The UK resident non-domicile system is being scrapped, but for those seeking alternatives, Italy and the UAE are worth considering, writes the author of this article.
As readers know, the way that countries such as the UK,
Italy, and United Arab Emirates treat high net worth and
ultra-HNW individuals born overseas has changed considerably,
with the end of the UK’s resident non-domicile system, and its
replacement by a new system, just one of the changes taking
place. In the following article, Carmen Kiavila, who is
attorney-at-law and founder, Kiavila Avocates, and Of Counsel at
Eptalex, explains the situation in Europe and the Middle East,
with particular focus on Italy and the UAE.
Kiavila was the winner of Most Prominent New Entrant in the
11th annual WealthBriefing Swiss Awards 2024. The editors are
pleased to share these insights; to comment, please email
tom.burroughes@wealthbriefing.com
and amanda.cheesley@clearviewpublishing.com
“Non-domiciled” or “non-dom” refers to a historic British tax
regime that permitted UK tax residents to benefit from not paying
tax on their foreign income and gains, provided that these income
and gains were not repatriated (remittance basis). This status
was based on the legal concept of domicile, which differs from
tax residence. Therefore, a person could reside in the UK while
still being regarded as having a “domicile of origin” in another
country.
This system provides:
— Taxation based on repatriation means that non-domiciled
individuals only paid British taxes on income and gains
effectively brought to the UK. Income maintained abroad was not
subject to taxation.
— An exemption from inheritance tax applies to foreign assets.
Therefore, assets that non-doms hold outside the UK are exempt
from IHT, even if the taxpayer dies (1).
The UK announced eliminating the non-domiciled tax status in the
Spring Budget 2024 and the Autumn Budget 2024.
Effective April 2025, this change replaces the domicile-based
system with a tax. Beginning on 6 April, 2025, UK tax residents
will be taxed on their worldwide income and gains. The remittance
basis will require non-doms to declare only the income
transferred to the UK.
However, individuals relocating to the UK after a 10-year absence
will benefit from a four-year transitional Foreign Income and
Gains (FIG) regime.
During this time, eligible individuals’ foreign income and gains
will be completely exempt, even if they are repatriated (2).
A Temporary Repatriation Facility will allow former non-doms to
repatriate income and gains before 2025 at reduced rates of 12
per cent from 2025 to 2027 and 15 percent from 2027 to 2028
(3) .
In certain jurisdictions, such as Italy and the United Arab
Emirates, there are similar tax schemes that offer various
advantages.
I. Italian system
In Italy, foreign pensioners enjoy a uniquely favourable tax
regime. A flat rate of 7 per cent is imposed on income from
foreign sources.
To be eligible, the pensioner must:
— originate from a country that has an administrative
cooperation agreement with Italy;
— reside in a municipality with fewer than 20,000 inhabitants in
the southern part of the country; and
— and not have been a tax resident in Italy for at least five
years before the application.
Certain exclusions and limitations apply.
Regime for inpatriate
The “impatriati” tax regime for inpatriate workers permits a 50
percent reduction in the taxation of income comparable to that of
salaried employment and income generated from professional
activities conducted in Italy, with an annual limit of 600’000
euros.
This scheme is subject to several conditions:
— Workers must commit to being residents in Italy for tax
purposes for at least four years. They must not have been
residents in Italy for tax purposes during the three years before
their transfer; and
— They should primarily conduct their activities in Italy. And
they must have high or specialized qualifications.
The regime would apply for the year of the transfer and the
subsequent four years. However, if tax residence in Italy is not
maintained for at least four years, the benefits are revoked and
recovered with interest.
This scheme is compatible with other tax benefits, enabling the
accumulation of multiple schemes if their conditions are met. An
additional reduction is available for workers with minor
children. Their income is taxed at 40 per cent if the transfer to
Italy included a minor child or if a child was born or adopted
during the application period of the scheme.
The child must live in Italy during this time to benefit from
enhanced advantages (4).
Before 2024, this same regime was in effect with different
characteristics and with a reduction of 70 percent instead of 50
percent.
Regime for neo-domiciled individuals
Italy provides an appealing tax regime for affluent individuals
who relocate their tax residence to the country. Introduced in
2017 under Article 24-bis of the TUIR (Consolidated Income Tax
Act), this regime aims to attract high-income earners and
encourage foreign investments in Italy.
To qualify, applicants must meet several conditions. They must
not have been tax residents in Italy for at least nine of the ten
years preceding their transfer. Additionally, they must establish
residency in Italy, which involves fulfilling the criteria for
tax residency as defined by Italian law, including spending a
minimum of 183 days per year in the country.
This regime allows new residents to benefit from a flat tax of
200’000 euros annually on their foreign-sourced income,
regardless of the total sum, for the individuals who transferred
their residence to Italy after August 2024. The fixed tax amount
is determined by the date of residence transfer. If the residence
is transferred before August 2024, the fixed tax is 100’000 euros
per year.
