On July 9, 2024, the UK’s HMRC released figures showing that non-domiciled and deemed domiciled taxpayers contributed a combined £12.3 billion in income tax, capital gains tax (CGT), and national insurance contributions (NICs) for the tax year ending 2023.

This group included 83,800 individuals, marking a rise in the number of taxpayers but a slight decrease in tax liabilities from the previous year.

Rising Numbers Amid Policy Changes

The number of individuals claiming non-domiciled status increased to 74,000, primarily driven by new arrivals after pandemic-related restrictions eased. Newly arrived non-doms increased by 18%, and total tax revenue from this group reached its highest level since 2017. In contrast, the number of deemed domiciled taxpayers, who are taxed on worldwide income and gains, declined slightly, with their tax contributions falling from £4 billion to £3.4 billion.

As the UK Labour government moves to eliminate domicile status from the tax system, a new four-year residence-based foreign income and gains (FIG) regime will replace the current system.

From April 6, 2025, new arrivals to the UK will benefit from 100% relief on foreign income and gains in their first four years, provided they haven’t been UK tax residents in the previous decade.

This shift aims to reduce the preferential tax treatment currently enjoyed by non-domiciled individuals, with broader changes targeting the tax advantages associated with trust structures for both non-doms and deemed domiciled persons.

Cyprus and Dubai: Attractive Alternatives for HNWIs

Given these changes, high-net-worth individuals (HNWIs) may seek alternative jurisdictions like Cyprus or Dubai, which offer appealing tax regimes, lifestyle benefits, and strategic positioning for international business.

Cyprus: A Strategic and Tax-Friendly Hub

1. Attractive Tax Regime: Cyprus offers a favorable tax environment with no inheritance tax, a low corporate tax rate of 12.5%, and the possibility of benefiting from the non-domiciled tax regime, which allows foreign-sourced income, including dividends and interest, to be exempt from taxation for non-domiciled residents.
2. Lifestyle and Accessibility: The island boasts a high standard of living, excellent healthcare, and an international lifestyle with English widely spoken. Cyprus is a popular destination for HNWIs due to its strategic location bridging Europe, the Middle East, and Africa.
3. Investment Incentives: Cyprus offers incentives for investment in real estate, businesses, and funds, making it an attractive destination for investors looking to diversify and protect their assets.

Dubai: A Global Financial Hub with Zero Income Tax

1. Zero Income Tax: Dubai offers a zero personal income tax regime, making it highly attractive for HNWIs and entrepreneurs. This extends to income, capital gains, and inheritance, providing significant tax savings compared to other jurisdictions.
2. World-Class Infrastructure and Connectivity: Dubai is a major global financial hub with excellent connectivity, state-of-the-art infrastructure, and a business-friendly environment, attracting top talent and businesses worldwide.
3. Residency and Lifestyle Benefits: Dubai’s Golden Visa program allows investors and skilled professionals to obtain long-term residency, enhancing stability and security for families. The city’s luxury lifestyle, international schools, and world-class healthcare facilities make it a prime choice for HNWIs seeking a high standard of living.

Conclusion

As the UK moves towards a more restrictive tax regime for non-domiciled individuals, Cyprus and Dubai present attractive alternatives for HNWIs seeking to optimize their tax position while enjoying vibrant business environments and exceptional quality of life. Both jurisdictions offer unique benefits that cater to the needs of global investors and entrepreneurs, providing strategic advantages in an increasingly complex global tax landscape.

For all enquiries please contact our team of experts at agp@agplaw.com 

Read more:

Doing Business in Cyprus 2024: An Analysis of Law & Practice

Recent VAT Changes in the Cyprus Legislation & their Effect on Immovable Property Transactions: A Practical Viewpoint

The information provided by AGPLAW | A.G. Paphitis & Co. LLC is for general informational purposes only and should not be construed as professional or formal legal advice. You should not act or refrain from acting based on any information provided above without obtaining legal or other professional advice.