6:37 AM, 27th October 2020, About 3 years ago 11
Confronted with the high income tax rates in the UK, British citizens have been more interested in alternative taxation programs in recent years. One of them is the Non-Habitual Residency (NHR). According to a study by UHY (Urbach Hacker Young International Limited) in 2019, tax rates for salaries in the UK are higher than the European average. The rate in the UK is 46.1% while the European average is 44.2%. On the other hand, most of the Golden Visa programs offer either lower tax rates or complete tax exemptions for the applicants.
These programs also grant you residency and later citizenship in certain countries. This means that the programs pave the way for becoming an EU citizen again, considering Brexit.
We will now guide you through the top ten residency or citizenship by investment programs which also offer great tax treatments.
According to 2019 data on SEF (Portuguese Immigration and Borders Service), there are a total of 590.348 registered expats in Portugal. Around 35.000 of them are UK citizens. However, it is claimed that the total number of UK citizens is almost twice the mentioned number above. So, why do so many UK citizens choose to live in Portugal? To start with, Portugal offers irresistible tax treatments to expats. Naturally, tax-overwhelmed UK citizens try to find alternatives to pay fewer taxes.
Portugal offers two main tax treatments to expats. One is the Double Taxation Agreement (DTA) and the other is the Non-Habitual Residency (NHR) program. The UK has signed DTA with more than 60 countries in the world. NHR, on the other hand, allows you to be exempt from most of your foreign source income for ten years. Luckily, the UK is one of those countries.
Property investments in the country provide great returns including Portugal Golden Visa for UK citizens. Another data from SEF indicates that between October 2012 and July 2020:
Greece Golden Visa is one of the most popular Golden Visa programs in the world. It has by far the lowest investment threshold in Europe. The minimum investment amount is only €250.000. The program came into effect in 2013. From 2013 until September 2020, a total of 7.903 applicants and 23.618 dependents of these applicants have received their Greece Golden Visa. Enterprise Greece (an official agency of the Greek State) has released this data.
Greece also has signed a DTA with many countries. So, the income you receive outside of Greece will not be subject to taxation.
Moreover, the country has introduced a new tax law waiting for approval by the parliament. If it comes into effect, foreign retirees will be subject to a 7% tax rate on all of their incomes for a period of ten years. The condition is that they must move their tax residency to Greece. Also, it seems that the country will only admit applicants from high profile countries. The applicants must also agree that they will stay in the country for more than six months a year.
Greece does not impose any stay requirement in the country to qualify for a Golden Visa. You can invest in the country in different ways. You can either buy a real estate with a minimum value of €250.000 or you can invest in the country’s bank deposits, and government bonds. You can also sign ten years of a lease agreement for hotel accommodations or tourist residences.
According to data from IATA (International Air Transport Association), Malta holds the 8th strongest passport in the world.
According to 2019 data of ORIIP (Office of the Regulator of the Individual Investor Programme), around 50% of the applicants of the MIIP (Malta Individual Investor Programme) are from Europe, following Asia.
Also, 92% of Individual Investor Programme applicants chose to rent property, while the remaining 8% have bought luxury homes in Malta exceeding €900.000.
For the Malta Residency and Visa Programme, there is more than one investment type. First, you must contribute €30.000 to the government of Malta, and invest €250.000 in government bonds which you should maintain for at least five years. Then you can choose one of the investment options below:
Spain is one of the favorite holiday destinations of UK citizens. It also has the second most popular Golden Visa in the EU. The country signed Double Taxation Agreements (DTA) with around 90 countries, including the UK. This means that when you gain your Spain Golden Visa, the income you gain from the UK or any other country will not be subject to taxation in Spain.
As to the tax rates for expats: as a non-resident, (if you live in Spain less than 183 days) you will pay tax only on the income (at a flat rate) you earn in Spain. The general flat rate is 24%, and if you are from an EU/EEA country, it is 19%. Capital gains from transferred assets are taxed at 19%. For investment interest and dividends, the tax rate is 19%, however, they are typically lower through double taxation agreements. EU citizens are exempt from interest tax. Royalties are taxed at 24%. Pensions are at progressive rates, from 8% to 40%.
For your Golden Visa investment, the minimum value you pay for a Spanish Golden Visa is €500,000 for a real estate property. Other investment options include investments in public debt, shares of companies, investment funds, bank deposits, or establishing businesses. However, these types of investments vary between €1-2 million.
