In recent years we’ve seen a marked increase in the number of individuals and families who wish to permanently move to a new country, in search of a more comfortable living and working environment, better healthcare, educational and business opportunities as well as enhanced tax efficiency.
Whilst some governments are increasing taxation for all residents, others who wish to attract individuals, families and foreign investment provide tax incentives to those who choose their country in which to establish their primary place of residence.
In such instances qualifying applicants receive a special tax status which, depending upon the selected programme, may include:
- No income tax on foreign-sourced income unless it is remitted to the country in question.
- A flat tax rate of tax on foreign-sourced income.
- Reduced tax rates applicable to locally generated income.
- Reduced or no tax applicable to foreign-sourced dividends, rental income, interest and/or capital gains.
- Preferential local corporateion tax rates.
- No estate duty or inheritance tax.
- The application of numerous double taxation treaties.
Establishing Residency
Applicants are first required to establish residency in their chosen country. EU, EEA and Swiss citizens have the right to move freely within the territory of the European Union, European Economic Area and Switzerland. They can therefore establish residency in another member country by simply moving to, renting or purchasing a property and, usually after 90 days, registering with the local authorities.
All other nationals must first establish residency through a range of visa programmes – investment, passive income, business start-up or incubation. The residency and citizenship division of the Sovereign Group provides all-encompassing advice and assistance on all the above.
The Programmes
The most popular European countries offering preferential tax rate programmes to new residents are as follows:
- Cyprus: Tax Residency Programme – Offers a wide range of preferential tax incentives for qualifying non-domiciled individuals who are resident in Cyprus. Providing tax benefits for up to 17 years, to qualify applicants are required to stay in Cyprus for a minimum of either 60 days (T&Cs apply) or 183 days per year. It also requires that applicants do not reside in any other single country for more than 183 days each year.
- Malta: Global Residency Permit (GRP) – A remittance-based tax residency programme that provides both residency rights and tax residency benefits to non-EU nationals. The minimum annual tax payment in Malta is €15,000. This includes the first €100,000 of income that is remitted to Malta, while any remittances above this threshold are taxed at 15%.
Malta does not apply income tax to foreign-sourced income unless it is remitted to Malta, and there is no tax on capital and savings remitted to Malta and no capital gains tax on assets held outside Malta. Malta has no inheritance tax.
There is no minimum annual stay requirement, but Malta does require applicants to not reside in any other single country for more than 183 days each year.
- Malta: The Residency Permit (TRP) – Provides EU nationals with the same benefits as the GRP detailed above.
- Gibraltar: Category 2 Programme – A remittance-based tax residency programme that provides both residency rights and tax residency benefits to qualifying applicants. The ‘CAT 2’ programme offers a capped annual tax liability based on income of £118,000. The minimum annual tax payment is currently £37,000 and the maximum is £44,740. There is no specific legal requirement concerning length of stay in any particular year.
- Portugal: Non-Habitual Residency (NHR) Programme – Enables qualifying individuals to become tax residents of a white-listed jurisdiction whilst minimising their tax liability on many categories of local and foreign-source income for a period of 10 years.
In a television interview on 3 October 2023, the Portuguese Prime Minister announced that the NHR programme will end in 2024. At the time of writing, this had not been legislated so the details remain unclear. Anyone who intends making Portugal their home and wishes to receive the benefits offered under NHR should act now.
- Greece: Non-Domicile Regime for Investors – A 15-year flat tax programme for non-EU nationals who have invested a minimum of €500,000 in Greek assets. Holders are also required to pay an annual fixed tax payment of €100,000.
- Greece: Non-Domicile Regime for Retirees – A 15-year programme for non-EU nationals that provides for a 7% flat tax rate on pensions and other passive income such as dividends, interest and capital gains earned from a foreign source.
- Italy: Lump Sum Regime – Allows new non-EU national 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 must each pay €25,000 annually.
- Italy: Southern Italy Flat Tax Regime – A flat tax rate of 7% is applicable to foreign-source passive income, such as pension, dividends, annuities etc., for 10 years.
- Switzerland: Lump Sum Taxation Regime – Allows foreign nationals who have not been a Swiss tax resident at any time in the previous 10 years and who will not perform gainful activity in Switzerland, to pay an expense-based tax instead of ordinary income and wealth tax. The specific amount payable is usually subject to negotiations with the tax authorities and varies depending on the canton of residence, typically ranging from CHF250,000 to CHF300,000 for non-EU/EFTA nationals. EU/EFTA nationals may benefit from a lower tax base.
Alternative Non-European Low Tax, Flat Rate and Remittance Based Tax Programmes
Tax efficient benefits can also be obtained in alternate low tax jurisdictions such as the UAE or in the Caribbean. The residency and citizenship division of the Sovereign Group provides all-encompassing advice and assistance on all these and more. Please contact us for further information
Important Considerations
It’s important to note that establishing tax residency in one country will not mean that you are automatically deemed a non-tax resident of another. Also, tax regulations and requirements can change, so it is advisable to consult a tax professional or advisor for the most recent and accurate information available.
Comprehensive Residency and Citizenship Programmes with tax efficient planning and solutions
Sovereign’s extensive network of offices, experienced local teams and professional service partners ensure we are well placed to assist clients in the development and implementation of the most suitable overall residence strategy for their needs.
Sovereign works closely with applicants during each stage of the planning and implementation process. When combined and managed correctly, the following Sovereign Group services will also enable clients to develop and implement a comprehensive, flexible and tax efficient strategy:
- International residency and citizenship programmes
- Tax residency programmes and planning
- Trusts and foundations
- Estate and succession planning
- International retirement plans
- Wealth management
- Corporate structures and banking
- International life and medical insurances.
Contact Sovereign’s Residency and Citizenship Planning Division
If you have any questions or would like to discuss how you and your family could benefit through the creation and implementation of an international residency, tax residency or citizenship-based strategy, please contact Sovereign’s Residency and Citizenship Planning team below.
