Non-Domiciled Regimes: Benefits, Updates, and Key Jurisdictions such as the United Kingdom, Italy, Malta, and Cyprus

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If you earn income outside the country where you reside, a non-domiciled (non-dom) tax regime may protect that foreign income from local taxation.

Understanding how these regimes operate can help you determine whether changing your tax residence makes sense for your personal and wealth-planning circumstances.

Understanding Non-Dom Status: What Does “Non-Domiciled” Mean?

“Non-domiciled,” or non-dom, refers to individuals who are tax resident in a country (such as Italy or Malta) but whose permanent legal domicile is located elsewhere.

The Difference Between Tax Residence and Domicile

Tax residence refers to the country where an individual lives and, by meeting certain criteria (such as days of physical presence or economic ties), becomes subject to taxation.

Domicile refers to a person’s permanent legal home and long-term personal connections. It generally corresponds to one’s country of origin or the country to which the individual intends to return permanently.

Accordingly, an individual may be tax resident in one country — and taxed there on worldwide income — while maintaining domicile in another. This legal distinction forms the basis for non-dom regimes and enables preferential tax treatment, particularly in relation to foreign income and capital gains.

How Does a Non-Dom Regime Work?

A non-dom regime does not automatically mean that only income generated within the country of residence is taxed. Its scope depends on the specific jurisdiction. In certain countries, non-domiciled status allows individuals to limit, reduce, or substitute taxation on foreign-source income.

Foreign income may:

Be fully or partially excluded from local taxation; or
Be taxed only when remitted to the country of residence

This distinction is significant because, under ordinary tax rules, most countries tax their residents on worldwide income. Non-dom regimes introduce an exception or special treatment to that general principle.

There are two primary approaches:

Remittance-based systems: Foreign income is taxed only when transferred into the country of residence.

Territorial systems: Only income generated within the country is taxed, while foreign-source income is generally excluded.

The former UK model followed the remittance basis. Countries such as Singapore and Panama operate territorial systems.

Why Do Countries Offer Non-Dom Tax Regimes?

These regimes attract talent, investment, and capital by reducing the tax burden on foreign income. However, concerns regarding tax fairness, revenue loss, and global anti-avoidance efforts have led to increased scrutiny and reforms in several jurisdictions.

Key Advantages

Foreign income exemption or reduction: Dividends, interest, capital gains, and pensions may be exempt or taxed at reduced rates.
Tax certainty: Flat-tax regimes such as Greece (€100,000) or Italy (€300,000) provide predictability regardless of income volatility.
Estate and wealth planning benefits: Many regimes reduce or eliminate inheritance or wealth taxes on foreign assets.
European lifestyle with tax efficiency: Access to healthcare, education, infrastructure, and EU freedom of movement.

Key Jurisdictions

United Kingdom

For decades, the United Kingdom offered one of the world’s most generous non-dom regimes. High-net-worth individuals could avoid UK tax on foreign income and capital gains for up to 15 years, provided the funds were not remitted to the UK.

However, the traditional non-dom regime, including the remittance basis linked to domicile, was abolished with effect from 6 April 2025 under the 2024 Autumn Budget and Finance Act 2025.

The UK has now adopted a fully residence-based system, removing domicile as a determining factor for income tax, capital gains tax (CGT), and inheritance tax (IHT).

Key Changes

End of the remittance basis: No longer available for foreign income or gains arising on or after 6 April 2025. UK residents are generally taxed on worldwide income as it arises.
New Foreign Income and Gains (FIG) regime – 4 years: New qualifying residents (who have not been UK tax resident for at least 10 consecutive prior tax years) may benefit from a 100% exemption on foreign income and gains for their first four years of UK tax residence, even if remitted.
Applies from 6 April 2025 or from the later date of arrival.
Existing residents may qualify for any remaining years if within the eligibility window.

Transitional Measures

Pre-6 April 2025 foreign income and gains remain taxable only if remitted.
Temporary Repatriation Facility (TRF):
- 12% for tax years 2025/26 and 2026/27
- 15% for 2027/28 (Three-year window)

Additional measures include asset rebasing and limited transitional taxation options.

