Where in Europe is foreign income not taxable?
The global citizen is destined to fend off greedy governments looking to stick a hand in their pocket. Europe is a very popular destination with HNWI because of its lifestyle and central position in the globe. When your courtyard is the world, as an international businessperson, you never stay anywhere for too long, and in many cases you don’t have the time to use the social services and benefits. When you relocate to a country where you will spend only a few months of the year, you ask yourself, “Why should I pay so much to the taxman? Why should I pay millions in tax when I don’t use any of government services and benefits?” This is where you start looking for places that have special tax schemes, particularly on foreign income. Jurisdictions levying tax on a territorial basis are exactly what you should be looking for, except that they are scarce in Europe.
But don’t worry. We’ve compiled a list of the best jurisdictions for you to choose from.
Portugal tax on foreign income
Portugal might be a surprising choice, since it’s far from being a tax haven. Taxes are high in Portugal, but a special regime exists for non-domiciles. Being domicile and resident are 2 different concepts. A person can be considered a tax resident in Portugal by spending 183 days there or by having residential ties. But to be considered domiciled, a person must have his center of vital interests in the country. Therefore, a foreigner who lives in Portugal would be considered a non-domicile if his source of revenue is abroad. As a non-domiciled resident, that foreigner would not be liable to pay tax on his foreign income for a period of 10 years. He can also have his income generated in Portugal taxed at a flat rate of 20%. An easy way to obtain residence in Portugal is by applying to the highly popular Portugal Golden Visa, which provides a 5-year resident permit to investors.
The UK tax on foreign income
The UK is another surprising choice for many, as the country’s tax rates are pretty high across the board. Nevertheless, the UK has been a master in the art of finding opportunities for the financial sector and the wealthy to reduce their tax liability. But you don’t have to travel to a British Overseas Territory to be free of tax – the UK also has a special tax regime. The non-domicile rule has existed for a long time, but the controversial tax rule is slowly coming to a close. The non-domicile status ends after 15 years of residence out of the previous 20 years. Nevertheless, HNWI relocating to London will be glad to know that under the non-domicile rule, they are only taxed on their foreign income if it is remitted to the UK. But the non-domicile rule is not a benefit to everyone, as tens of thousands of pounds are charged as fees to enter the scheme. If you are not an UHNWI, London might not be the best place for you to relocate and benefit from the non-domicile scheme. But if you are, the UK Tier-1 Investor programme can help you relocate quickly to the UK, as approval can be given in as little as 24h under the Super Premium Service.
Cyprus tax on foreign income
Cyprus is a financial center well-known for its pleasant climate and favorable tax regime. Cyprus has the particularity of providing tax residence to those who are physically present in the country for 60 days in a calendar year, as long as they don’t spend more than 183 days in another jurisdiction. Cyprus levies tax on worldwide income, including foreign income, but like the others previously listed, protects non-domiciled residents from certain taxes. Non-domiciled residents are shielded from tax on capital income generated abroad or in Cyprus. This is particularly attractive to international businesspeople who generate their income through capital. Cyprus is peculiar in that it offers one of Europe’s only citizenship-by-investment programmes, permitting applications to obtain Cyprus citizenship. The great thing about Cyprus citizenship is that is enables freedom of movement across the Schengen area, thus allowing the holder to live anywhere in Europe and be taxed favorably in Cyprus as long as he resides there 60 days a year and never for more than 183 days in another jurisdiction.
Malta tax on foreign income
Malta possesses many different residence and tax schemes that cater to HNWI. Malta’s HNWI tax scheme allows for tax residence to be set at only 90 days in a calendar year, as long as the individual does not spend more than 182 days in another jurisdiction. The HNWI tax scheme also permits the approved applicant to be taxed at a flat rate on foreign income of 25%, as long as the minimum contribution is above €25,000. If this is not to your satisfaction, as a non-domiciled resident you can opt to be taxed on foreign income on a remittance basis (i.e., only if you decide to transfer that income into Malta). Those interested in the HNWI tax scheme can apply to it after being approved under the Malta citizenship-by-investment programme (the Malta Individual Investor Programme) or by applying to any of Malta’s residence-by-investment programmes (like the new Malta Residence Visa Programme).
If you are interested in more information about any residency program or citizenship program, contact us by phone at+1 852 5808 1895 or by email at [email protected].