Ireland has a good reputation for protecting investor funds. The country welcomes foreign capital as well. The normal corporate tax rate is 12.5%, but it is reduced to 6.25% for IT companies. Furthermore, there is a 0% tax rate on foreign-sourced dividends.
According to data from the Irish Ministry of Justice, between the years 2015-2019, 74% of approved applicants applied for the Enterprise Investment option. So, if you plan to apply for Enterprise Investment, you can think of Ireland as an option.
Montenegro has a relatively small economy. For personal incomes, the general tax rate is 9%. If the income is above the average, then the tax rate is 11%. An exception to the flat rate is also available. Non-residents pay 5% on the interest income. Companies in Montenegro also pay a 9% tax rate as income tax, and for capital gains and interest income, the rate is the same.
Montenegro signed a DTA with the UK as well. Different countries have different withholding rates. For the UK, according to data on PwC, investors pay a withholding tax rate of 5/15% for dividends, 10% for interests, and 10% for royalties.
Latvia offers a residency by investment program. It also has signed the DTA (Double Taxation Agreement) with more than 60 countries. Unless you are a tax resident of Latvia, you will not pay taxes on the income you earn abroad. Individuals pay a fixed rate of 23%. For annual incomes up to €20,000, the tax rate is 20%. The information on the website of the Ministry of Finance shows the remaining tax rates as follows:
According to data on the UK embassy, the estimated number of permanent UK residents in Bulgaria is more than 5000. It is not certain how the UK expats will be treated in the future after Brexit officially comes into effect. As a rule, non-EU citizens can buy houses but not yards. So, the British will wait for the process.
Normally, if you are a tax non-resident, you pay taxes on your Bulgarian source income. If you have been in the country for more than 183 days in any 12-month period, you will become a tax resident in Bulgaria. In that case, your worldwide personal income is taxed at a flat rate. Foreign tax residents are subject to a 10% tax for fees for technical services paid to them. No deductions are allowed. Rental incomes from Bulgaria are also subject to a 10% tax. In the same way, capital from the disposal of a real estate in Bulgaria, and on disposal of securities are also subject to a 10% tax rate.
Belgium doesn’t technically have a Golden Visa. Instead, it is more like an entrepreneur visa investment. You can apply for it by establishing a Belgian company. The usual investment amount is between €350.000-500.000.
There are no taxes on capital gains and no tax on surplus value of a (private) real estate in Belgium. Not to mention that it has DTA with the UK as well.
Austria may also be a good option for UK citizens because the cost of living is very low compared to the UK. For example, rental costs in Vienna are 75% cheaper than in London. Furthermore, corporate tax rates are low, and there are no wealth or trade taxes.
Normally, Austria does not offer a passive investor visa program. However, investors can obtain permanent residency via different types of investments. These include the Self-Employed Key Workers Residence Visa Programme, Startup Founders Residence Visa Programme, and Financial Self-Sufficiency Residence Visa Programme. After five years of successful residency, you can apply for long term residency.
13:13 PM, 27th October 2020, About 3 years ago
What a fantastic thread. I already know about the low corporation tax rate in Ireland for IT companies and have spent much of the last few months wondering what the chancellor is going to do to make the UK an attractive place to run an IT company once the UK finally leaves the EU. With so much of our business now happening online and particularly since the impact of Covid-19 moved much of our work on to Zoom, Teams, Skype and elsewhere there is the potential for much of our work to go abroad. I could do a large portion of my work sitting in a villa in Portugal, or a ski chalet in Austria for example.
With respect to the rest of it I was aware of some of the countries but not all. I have had former colleagues who have moved their pensions out to retire in Portugal or elsewhere although some have chosen to move them via Cyprus. Anyone know why this is?
Also, in the UK we are not allowed to hold residential property in a pension. Is this also the case in all these other countries? Or can you hold residential property in your pension outside the UK?
Falco van der Gragt
7:37 AM, 28th October 2020, About 3 years ago
As I understand it, there is another good thing about Bulgaria. If you sell a property owned by you for 3 years or more you can sell one of those a year free of capital gains tax. If you owned it 5 years or more you can sell 3 a year free of capital gains tax.
15:23 PM, 28th October 2020, About 3 years ago
Reply to the comment left by Beaver at 27/10/2020 - 13:13I’m not a professional international tax accountant but I’ve done some research.
If your a landlord with UK rental properties then you have two major taxes to pay, income tax on the rents and Capital Gains Tax if/when you sell up.
