreover, catering to diverse groups of residents, Malta runs various residency programmes aimed at investors and retirees. Including relatively flexible entry requirements; with High Net Worth Individuals (HNWIs) required to either prove they have €500,000 in capital or acquire a property worth €350,000.
In a world where mobility and financial freedom have become increasingly important, Malta’s remittance regime presents a compelling case for wealthy individuals seeking tax-friendly jurisdictions. Its combination of flexible requirements, beneficial tax laws, and an attractive lifestyle set it apart as an ideal choice for anyone seeking a new wealth destination.
Dubai and Monaco
For high-net-worth (HNW) non-domicile individuals with a fondness for low or no taxes, there’s a world of attractive options beyond the traditional societies. These individuals often look to non-dom hubs like Monaco, the United Arab Emirates, Bermuda, and the Cayman Islands. Not just for their tax benefits, but also for the luxurious lifestyle and unique experiences they offer.
Dubai’s Golden Visa regime, for instance, is seemingly a piece of cake for ultra-high-net-worth (UHNW) clients to navigate.
Then there is the playground of the rich and famous – Monaco. With improving schools and larger apartments built in the new developments.” However, adapting to the change from a sprawling estate in Sussex to a flat in Monaco can be quite the lifestyle adjustment.
Lifestyle vs Tax Benefits
Advisers play a crucial part in the decision-making process, recommending that the decision to move should take into account lifestyle factors in addition to tax benefits.
When a client asks us, “Where are the new non-dom hubs?” the answer lies in understanding what stage of life they’re at. A pending large business sale, retirement status, personal preferences – are they extravagant or nature lovers, do they love sailing? All these questions come into play.
In the end, our work is about helping clients find the perfect balance between tax efficiency and quality of life, ensuring they make a decision that fits both their financial and lifestyle needs perfectly.
So, if you’re an HNW individual looking for a significant change, remember, the world is your oyster! Explore your options and make the right choice.
We can help you to make that choice by providing the most up-to-date advice and managing your tax liabilities. We offer a free initial consultation so why not get in touch and find out how we can help?