Inheritance Tax (IHT)

IHT is now residence-based: worldwide assets become taxable after 10 out of the last 20 years of UK residence.

Elimination of Annual Charges

The former remittance basis charges (£30,000–£60,000) have been abolished and replaced by the new FIG regime.

These reforms aim to enhance fairness, transparency, and alignment with international standards while maintaining competitiveness.

Italy

Italy adopts a different approach. Rather than fully exempting foreign income, it offers a lump-sum substitute tax that replaces ordinary taxation on non-Italian income.

Following the 2026 Budget Law (published 11 February), the annual substitute tax increased from €200,000 to €300,000. The levy for each dependent family member rose from €25,000 to €50,000.

Importantly, individuals who established Italian residence before 31 December 2025 will continue to pay the previous €200,000 rate under a grandfathering provision intended to preserve regime stability.

The substitute tax regime may be applied for up to 15 years.

The higher threshold is clearly targeted at ultra-high-net-worth individuals. For those earning €1.5 million or more annually from foreign sources, the regime may remain financially advantageous.

Advantages

Family inclusion permitted
Predictable flat tax simplifies planning
Access to Italian lifestyle and EU residence

Disadvantages

High flat tax may not be suitable for moderate foreign income
Physical presence required for tax residency
Italian-source income taxed at standard rates

Malta

Malta’s Non-Dom regime operates on a remittance basis. Only income generated in Malta and foreign income remitted to Malta are subject to tax.

If you are tax resident but not domiciled in Malta, foreign income and gains that remain offshore are not taxed, making the regime particularly attractive for internationally diversified investors.

Malta does not impose a general wealth tax or inheritance tax on foreign assets, reinforcing its appeal for international wealth structuring.

There is no deemed domicile rule. Non-dom status may be maintained indefinitely without automatic transition to worldwide taxation.

To qualify:

The applicant must not have been Maltese tax resident during the relevant prior period.
Legitimate foreign income sources must be demonstrated.
Local residency and registration requirements must be met.

Cyprus

Cyprus offers a highly attractive Non-Dom regime, particularly for investors with significant passive income.

Unlike remittance-based systems, Cyprus formally applies the worldwide taxation principle to tax residents. However, individuals qualifying as non-domiciled benefit, for up to 17 years, from a 0% rate on dividends, interest, and most passive income under the Special Defence Contribution (SDC).

In practice, although worldwide taxation applies in principle, the effective tax burden on foreign passive income can be significantly reduced.

To qualify:

183-Day Rule: At least 183 days in Cyprus in a calendar year; or
60-Day Rule: Minimum 60 days in Cyprus, no tax residence elsewhere, and sufficient economic and social ties.

The applicant must also not be domiciled in Cyprus and must comply with local tax registration requirements.

How to Choose the Right Non-Dom Program

Selecting the appropriate non-dom regime depends on income structure, lifestyle preferences, family needs, and long-term objectives.

Key Considerations

Foreign income structure: Flat-tax regimes suit high foreign income; remittance-based systems benefit those retaining income offshore.
Family inclusion: Evaluate associated costs and conditions.
Physical presence requirements: Some programs require more days in-country.
Long-term goals: Consider EU citizenship timelines, investment obligations, and lifestyle factors.
Strategic timing: Following the UK’s non-dom closure and 2025 reforms, early planning may be crucial to securing EU residence and related tax benefits.

Final Perspective

Non-dom regimes can represent a strategic tool within international migration and tax planning. However, each jurisdiction has specific requirements, legal implications, and tax consequences that must be assessed individually.

Before making any relocation or tax residence decision, a comprehensive review of your personal, family, and business circumstances is essential.

Our team can assist with comparative evaluation of available programs, proper structuring of your residence, and full regulatory compliance in each jurisdiction.

📩 Contact our team: Email us at info@creimermanlaw.com

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