For years, the non-domiciled tax regime in the UK provided a lucrative fiscal environment for the world’s ultra-rich, allowing them to pay minimal taxes on their global incomes.

However, this two-century-old regime will soon be a thing of the past, leaving many millionaires who are well-established in the UK feeling abandoned.

Unlike other discontinued regimes such as Portugal’s NHR, which is phasing out gradually and preserving all the conditions for those already enrolled, the UK will not offer such a transition: starting April 2025, the tax exemption on the foreign-source income will end overnight.

As a consequence, at Relocate&Save we’ve observed a surge in requests from high-net-worth individuals (HNWI) looking for assistance to move from the UK to countries offering favorable tax conditions such as Spain, Monaco, Andorra, and Dubai.

Yet, the standout destination has become Italy, primarily due to its attractive flat tax regime, as we will explain later in this article.

The End of the UK Non-Dom Regime

The British non-domicile status, commonly referred to as “non-dom,” allowed individuals not domiciled in the UK to limit their tax exposure to income generated within the country. If their foreign income was not remitted to the UK, it was not subject to UK taxation.

This system was particularly beneficial for the ultra-wealthy with substantial overseas income, providing significant tax advantages and attracting many high-net-worth individuals to Britain.

However, recent reforms announced by Chancellor Jeremy Hunt will fundamentally alter this landscape starting from April 2025. The new system will abolish the remittance basis and instead impose UK taxes on worldwide income after individuals have resided in the UK for four years. This marks a significant departure from over two centuries of the non-dom regime, which will now include:

• A four-year tax relief on foreign income for new arrivals.
• A temporary 50% reduction on foreign income tax in the 2025-26 tax year for those who will lose the non-dom status.
• A provision allowing the repatriation of previously untaxed foreign income at a favorable rate of 12% for two years until April 2027.
• A shift to a residence-based inheritance tax system, details of which are yet to be finalized.

These changes are designed to make the tax system fairer and raise additional revenue for the government, projected to be £2.7 billion annually by 2028-29. However, the reforms have spurred a backlash among the wealthy, who are now considering relocating to more tax-friendly jurisdictions.

For instance, Bassim Haidar, a prominent entrepreneur, has publicly expressed his dissatisfaction with the new tax regime, stating that the abrupt end to the non-dom status will force him to relocate in order to protect his wealth from significantly higher taxes. He articulated that the UK’s decision is pushing him and other wealthy individuals to consider countries with more favorable tax regimes, such as Monaco or Dubai, which do not impose similar taxes on global income.

This sentiment is echoed by other wealthy residents and financial advisors who predict a mass exodus of capital and high-net-worth individuals from the UK, undermining the intended fiscal benefits of the reform. The transition measures introduced by the government have not convinced many of the current non-doms, who see them as insufficient to offset the increased tax burden they will face under the new rules.

Meet the Italian Flat Tax Regime

Italy’s flat tax regime, introduced in 2017, has been a resounding success in attracting global wealth, especially from those disenchanted by stricter tax environments like the UK. By offering a straightforward deal—€100,000 annually for a comprehensive tax exemption on foreign income—Italy has positioned itself as a prime destination for high-net-worth individuals (HNWI).

Also, this program guarantees fiscal stability for up to 15 years, ensuring long-term planning and financial security within the stable legal framework of the European Union.

The program’s first year saw 98 participants, which surged to 1,339 by 2021, highlighting its growing popularity. This boom has not only benefited the real estate sector but has also spurred significant investments in local luxury brands and services, enriching the cultural and economic fabric of the Italian cities they settle in.

As said, this tax regime sets a cap of €100,000 on the tax payable on foreign-sourced income, which encompasses dividends, rental income, and other forms of income generated outside of Italy. This fixed tax replaces the standard progressive tax rates that could otherwise apply to such income, providing significant savings especially for those with substantial foreign earnings.

Besides this €100,000 tax, individuals opting into the regime are still subject to regular taxes on any income generated within Italy itself, at normal Italian tax rates. However, while the regime exempts foreign income from higher taxes, it does not extend to inheritance or gift taxes, which means any assets transferred within Italy could still be taxed under the normal rules.

Requirements

The primary requirement is that applicants must not have been tax residents of Italy for at least nine out of the ten years preceding their application. Once eligibility is established, individuals can submit a preliminary ruling request to the Italian tax authorities, which provides a level of certainty about their tax status before they actually move.

The approval process is generally quick, with applicants often receiving confirmation within a few months of submitting their tax returns in the year they establish Italian residency.

For families, the regime is particularly accommodating; it allows the primary applicant to extend the flat tax benefit to family members for an additional €25,000 per person per year. This inclusion is pivotal for those looking to move their entire household.

Can I apply to the Italian Flat tax regime if I am not European?

This special regime has also been accompanied by an “Investment visa” to attract non-European high net worth individuals or sportsmen.

Foreign investors should be willing to make one of the following investments:

• 1 million euros in Italian companies
• 2 million euros in Italian government bonds
• 1 million euros donated to charities, the Italian government offers the possibility to obtain a resident visa in Italy for a minimum period of two years

The abovementioned procedure applies to both the taxpayer and their descendants.

Make the first move

Our team of Italy tax experts includes a Doctor of International Tax Law from Leiden University and professionals with over 20 years of experience. They have collectively facilitated the issuance of hundreds of tax rulings since our firm’s inception, thanks to our client-focused approach.

If you are considering applying for this valuable opportunity that offers an advantageous tax regime for 15 years before it expires, please contact us directly at [email protected] or through the contact form and we will be happy to givey you a fully personalized assistance.