- The massive departure of wealthy individuals: will Europe manage to retain its affluent elite?
The race among nations with low taxes to attract affluent expatriates is heating up. While the UK has scrapped a tax advantage favored by foreigners, other countries keep wooing millionaires and billionaires.
Particularly, Cyprus, Greece, Italy, Malta, Portugal, and Spain are giving Switzerland, the traditional tax haven, some stiff competition. However, the United Arab Emirates have emerged as a popular destination for many.
Europe continues to offer attractive tax policies
The Labour government, which took power in July in the UK, has done away with a tax rule that mainly benefited wealthy foreigners. The so-called "Non-Dom" rule, in place since 1799, exempted income earned in the UK from taxing. Originally designed to help aristocrats dodge taxes on their overseas property, this rule has now extended global income to taxation. There are temporary relaxations for new arrivals, but the British "Financial Times" reports a spike in emigrations since the change. Norway's alteration of its wealth and capital gains tax system in 2022 has resulted in a slow but steady influx of ultra-rich individuals to Switzerland. Many from France are also rumored to be planning their departure due to the left-leaning coalition's potential rise in parliament and increased wealth taxation.
Wealthy individuals seek to lower their spending through expatriation. Favorable taxation is a crucial draw for affluent foreigners who consume significantly more than the average local citizen.
Switzerland leads the way in offering personalized tax agreements with local authorities for wealthy individuals. But Cyprus and Malta also offer exemption from foreign dividend taxes. Greece and Italy have maximum flat tax rates of 100,000 euros and 200,000 euros per year, respectively. Italy recently increased the annual flat tax on foreign income for new residents to appease local sentiments over the benefits.
Super-rich expatriates' exodus gains momentum
However, this change was met with criticism as wealthy expats value stability above all – politically, economically, and tax-wise. Experts attribute the recent trend of emigration to increasing global financial uncertainties that require individuals to protect their wealth.
Pascal Saint-Amans, the former head of the tax department at the OECD, commented to the "Financial Times" that people used to keep their money offshore while residing in their own country. However, the end of banking secrecy and information exchange has resulted in individuals moving out of countries if they want to avoid paying taxes there.
Anthony Richardson, a lawyer with Church Court Chambers in London, says there's a growing trend of millionaires and billionaires leaving the UK and other countries due to the financial crisis brought about by the pandemic. "They fear their wealth could be seen as easily accessible cash," he added.
As a result, ultra-wealthy Europeans are increasingly opting for the United Arab Emirates, especially Dubai, according to surveys by Henley & Partners, an investment migration consultancy firm. Dubai does not levy any income or capital taxes on individuals.
The scrapping of the "Non-Dom" rule in the UK has led to a spike in emigrations, as wealthy individuals seek to lower their spending through expatriation due to favorable taxation. Europe continues to offer attractive tax policies to affluent expatriates, with countries like Cyprus, Malta, Greece, Italy, Portugal, and Spain giving Switzerland some competition.
