Increased migration to countries offering tax incentives to new or returning residents

Ongoing geopolitical events and recent or upcoming elections, combined with the expectation of increased taxation, both personal and corporate, have led to a significant increase in the number of high-net-worth (HNW) individuals, families and companies contacting the Sovereign Group to discuss personal or financial migration.

Changing administrations, the prospect of higher taxation and the withdrawal of long held tax benefits for recent or new residents – most notably the UK’s ‘non-dom’ and Portugal’s Non-Habitual Resident (NHR) regimes – are the main concerns voiced by clients currently in the UK and Europe, and in Brazil and Thailand.

For current residents of South Africa, Israel, India, China, Taiwan and the US, however, the principal concerns are political uncertainties, economic unpredictability, regional tensions and military conflicts.

While their concerns may differ, these clients are all looking to identify a new country of residence that offers security, a comfortable standard of living, access to good healthcare, education and business opportunities, as well as potential tax efficiencies.

Whilst some countries are looking to increase taxation for new residents, others that recognise the benefit of attracting foreign investment in the shape of high-net-worth, entrepreneurial or skilled individuals, together with their families and businesses, will offer both residency rights and tax incentives to those who choose their country in which to establish their primary place of residence.

In such cases, qualifying applicants will 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 their new country of residence.
• A flat tax rate 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 corporate tax rates.
• No estate duty or inheritance tax.
• The application of numerous double taxation treaties.

Tax Residency Programmes and Low Tax Countries

Tax Residency Programmes provide preferential rates for new residents, returnees and/or non-domiciled individuals who establish tax residency. Such programmes can be divided into two categories, those with minimum annual stay requirements and those with minimum annual contributions payable to the local revenue authority.

Comparison Tools and Tables

For further information regarding the tax treatment of individuals and companies under Tax Residency Programmes and Low Tax Countries, please refer to our Tax Residency comparison tools and tables at the following link: Sovereign Tax Residency Programme Comparison Chart

Minimum Stay Requirements

The following countries offer a tax residency programme with preferential personal tax rates to new residents, returnees and/or non-domiciled individuals, provided they qualify as resident and spend a minimum number of days in country each year:

1. Cyprus
2. UK
3. Italy
4. Greece

Minimum Contribution Requirements

The following countries offer a tax residency programme with preferential personal tax rates to new residents, returnees and/or non-domiciled individuals, provided they qualify as resident and pay a minimum lump sum annual contribution to the local revenue department.

1. Malta
2. Gibraltar
3. Italy
4. Greece
5. Switzerland

Low Tax Countries

The following countries and regions offer zero or low personal and/or corporate tax rates to qualifying residents.

1. Mauritius
2. United Arab Emirates
3. Oman
4. Saudi Arabia
5. Bahrain
6. Qatar
7. Antigua & Barbuda
8. St. Kitts & Nevis
9. Bahamas

Important considerations

It’s important to note that establishing tax residency in one country does not mean that you will automatically be deemed a non-tax resident of another. You will have to comply with both the tax residence requirements of your new country of residence and the non-tax residence requirements of your former country of residence.

In some cases, notably the US, you may have to consider renouncing citizenship because a US citizen remains subject to US income tax on worldwide income regardless of residence.

The cessation of tax residence will frequently attract special tax compliance requirements and disclosures. Apart from its tax consequences, cessation of tax residence can in some countries create significant exchange control and property ownership difficulties.

It is important to remember that 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.

Establishing residency

In most cases (but not all), before applicants qualify for the tax incentives offered through tax residency programmes, they are first required to establish residency in their chosen country.

Within Europe, citizens of EU and EEA member states and Switzerland have the right of freedom of movement. They can therefore establish residency in another member country simply by demonstrating they have employment or are financially self-sufficient, have rented or purchased a property and, usually after 90 days, registered with the local authorities.

All other nationals looking to move to Europe or elsewhere, and/or Europeans moving outside of Europe, must first establish residency using government-approved residency programmes. Such programmes enable foreign nationals to gain full residency rights in the new country in return for making a capital investment, establishing a local business and/or injecting capital into the economy. Such residency programmes can be categorised as follows:

1. Residency-by-Investment (RBI) Programmes (often referred to as ‘Golden Visas’) provide individuals and their dependents with a residence permit and a variety of associated benefits in exchange for a wide range of investment and/or donation options.
2. Financially Independent Visa Programmes provide residence permits to applicants who can demonstrate a regular income and/or personal wealth above a specified amount. These programmes generally require applicants to make the chosen country their primary place of residence and tax residence.
3. Business Start-Up, Investment and Incubation Programmes provide residence permits to applicants who establish a new business or invest in an existing business, creating local economic activity and employment opportunities in the chosen country. In some cases, the minimum initial investment requirement is relatively low.

Comparison Tools and Tables

For further information regarding all Residency Programmes offered within the Sovereign Group, please refer to our comparison tools and tables at the following link: Sovereign Group Residency and Citizenship Programme Comparison Charts

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 that 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.