7 Western European Low-Tax Destinations Poised to Benefit From Closing of UK’s Non-Dom Regime

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The UK government’s move to abolish its long-standing “non-dom” tax regime has sent shockwaves through the country’s community of affluent foreign residents. An estimated 68,000 high-net-worth individuals (HNWIs) face higher tax liabilities, and many are now reevaluating residential options to preserve their tax-efficient lifestyles.

Several Western European jurisdictions stand to potentially absorb this exodus by touting their own preferential tax schemes tailored to HNWIs. Here are seven of them:

1. Greece – Non-Dom Regime for Investors

KEY INDICATORS

• Maximum duration: 15 years
• Years of non-tax-residence required to qualify: 7 of the last 8 years
• Extendable to family members? Yes

The Greek Non-Dom Regime for Investors allows individuals who invest €500,000 in Greek assets to pay a lump sum tax of €100,000 per year, regardless of the size of their income or wealth. Most common asset classes are eligible, and the individual may invest through a company.

The regime is also available to family members through the payment of an additional tax equal to €20,000 per adult family member per tax year.

Foreign-sourced income is entirely exempt from taxation under this scheme, as are assets held abroad. Income derived from within Greece is subject to standard Greek tax rates. The scheme is open to both Greeks and foreigners.

Learn more about Greece’s low-tax regimes here.

2. Ireland – Resident Non-Dom Remittance Basis

KEY INDICATORS

• Maximum duration: No maximum
• Years of non-tax-residence required to qualify: N/A
• Extendable to family members? No

The Irish Non-Dom Remittance Basis regime allows non-domiciled individuals to pay tax only on that part of their overseas income they remit to Ireland.

A more favorable version of its English cousin, Ireland’s regime applies no minimum annual charge, imposes no explicit limit on the length of time during which an individual may enjoy this preferential tax regime, and does not require that the individual has not been a tax resident of Ireland for a certain period prior to taking up remittance basis tax residency.

Individuals should be cautious not to take any actions that could indicate they intend to make Ireland their permanent home (becoming domiciled), which could jeopardize the preferential tax status.

Moreover, individuals should also familiarize themselves with what constitutes a remittance. The rules and case law governing the remittance basis regime are extensive but unambiguous; individuals should engage in comprehensive tax planning well ahead of taking up residence in Ireland to avoid unnecessary tax or administrative burdens.

3. Italy – Lump-Sum €100,000 Annual Tax

KEY INDICATORS

• Maximum duration: 15 years
• Years of non-tax-residence required to qualify: 9 of the last 10 years
• Extendable to family members? Yes

The Italian Lump-Sum Tax regime, first introduced in 2017 to attract HNWI residents otherwise deterred by Italy’s high rates of ordinary taxation, allows new residents to pay a fixed tax of €100,000 per year on all non-Italian sourced income for up to 15 years. This option is also extendable to family members, who would each pay €25,000 annually.

The lump sum payment covers practically all categories of non-Italian sourced income. Participants are also exempt from donations and inheritance taxes relating to assets and real estate owned abroad, as well as from wealth taxes on foreign real estate or financial assets.

Furthermore, no remittances tax or foreign-held asset reporting is required when opting for this regime, allowing individuals the freedom to remit funds between countries with no restrictions due to the already paid lump sum tax.

Note, however, that capital gains realized upon transfer of non-Italian ‘qualified’ shareholdings within 5 years of becoming tax residents are not covered under this scheme and must still be declared separately according to Italian laws.

Learn more about Italy’s low-tax regimes here.

4. Malta – Resident Non-Dom Remittance Basis

KEY INDICATORS

• Maximum duration: No maximum
• Years of non-tax-residence required to qualify: N/A
• Extendable to family members? In some cases

Malta imposes tax on non-domiciled individuals who are tax resident in Malta (“res non-doms”) only on Maltese-source income and foreign income that is remitted to Malta.

Unlike its UK progenitor, Malta’s remittance basis regime applies only a nominal minimum annual charge of €5,000 on persons claiming Maltese res non-dom tax status and does not have the complex statutory residence and deemed domicile rules recently introduced in the UK.

The absence of deemed domicile rules means there is no limit on the length of time during which an individual may enjoy this favorable tax system. Nor does the Maltese tax system mandate that the individual not be a tax resident of Malta for any period prior to taking up tax residency.

While a domicile of choice in Malta is very hard to establish, individuals should be careful not to take any actions that could indicate they intend to make Malta their permanent home (domicile) and that exclude the possibility of any return to their domicile of origin, which could jeopardize their non-dom tax status.

5. Switzerland – Forfait Fiscal

KEY INDICATORS

• Maximum duration: No maximum duration
• Years of non-tax-residence required to qualify: 10 years
• Extendable to family members? No. Family members qualify independently

Foreign nationals residing in Switzerland who are not gainfully employed there may use a simplified assessment procedure referred to as expenditure-based taxation, lump-sum taxation, or – simply – the forfait fiscal.

Under this regime, residents are taxed a single lump-sum amount each year based on their living expenses rather than their income. In effect, the more frugal the tax resident is relative to his income, the greater the tax savings under the Forfait Fiscal regime.

The lump-sum amount is calculated by applying standard tax rates (federal and cantonal) to an amount equal to the total annual living expenditures in Switzerland and abroad of the taxpayer and his/her family.

As a rule of thumb, the amount is often equal to roughly 7 times the individual’s annual rent expenses (or deemed rental value if the resident owns the home). Prospective lump-sum tax residents typically determine the precise lump-sum amount in advance in concert with the local tax authorities.

Note that 6 out of Switzerland’s 26 cantons have abolished the lump-sum regime: Appenzell, Ausserrhoden, Basel-Landschaft, Basel-Stadt, Schaffhausen, and Zürich.

6. Monaco - No Income Tax for Residents

The tiny sovereign principality of Monaco remains one of the world's preeminent tax havens by levying no personal income tax on its residents. HNWIs able to obtain coveted Monegasque residency essentially render their global income completely tax-free. However, residency is notoriously difficult to establish, requiring Monaco real estate ownership, compliance with strict residency rules, and enormous rental/property purchase costs, given Monaco's scant square mileage.

7. Andorra - Low, Flat Taxes

The landlocked microstate of Andorra provides low personal tax rates of 10% on worldwide income. HNWIs from outside Andorra can qualify for residency permits by meeting financial criteria and purchasing or renting property in the country. Andorra's modern tax treaty network prevents double taxation on income while ensuring tax obligations are consolidated efficiently.

The nation's Qualified Residents (QRP) and Active Residents (RES) schemes further enhance its appeal for globally mobile individuals and families by extending special tax rates and allowances. Under QRP, passive income, like investments, faces a flat 10% tax rate. RES extends the same 10% rate to active income from employment or businesses.

Read more about residency in Andorra here.

IMI Pros who can help with international tax residency planning