The impending abolition in the UK of a tax benefit for wealthy residents has triggered a pan-European search for tax havens as the wealthy cast their net from sunny, emerging destinations like Portugal to trusty Switzerland.
Tax Advisers across the continent are reporting a flood of enquiries that began when the UK’s previous Conservative government pledged to end its non-resident tax regime from 2025, and accelerated when the new Labour administration said it would do so. go ahead in the plan.
Non-domiciled status is available to UK tax residents whose permanent domicile is overseas. It allows beneficiaries to avoid paying UK tax on their overseas income or capital gains for 15 years, provided they do not bring them into the UK.
For the wealthy whose commitment to the UK will expire with the waiver, there are no exact copies of the British system, but several countries offer similar incentives. Those who value lifestyle are also considering how other places might compare with London’s strengths (its social activity) and weaknesses (its climate).
Switzerland’s reputation as a tax haven means it is accustomed to attracting a steady level of interest from the wealthy, but Stefan Piller, head of tax and legal affairs at BDO’s Zurich office, said: “We are receiving more requests every week, and many more than we experienced last year.”
The Alpine nation’s tax appeal is centered on its low income tax rates. Most cantons, such as Geneva and Zug Offer a system of flat or “forfait” (income tax) taxes for the very rich, based on people’s living expenses, allowing them to make tailor-made arrangements on the taxes they pay. Zurich and Basel have abolished the system.
The resulting taxes are “not cheap,” said Justine Markovitz, director of Withers’ Swiss office, but they do provide much-needed security. The downside is that people who benefit from the forfait system cannot work in Switzerland.
Another option is Monaco, the tiny Mediterranean principality that has no income or capital gains tax, although its sky-high cost of living deters some.
Many non-domiciled Britons are weighing up their options with April 6, 2025, in mind, when the old regime will be abolished and replaced by a new residence-based system, under which new resident applicants who have lived outside the UK for at least a decade will be exempt from UK tax on foreign income or capital gains for four years, not fifteen.
What is striking is the fact that the Labour government has said it will also remove the ability to permanently shield foreign assets held in a trust from the UK’s 40 per cent inheritance tax.
“The estate tax is what’s causing most of the unrest,” Markovitz said. “I find that a lot of people are saying, ‘I can’t do that for my kids, I can’t sacrifice 40 percent of my asset base.’”
Switzerland does not levy inheritance taxes at the federal level, and its cantons typically charge relatively low or zero taxes. Portugal, another place that attracts the attention of the wealthy, also does not levy inheritance taxes. Lisbon does levy a 10% “stamp tax” on Portuguese assets passed on after death, but it does not apply to assets held abroad.
Portugal has offered more than that: over the past decade it has courted foreigners with golden visas and a generous tax regime for tax residents who remained domiciled elsewhere. But the wealthy are finding that much has changed.
His previous centre-left government scrapped the non-resident regime last year and replaced it with a more limited tax incentives for returning Portuguese foreigners and expatriates who have employment contracts in certain fields, such as technology, research and development, and academia. These incentives include a tax exemption on foreign income, excluding pensions, and a flat 20 percent tax on Portuguese employment or business income from qualifying activities.
Now, crucially, a new centre-right government is drawing up regulations to implement its predecessor’s policy before the end of the year, and tax advisers expect more people to become eligible for the new system.
“We have received many questions,” said Luis Nascimento, a tax advisor at the consulting firm Ilya.[But] Until the Government publishes the new ordinance, there is still a lot of uncertainty about what the new regime will be.”
Nuno Cunha Barnabé, a tax partner at Lisbon law firm Abreu Advogados, says Portugal is also keen to sell its lifestyle. “If you live in London and what you like there is the fancy restaurants, the nightlife and the hustle and bustle, Portugal is not for you,” he says. “But if you want a quieter country, where the weather is good, where there is outdoor life, Portugal is probably for you.”
The Mediterranean lifestyle is also part of Italy’s appeal, which is expected to… endure Despite Rome’s recent decision to doubling a fixed tax on the foreign income of wealthy expatriates up to 200,000 euros per year.
“If you ask someone to buy a product and the next day the price doubles, nobody is happy,” said Jacopo Zamboni, managing director for private clients at Henley & Partners. But, he added, “when you weigh up the pros and cons, clients want a stable legislative framework, they don’t just want a stable tax rate.”
Italy’s regime, which is available for 15 years to new tax residents who invest at least €250,000, was created in 2016 in a post-Brexit effort to attract wealthy individuals outside the UK. Since 2017 it is estimated to have attracted around 4,000 billionaires, including oligarchs and private equity investors. Wealthy individuals who moved in before the recent increase will continue to pay €100,000 a year.
Across the Ionian Sea, Greece boasts a lower cost of living than Italy (though that may be of little importance to the very rich) and a similar system. Its regime, introduced in 2019, offers a flat annual tax of €100,000 on foreign income for 15 years for people who meet residency requirements and invest at least €500,000 in real estate, businesses or securities.
So far the regime has attracted more than 230 millionaires to the country.
Vassilis Vizas, PwC Greece’s tax and legal services leader, said he had seen an increase in interest in Greece from non-UK domiciles in recent months, but noted that most of them were wealthy individuals of Greek descent.
The durability of Greece’s tax regime is an issue of concern to potential residents.
Although Vizas sees no signs of reforms on the horizon, he said that “a common question is whether favorable fiscal policies will remain unchanged.”
Additional information from Sérgio Aníbal in Lisbon