UK’s Tax Regime for Non-Doms

Published:
August 11, 2023
UK’s Tax Regime for Non-Doms

The UK is indicated by foreign capital-holders as a jurisdiction with favorable tax-system: it’s diverse approaches for everyone, privileges, and governmental prompt regulation of tax policies in times of crisis. The current system of taxation encourages non-citizens to invest in the development of the local economic environment and is very fair and loyal to non-doms taxpayers. Non-residents pay taxes only on profits gained inside the jurisdiction.

Who is a non-domicile

Domicile is a concept used in UK tax law. It differs from such concepts as “tax resident” and “citizen”. A person can be a tax resident and even a citizen of several countries at once, but he/she will have only one domicile belonging to any country by birth or selection.

Such definition is used to determine the individual tax-status. In United Kingdom, there’s a special preferential tax regime for immigrants who are non-domicile under British law.

Remittance

Local special tax payment regime means a tax-resident being non-domicile in relation to his/her new place of residence is required to declare all his/her income received in UK, as well as imported into this jurisdiction and, accordingly, pay taxes on declared incomes. Profits gained outside UK and not brought into jurisdiction aren’t taxed.

Features of tax loyalty for non-residents in the UK

Peculiarities and organizational structure of British fiscal mechanisms allow entrepreneurs to get benefits from correct tax planning. Entrepreneurs can claim partial or full exemption from UK taxes on their incomes if they’re non-residents and countries of which they are citizens have entered into a double tax treaty with the UK. Such agreements are concluded so that entrepreneurs do not pay tax twice on the same income.

Foreign business owners are eligible to claim exemption from the following types of profits:

  • bank and building societies interests;
  • royalty;
  • most work pension payments;
  • annuities;
  • British dividend.

Entrepreneurs are also given the option to claim a partial exemption to recover some of the UK taxes they pay on their UK incomes.

How non-doms can get UK tax credits on incomes

To receive all benefits, it is necessary to comply with certain conditions, which vary depending on the scale of the business and individual features of the commercial project. In particular, conditions may be as follows:

  • entrepreneurs must be the beneficial owner of the income. This means that the income is not in the name of the entrepreneur, but he enjoys its benefits;
  • incomes must be tax-charged. It’s taxed in jurisdiction in which the entrepreneur lives, whether it be all income or only the amount he/she receives in his/her country.

Before applying for a UK tax exemption, entrepreneurs need to:

  • check all the terms of arrangement on avoidance of double tax-payments, which relate specifically to the entrepreneur;
  • collect enough evidence to show that the entrepreneur meets these conditions;
  • save evidence. This may be necessary to confirm this assertion.

The tax regime also continues to improve and modernize. Recently, a significant amendment has been made to the legislation regulating capital gains from the sale of residential real estate. It was decided to balance the tax regime in favor of UK taxpayers. A non-resident investor who stays in the country for less than 90 days during a tax year will now pay tax of 18% or 29% (depending on total incomes) on capital increases.

Thus, UK continues to engage numerous non-doms investors. Reasons for this are stable capital growth and return on investment and a more favorable tax regime than in other countries.

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