If UK resident then you will always pay both of these taxes, unless Resident but Non Domiciled I believe.
If you become UK non resident then depending on which country you move to you may or may not pay those taxes in your new country. Certainly the UK requires you to file a tax return on your UK rents wherever you are living in the world but your new country if it has a DTA with the UK shouldn’t be charging income tax also. Regarding CGT some countries cover that also with a DTA and won’t charge it if the UK doesn’t also. If you’ve already been UK non resident for several years, as have I, then the UK only charges CGT on gains made after April 2015.
The reason Portugal and Cyprus are good places to have residency are because they also won’t charge CGT on the sale of your UK properties.
Other places to investigate a move to escape UK CGT are Andorra, Gibraltar, IOM, Monaco, Malta, Belize, Hong Kong, Jamaica, Sri Lanka, Thailand.
Other countries with I believe CGT rates below UK are Bulgaria, Croatia, Czech Republic, Romania, Russia, Ecuador, Malaysia, Costa Rica, New Zealand, Singapore.
None of this information is guaranteed as it was done a couple of years ago, you must do your own research and obtain your own professional advice.
Brexit will also create uncertainty, which is why I hate it, nothing to gain but lots to lose.
There was a previous posting on this subject from 2018 which is very interesting.
17:38 PM, 28th October 2020, About 3 years ago
Reply to the comment left by Bristol Landlord at 28/10/2020 - 15:23
Thanks, that's interesting. Like Brexit or not (and I think that everybody is entitled to their own view without criticism or the awful widespread allegations of bigotry around the time of the vote) it's just a fact that the UK voted out. And you've got to say to yourself, if the benefits of being in were so self-evident, why did the UK vote out?
What's interesting about this thread is just how different the tax laws are, even around the EU. I'm still unsure why my former colleague moved his *Pension* out via Cyprus.
All these fiscal policies evolved before we knew that the UK would be leaving the EU. Countries were competing for capital even then (except maybe France :-)).
It seems to me that with the widespread impact of Covid-19 and the way in which it has accelerated the move to doing business online, Brexit is now almost irrelevant. Yes if the government isn't careful countries like Ireland will take advantage of the situation; but they were doing it anyway. The move to online business is just going to accelerate changes that were already happening.
20:48 PM, 28th October 2020, About 3 years ago
Reply to the comment left by Beaver at 28/10/2020 - 17:38
I think you’re being very misleading, I said I hated Brexit, I never said I hated the people who voted for Brexit, completely different things.
Millions of voters voted out of the EU because they were deliberately misled by the Brexit campaign and didn’t understand the true issues.
Many believed the lie that there would be millions more in the kitty for the NHS despite the fact of the EU having absolutely nothing to do with how the UK Govt decides to spend the UK tax payers money. There would be way more money available for the NHS if it wasn’t wasted on things like the Trident nuclear missile program or by allowing multinationals like Amazon to pay next to nothing in taxes.
Brexit is a gigantic con affecting the lives of millions of people and all for the benefit of a few well connected multi millionaires.
Here’s some articles;
9:22 AM, 29th October 2020, About 3 years ago
Reply to the comment left by Bristol Landlord at 28/10/2020 - 20:48
I apologise: In my post I didn't mean to imply that *you* hated the people who voted out. But there was a general swell of people hating each other on the internet, and a lot of people calling those who voted out racists...I didn't mean you.
The reason for my interest here is this. I'm not just a landlord, I also run an internet business. And I use Stripe. I got this update from Stripe this morning.
At Stripe, we want to help you grow your business by making payments as simple, borderless, and programmable as the rest of the internet. With the Brexit deadline approaching, we'd like to reassure you that our services in Europe will continue to run without disruption, and your Stripe experience will be unaffected.
From 4 November 2020, the Stripe entity responsible for processing payments for Stripe accounts in Europe (excluding the UK and Switzerland) will change to our Irish regulated entity, Stripe Technology Europe Limited, instead of our UK regulated entity, Stripe Payments UK Limited (SPUKL). Stripe accounts based in the UK or Switzerland will continue to receive payment services from SPUKL. There’s no action needed from you, but if you’d like to learn more, you can read about Stripe’s preparation for Brexit here. ..."
So my point is not so much about Brexit per se, but about the fact that the *acceleration* of changes that are happening anyway caused by Covid-19 will damage the UK economy *if* the chancellor does not wake up to the fact that there is an increasing risk of businesses, capital and employment moving offshore.
