With the recent uproar over Akshata Murthy’s tax status in the UK and her decision not to elect the remittance basis of taxation going forwards, we thought it would be interesting to do a round-up of some of the tax incentives offered across Europe to individuals relocating who have previously been non-resident in the territory in question.
The ones we see most often among our client base are:
- Portugal: the non-habitual residence regime means that individuals can relocate to Portugal on the basis that their non-Portuguese income will, in the main, suffer no tax in Portugal and pension income is taxed at a maximum of 10%, both for up to 10 years
- Spain: the so-called “Beckham rule” provides a flat income tax rate of 24% on most types of income for individuals moving to Spain, for the first 5 years; taxpayers with this status also benefit from being outside the wealth tax regime for that period
- Italy: the inpatriates tax regime allows for individuals moving to Italy for a minimum of two years to be taxed on only 30% of their employment income or self-employment income during the first five tax years they are resident and working in Italy – there are also further tax reductions (up to a 90% reduction in the taxable income) for taxpayers moving to certain underpopulated areas in the South of Italy
- The Netherlands: the 30% regime provides for a 30% reduction in an employee’s taxable earned income for individuals becoming resident and employed in the Netherlands, for up to five years; in addition, income and gains outside of the Netherlands are not taxed within this time period.
As these regimes are designed to attract new people to move into each of the territories, there are typically a number of conditions including being non-resident in the territory for a number of years before relocating.
Some regimes require the purchase of property locally, or for the taxpayer to invest a certain amount of money in the territory or to acquire a particular visa. As always, anyone considering a move should check the details and requirements of any potential tax-breaks of which they are hoping to take advantage.
Despite the perception that the UK is overly generous to non-doms who come to the UK for work and business, the International Tax Competitiveness Index shows in order of most competitive OECD regime that the UK is only ranked 22nd and is behind the US:
| 1 | Estonia |
| 2 | Latvia |
| 3 | New Zealand |
| 12 | The Netherlands |
| 21 | USA |
| 22 | United Kingdom |
| 30 | Spain |
| 34 | Portugal |
| 37 | Italy. |
It should also be borne in mind that making a move overseas as tax effective as possible depends as much on efficiently and cleanly exiting the UK as it does on the tax regime in the new home country: we are happy to advise individuals on leaving the UK efficiently and how to make a clean break for tax purposes where appropriate.
Contact us
To discuss your tax affairs, contact us on 01761 241 861 or info@sestiniandco.com or make an appointment to visit us at our Somerset or central London office.
