IN436 - Restarting the Clock for Non-UK Domiciles: Why Cyprus, Malta and Portugal are Attractive Jurisdictions to Consider for Relocation
The UK offers an attractive tax regime for up to 15 years for individuals who are resident in the UK but do not have a UK domicile.
Individuals who are UK resident, but not UK domiciled, do not have to pay UK tax on their foreign income and gains, as long as these sums remain outside of the UK.
Individuals may choose to structure their tax affairs so that they cease to be UK tax resident for a certain period of time. By doing this, they can avoid being considered UK deemed domiciled (which occurs when they have been UK resident for 15 of the previous 20 tax years), or they can lose their deemed domiciled status if this has already been acquired. If they then decide to return to being a UK tax resident, after the necessary period of time, they will have the opportunity to ‘reset’ the year count for the deemed domiciled test.
Alternative Jurisdictions to Consider for Non-UK Domiciles Wishing to Move Out of the UK
The jurisdictions of Cyprus, Malta and Portugal are attractive jurisdictions to consider for individuals wishing to cease being UK tax resident. They offer a number of advantages and are close to the UK. However, there are strict limits on the number of days that can be spent in the UK and care must be taken.
Additional details regarding the factors affecting UK resident and non resident status can be found in Dixcart Article: The UK Resident/Non Resident Test.
Reasons to Consider Relocating to Cyprus
Cyprus is the largest island in the eastern Mediterranean and an attractive European country. The population of Cyprus is approximately 850,000 and the official language is Greek; however, English is widely spoken.
Cyprus is part of the EU and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK. There are also a number of residence programmes available to non-EU citizens.
Non-EU Individuals Relocating to Cyprus
There are two options available to non-EU nationals seeking to relocate to Cyprus. These are the Citizenship by Investment Programme, which is a “fast track” means of acquiring a Cypriot passport, and the Permanent Residence Programme.
The Citizenship by Investment Programme
This scheme allows individuals to acquire a passport (by investing in Cyprus) and they can then obtain visa-free travel to over 150 countries.
It is possible to obtain a Cyprus passport within six months of the application if all of the correct documentation has been supplied and relevant criteria have been met.
The minimum investment is €2.5 million. This however reduces to €2 million if the investment is totally in residential property, with one property being the investor’s private residence and worth a minimum €500,000. Full details are available from the Dixcart office in Cyprus.
The Permanent Residence Permit
This permit simplifies travel around Europe and is particularly relevant to individuals who have a number of business interests across several EU jurisdictions. The applicant’s passport is stamped and a certificate is provided which indicates that Cyprus is considered a permanent place of residence for that individual.
The applicant must purchase a real estate property or properties in Cyprus with a market value of €300,000 (excluding VAT). The main applicant must also have a minimum annual income of €30,000 either from pensions, overseas employment, interest on fixed deposits or rental income from abroad.
For further information regarding the financial obligations and additional criteria relating to either of the two options, please refer to the Dixcart articles: IN440 Important Changes to the Cyprus (EU) Citizenship by Investment Programme and IN357 The Fast Track Cyprus Permanent Residence Permit and the Benefits it Offers.
Tax Advantages Available to Non-Domiciled Individuals in Cyprus
Individuals who are tax resident in Cyprus, but non-domiciled, can benefit from a zero rate of tax on the following sources of income:
- Capital gains.
- Capital sums received from payments made by pension, provident and insurance funds.
- Special Defence Tax.
In addition, there are no wealth and no inheritance taxes in Cyprus.
Malta is a highly attractive island to consider for relocation. There are several different residence schemes to meet different individual circumstances and Malta is an appealing EU jurisdiction just a short flight from the UK. Located in the Mediterranean Sea, south of Sicily, the Maltese archipelago consists of the three islands of Malta, Gozo and Comino and has a population of approximately 375,000.
Malta is part of the EU, and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK.
There are five Maltese Residence Schemes and, depending on the particular circumstances, one or more of these might prove attractive to a UK non-domicile seeking to leave the UK.
The first three schemes are applicable to non-EU individuals, whilst the advantages available through the Highly Qualified Persons scheme can be enjoyed by EU and non-EU individuals, and finally the Malta Retirement Programme is only open to EU individuals.
- Individual Investor Programme
The Individual Investor Programme (IIP) enables non-EU individuals and their families to gain Maltese citizenship by making a cash contribution and meeting certain other criteria. A key advantage of obtaining a Maltese passport is that it provides freedom of residence anywhere in the EU and ease of travel throughout the world.
The main applicant must make a minimum contribution of €650,000 to the Maltese Government and follow the following criteria:
- An additional contribution of €25,000 is required for a spouse and for each child under the age of 18. A contribution of €50,000 is required for each unmarried child between the ages of 18 and 25 years, and for each dependant parent over the age of 55; AND
- A property must be purchased in Malta with a minimum value of €350,000, or a property rented for a minimum annual rental of €16,000. This must be maintained for a minimum of 5 years; AND
- A minimum investment of €150,000 in eligible Government stocks, shares or debentures recognised by “Identity Malta” for a minimum of 5 years.
- Residence and Visa Permit Programme
The Maltese Government introduced this residence programme in August 2015. It is available to non-EU individuals and enables them to reside indefinitely in Malta.
The criteria for the programme are:
- A €30,000 contribution to the Maltese Government; AND
- An investment of a minimum of €250,000 in Malta or Gozo, which must be maintained for a minimum of five years; AND
- Purchase of a property in Malta for a minimum value of €320,000 (€270,000 if the property in Malta is situated in Gozo or the south of Malta), OR rental of a property for a minimum of €12,000 per annum in Malta (€10,000 per annum if the property is situated in Gozo or the south of Malta). The property must be owned or rented for at least five years.