He needs to make the UK an attractive place to run a business (especially an internet business), employ people, or spend your pension.
If not it will be a disaster.
9:12 AM, 31st October 2020, About 3 years ago
While easy to change your tax residency, domicile is a much more complicated matter. People will still be paying UK income tax on the rental income, and as mentioned above will also pay CGT on gains accruing from 6 April 2015. The requirements to report the gain and pay the tax within 30 days will still exist. Simply going abroad for a few years in order to benefit from the non-resident rules, and then returning to the UK having disposed of the properties, may see you falling foul of the temporary non-residence rules for CGT, and all of the gain coming into the UK CGT remit.
8:38 AM, 2nd November 2020, About 3 years ago
Reply to the comment left by Olls63 at 31/10/2020 - 09:12
Presumably though you could just transfer the properties into a limited company before you went. Or perhaps own the property partly in your own name and partly in the name of a limited company. Whether that should be as joint tenants or tenants in common I wouldn't know. Or perhaps if it was a small portfolio and you were married, own the properties jointly with your wife with one of you domiciled in the UK and one abroad.
12:48 PM, 2nd November 2020, About 3 years ago
BUT do people do this:
"Simply going abroad for a few years in order to benefit from the non-resident rules, and then returning to the UK having disposed of the properties, may see you falling foul of the temporary non-residence rules for CGT, and all of the gain coming into the UK CGT remit."
Is there a true benefit to doing so and if so where do they go?
TBH, I'd sell tomorrow but for the CGT noose hanging over me - if emigration was the genuine solution it's an option I'd happily take!!
13:57 PM, 2nd November 2020, About 3 years ago
Reply to the comment left by at 02/11/2020 - 12:48
My business is a small IT business. I'm UK-based and I've never worried much about going abroad because up until recently entrepreneur's relief was set at 10% for up to 10 million pounds per individual. You could also mitigate against excessive tax charges by paying into your pension. But you have to avoid the lifetime allowance and avoid paying more into your pension than your annual allowance, otherwise you are penalised.
As soon as IT businesses get to any significant size they end up competing with business from Ireland and elsewhere who pay a tiny fraction of the Corporation Tax we pay in the UK; so they go to Ireland, or perhaps Spain. So yes, I know people who have done this and were doing it a decade ago.
With respect to BTL property, it might be possible to avoid CGT by incorporating, and it might be possible to avoid paying excessive tax by paying from your company into your pension. Whether you could would depend on your age and circumstances. I've worked in other countries in Europe, I've worked in UK and New Zealand. I could move my pension, if not my property; but my property is managed by an agent so I could still manage to work offshore.
The big difference now is what just happened: Before Covid 19 I could have largely run my business from my desk. But customers and suppliers would still want to see us face to face so we would drive over and see them. *NOW* customers still want to do business but are *refusing* face to face meetings when previously they used to *ask* for them. The IT suppliers we used always were happy to do business online.
I actually had this discussion with my business partner last week; we discussed the fact that we could now run our business from somewhere in the sun, or near the snow. Now it would not be a problem because Covid-19 has brought a cultural shift in the way we do business.
Since Covid-19 more people are buying from Amazon and elsewhere than ever before. Businesses like Amazon always did use countries like Ireland or Luxembourg to pay less tax. Since Covid-19 though the service economy has started to move online. Lawyers consult on line. Accountants do. We do our accounts through Xero. Our accountants do not need to be in the UK. We use Stripe. We can take payment anywhere.
Sean Connery who just died was a famous SNP supporter. He was also famously one of those rockstars and film stars who like the Rolling Stones decided to take their assets and income offshore in the 1970s to escape the then Labour government's punitive tax regime. The difference now is that it is not just film stars that can do this. Minor TV celebrities have been doing it for years. The IT industry has been doing it for years but now, since Covid-19, we all accept and use systems that would allow many small businesses to take their businesses to the sun.
We always used to be able to rely on Labour governments to stimulate the flight of capital. Now the lines seem to be being blurred. The chancellor needs to wake up. This is the best time ever to leave the European Union. This is because all the prophets of doom who said that the economy would tank, and were wrong, will not be able to say that the decline in our economy (there will be some downward pressure but it will be minor) was due to Brexit. Brexit is an irrelevance compared to Covid. But the big thing is the cultural shift to doing business online.
The solution to your CGT problem is probably already now somebody who is operating offshore.