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UK Non-Dom Tax Regime Nearing Its End for 2025:

Legal & Tax Implications and Outlook

 

UK Non-Dom Tax Regime Nearing Its End for 2025

UK Non-Dom Tax Regime Nearing Its End for 2025

 

The advantageous non-dom tax regime in the UK seems to be heading towards its end and its complete elimination.

The UK Non-Dom Tax Regime Nearing Its End for 2025: Therefore, the Legal & Tax Implications and Outlook change dramatically!

The non-dom regime, which dates back almost 200 years, allows people with a permanent domicile outside the UK to pay tax in the UK only on what is produced there and not to pay tax on income or capital gains produced abroad, unless they are remitted to the country.

First, it is necessary to clarify the concept of domicile.

 

What is domicile for the UK?

The concept of domicile for Anglo-Saxon law is understood as that linked to the intention to reside permanently in a place for an indefinite period of time, linked mainly to one’s origins as it is normally acquired from one’s parents at birth and which is unlikely to change in the course of one’s life, useful as a premise for understanding what it means to be considered resident NOT domiciled in a country.

The Anglo-Saxon concept of domicile linked to the jurisdiction of origin and to permanent and lasting family ties is therefore quite different from the civil domicile provided for by the Italian Civil Code, understood as the place where the person ”has established the principal seat of his affairs and interests”. (art 43 C.C.)

 

Tax regime for non-dom residents in the UK

The tax regime for non-dom residents in the UK has changed over the years from indefinite to a current 15-year regime, where a person after being resident in the UK for 15 of the previous 20 years is considered to be domiciled in the UK, with all the tax consequences.

As recently announced by the UK government, the new regime will come into effect from the new tax year, i.e. April 2025, and will allow those who have not been resident in the UK for 10 consecutive years in the past to enjoy the privileged tax regime as a non-dom for only 4 years instead of the current 15 total.

Thereafter they will start paying tax on all income and under the ordinary regime.

An absolutely short time to plan a relocation and to be able to enjoy its limited tax advantages !!!

For the current non-doms there will be a transitional regime with payment of taxes on foreign income, but not on capital gains, reduced to 50% for the tax year 2025/26 and with a temporary two-year repatriation mechanism of foreign income and capital gains with payment of a reduced tax of 12%.

 

UK Non-Dom Tax Regime Nearing Its End for 2025: Legal & Tax Implications and Outlook

It will have to be seen whether or not this transitional regime will lead to current UK resident non-doms deciding to move to different, more attractive countries. Estimates, perhaps optimistic, already speak of at least 20% of current non-doms, some 10,000 UK residents, leaving the country.

According to official data, 20% of the highest-paid professionals and executives in the financial sector in the UK are currently under this favorable regime, the loss of which will cause an exodus and attractiveness of the country in general and particularly acute for the financial sector.

The overall change in the non-dom tax system as well as the already announced change in the inheritance tax system combined with a more complex situation of difficulties in the economic and financial system facing the UK after Brexit, as well as the new visa regime for entry into the country, are leading to a different assessment of the attractiveness of the country and directing many to relocate to other countries.

 

UK non-dom Tax END

UK non-dom Tax END

 

NON-DOM IN UK TAXES CRYPTO

The 2023 change to the taxation regime for BTC and cryptocurrencies, already as of this year without the favorable non-dom regime regardless of the legal profile of their beneficiary, are also evidence of this path.

 

MALTA continues to have an attractive permanent non-dom resident regime

MALTA for example continues to have an attractive permanent non-dom resident regime which allows those who transfer their residence to Malta, in compliance with the relevant rules, without the aforementioned intention to consider it as ”home” on a permanent basis, to acquire the status of non-domiciled resident also known as NON-DOM.

As a NON-DOM RESIDENT in Malta he will pay tax:

  • on income in any form produced in Malta and on capital gains produced therein
  • on foreign source income only if remitted to Malta

 

As a NON-DOM RESIDENT in Malta will NOT pay tax:

  • on ”clean capital” remitted to Malta
  • on ”capital gain” produced abroad and partly or wholly remitted to Malta.

 

A non-dom regime for NEO RESIDENTS has also been introduced in ITALY – La Dolce Vita

In Italy since 2017, a tax regime for NEO residents has been introduced with tax relief on income earned abroad for those who transfer their tax residence to Italy, which is increasingly attracting both foreign citizens and long-time Italian expatriates.

It is a scheme applicable to expatriates from Italy who have resided abroad for at least 9 years in the last 10 tax years and who now return to Italy and to foreign citizens who decide to transfer their residence to Italy.

The facility allows an exemption from the application of the worldwide taxation regime or taxation on a worldwide basis, i.e. the taxation of all income wherever produced in the world in force in Italy, by applying a sort of tax regime for NON-DOMICILIATES to all income from foreign sources.

The option is tacitly renewed from year to year, unless the taxpayer decides to revoke it, and has a maximum duration of 15 years.

It is intended for high net worth individuals (HNWI) as the option provides for the payment of a flat tax of €100,000 for each tax year in which it is exercised, but only on income produced abroad, i.e. not generated in Italy.

A person who receives foreign income of e.g. EUR 2 million, when he transfers his residence to Italy and applies for the application of this regime will in fact only have to pay a flat rate tax of EUR 100,000 on the foreign source income.

In this case equal to 5%. A very low taxation percentage for those with high incomes!

 

CONTACTS for UK Non-Dom Tax Regime Nearing Its End for 2025: Legal & Tax Implications and Outlook

 

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