This option can also be extended to family members for an
additional fee of 25’000 euros per member. The maximum duration
of this regime is 15 years, offering long-term tax stability.
Moreover, beneficiaries of this regime are only liable for
inheritance and gift tax on assets situated within Italian
territory (5) .
Policy for educators and researchers
Italy offers a favourable tax regime for teachers and researchers
who move their tax residence to the country. This regime,
established under Article 44 of Legislative Decree No. 78/2010,
aims to promote the return or relocation of academic talent to
Italy as part of the “brain gain” initiative.
To qualify, teachers and researchers must meet several
conditions:
— They need to hold a university degree or an equivalent
qualification, recognized in Italy through a “declaration of
value” issued by Italian consular authorities;
— Furthermore, they must have been tax residents abroad on a
non-occasional basis for at least two consecutive years;
— Additionally, they should have carried out documented teaching
or research activities abroad for at least two consecutive years
in public or private research centers or universities; and
— Once in Italy, they must engage in similar activities and
obtain tax residency in the country, which they must maintain for
the entire duration of the regime.
This tax regime offers a 90 per cent exemption on income derived
from teaching or research activities. The initial duration of
this exemption is six years, including the year of transfer.
However, this period can be extended up to 13 years depending on
certain conditions, such as the number of dependent children or
the purchase of a primary residence in Italy (6) .
II. United Arab Emirates
The United Arab Emirates remains one of the most attractive
destinations for companies and foreign investors.
A simplified territorial tax
In contrast with the legacy UK “non-dom” system and Italy’s
targeted flat-rate regimes (e.g. 7 per cent for pensioners,
100’000 euros foreign-income cap, and partial reliefs for
inpatriate and academics), the UAE offers an incentivising
territorial tax environment with zero personal income, capital
gains, inheritance or withholding taxes, combined with a simple,
low corporate tax of 9 % only above AED 375’000 (102’110
dollars).
100 percent foreign ownership permitted across nearly all
mainland sectors following the implementation of the Federal
Decree-Law no. (32) of 2021 on Commercial Companies eliminating
the legacy need for UAE national shareholders (with slight
exceptions remaining for specific captive industries and
sensitive activities to the UAE), extensive free-zone incentives
(0 % corporate tax on qualifying income), a growing network of
137 plus double?tax treaties the most recent of which is the
double taxation between the UAE and Russia of 17 February
2025, and cutting-edge incentives (small?businesses relief and
2026 research and development credits) make the UAE one of the
most competitive and investor-friendly jurisdiction globally.
(7)
The UAE’s corporate tax regime is straightforward: profits up to
AED 375’000 are taxed at 0 %, whilst amounts above that threshold
incur a 9 % rate only. Free-zone enterprises (as distinct from
the UAE mainland) that qualify as Free Zone Persons pay no
corporate tax on their qualifying income whilst non-qualifying
income is taxed at the standard 9 per cent. (8) (9).
Individuals benefit from a pure territorial system that does not
impose personal income tax and so salaries which rank amongst the
highest worldwide per industry are not taxed in the UAE. (10)
Granted, the UAE does not share Italy the UK’s traditional
taxation DNA (albeit to variable extents depending on the
European jurisdictional regimes and nexus) that is otherwise
omnipresent across Europe. Rather it is a young country that has
been built on entrepreneurship from all around the world coupled
with flow of oil-based industries’ income.
The latter has been deployed across diversified strategic sectors
which with the new 2031 vision positioned the UAE to attract
foreign direct investments from interested funds and
institutions. (11)
It is therefore against a greenfield background of raw taxation
that the UAE current system should be understood and appreciated
for maximum benefits to be derived from it.
Prevention of double taxation
The United Arab Emirates has concluded more than 142
international agreements to avoid double taxation of foreign
investors.
In addition, 111 treaties signed by the Emirates to encourage and
protect investments can benefit foreign investors.
Footnotes
1, Gov.uk « Tax on foreign income ».
2, HM Revenue & Customs « Reforming the taxation of non-UK
domiciled individuals”, published 30 October 2024.
3, LexisNexis « Temporary repatriation facility », updated
21 March 2025.
4, Ministero dell’Economia e delle finanze « Lavoratori
impatriati – nuovo regime (dal periodo d’imposta 2024) – Che
cos”è » updated 11 March 2025.
5, Ministero dell’Economia e delle finanze “Tax regime for
new residents”.
6, Agenzia delle entrate “tax incentives for attracting
human capital in Italy”, published February 2018.
7, UAE « Corporate tax (CT) » updated 6 June 2024.
8, PricewaterhouseCoopers (PwC), « United Arab Emirates – Taxes
on corporate income », updated 21 February 2025.
9, Klynveld Peat Marwick Goerdeler (KPMG), « Corporate Tax in the
UAE ».
10, Klynveld Peat Marwick Goerdeler (KPMG), « Doing Business in
the UAE », published 2024.
11, UAE Ministry of Investment, « UAE Matures Into a Global FDI
Magnet », released 24 January 2025.