Individuals who are not of Maltese origin and intend to stay in Malta for some considerable time, but do not intend to permanently establish themselves there, are classified as resident but not domiciled in Malta.
Such individuals will be taxed on Malta source income and certain gains arising in Malta. They will not be taxed on non-Malta source income not remitted to Malta. Capital gains will not be taxed even if they are remitted to Malta.
- Global Residence Programme
The Global Residence Programme entitles non-EU nationals to obtain a Maltese residence permit through a minimum investment of €275,000 in property in Malta.
Successful applicants can relocate to Malta if they choose to do so.
A key advantage of the Global Residence Programme is that a flat rate of 15% tax is charged on foreign income remitted to Malta, with a minimum €15,000 tax payable per annum. Foreign source income not remitted to Malta is not subject to tax in Malta. Individuals may also be able to claim double taxation relief under the regime.
- Highly Qualified Persons Scheme
The Highly Qualified Persons Scheme is directed toward professional individuals earning over €81,457 per annum, employed in Malta on a contractual basis.
When such individuals move to Malta, income tax is set at a flat rate of 15%. No tax is payable on income earned over €5 million per annum relating to an employment contract for any single individual.
This scheme is open to EU nationals for five years and to non-EU nationals for four years.
- Malta Retirement Programme
The Malta Retirement Programme is designed for EU nationals whose main source of income is their pension.
A flat rate of 15% tax is charged on the pension remitted to Malta and an individual must own or rent a property in Malta as his/her principal place of residence in the world, with a minimum value of €275,000.
The minimum amount of tax payable is €7,500 per annum for the main applicant and €500 per annum for each dependant. Income that arises in Malta is taxed at a flat rate of 35%.
For more information regarding the five Maltese Residence Schemes, please refer to Dixcart article: IN471 - Malta - Attractive Residence Programmes and Tax Benefits for Expatriates or for more information about relocating to Malta, please contact Sean Dowden: firstname.lastname@example.org.
Since the launch of the “Golden Visa” scheme in 2012 and the “Non-Habitual Residents” tax regime, Portugal has become one of the most attractive locations in Europe for EU and non-EU nationals.
Portugal is a beautiful country bordering Spain and the Atlantic Ocean. With only a two and a half hour direct flight time, individuals can travel to the UK relatively quickly from Portugal.
Portugal is part of the EU, and there are therefore no restrictions on EU or Swiss citizens moving there, including those moving from the UK. The Golden Visa is a residence programme available to non-EU citizens.
The Golden Visa Programme for Non-EU Individuals
By obtaining a Golden Visa, individuals are able to qualify for a residency permit in Portugal for up to five years. This allows them and their family to travel freely within the majority of European countries. The visa can lead to permanent residence and Portuguese citizenship as, at the end of the fifth year of being a Portuguese resident, the main applicant has a right to apply for a permanent passport.
In order to be eligible for a Golden Visa the applicant must fulfil ONE of the following financial criteria:
- A minimum investment of €1 million in Portugal (deposit in a bank account, or shares, or quotas in a company or companies); OR
- An investment of €500,000 in real estate; OR
- The creation of at least 10 jobs (temporary work contracts are eligible and the worker does not have to live in Portugal as long as social security is paid).
- Investment of a minimum €350,000 in a project relating to cultural or scientific research; OR
- The purchase of a property built at least 30 years ago or located in an area designated for urban renewal. The property, including the costs of rebuilding and/or renewal, must equal a minimum of €350,000; OR
- Investment of a minimum €250,000 to support artistic productions and/or national heritage projects organised through the central or local Portuguese authorities; OR
- Investment of a minimum €500,000 to purchase shares in investment funds or venture capital companies that are being used to support small and/or medium sized companies in Portugal that have generated viable business development plans.
In addition, individuals investing in a region with a low population density (less than 100 habitants per km2), or with a GDP 75% or less than the national average, benefit from a 20% reduction in the specified investment criteria. The two exceptions are the capital transfer of at least €1 million to a Portuguese bank account or a Portuguese company and the investment of a minimum €500,000 to purchase shares in investment funds or venture capital which is being used to support small and/or medium size companies.
The Non-Habitual Residents Programme
EU and non-EU individuals who become resident for tax purposes in Portugal may apply for the “Non-Habitual Residents Programme”, provided that they have not been a resident in Portugal for the previous five years.
The advantages from the scheme are:
- Tax exemption on foreign sourced income when certain conditions are met.
- Reduced tax rate of 20% on personal income tax for certain categories of employment.
- It is possible for non-EU individuals to apply for the Golden Visa and Non-Habitual Residents Programme simultaneously.
How Can Dixcart Help?
- Dixcart offers advice and assistance to individuals seeking to relocate to Cyprus, Malta and Portugal. There are staff in place to help make each move as simple as possible.
- Dixcart offers specialist advice regarding residence and citizenship and has extensive experience of the various residence programmes.
- Dixcart can provide advice on the best manner in which to plan a move from the UK.
- Dixcart offers expertise on how to ‘re-set the clock’ if the objective is to return to live in the UK at a later date.
If you require additional information regarding relocating to any of the following jurisdictions, please contact email@example.com or speak to any of the following Dixcart contacts:
- Robert Homem (Cyprus): firstname.lastname@example.org
- Sean Dowden (Malta): email@example.com
- Carlos Santos (Portugal): firstname.lastname@example.org
Updated August 2018