By Joana Mendonça, Head of Legal at Global Citizen Solutions

In a significant shift for international investors, the UK government has announced plans to abolish the non-domiciled (non-dom) tax regime by early 2025. This move, aimed at creating a more equitable tax system, will undoubtedly have far-reaching consequences for wealthy individuals who have long benefited from this status.

The non-dom tax regime, which allows individuals who reside in the UK but are domiciled abroad to limit their tax liability on foreign income and gains, has been a cornerstone of the UK’s appeal to high-net-worth individuals (HNWIs). For decades, this regime has enabled non-doms to enjoy the benefits of living in the UK without being subject to the full scope of UK taxation. However, with the government’s decision to scrap this regime, we are entering a new era that will fundamentally alter the landscape for foreign investors.

As the Head of Legal at Global Citizen Solutions, I see this development as a pivotal moment for the broader international investment community. The abolition of the non-dom regime will likely prompt many to reconsider their tax planning strategies and, in some cases, their continued residence in the UK.

With recent changes in the UK’s tax landscape, Cyprus stands out as an excellent alternative for those affected by the abolishment of the non-dom tax regime. In 2015, Cyprus introduced its own non-dom initiative designed to attract individuals and businesses. Under this regime, individuals who have not been tax residents in Cyprus for 20 consecutive years prior to the tax year or the implementation of the non-dom regime are exempt from taxes on dividends and interest. Additionally, income exceeding €55,000 sourced from within Cyprus can benefit from a 50% tax exemption for up to 17 years. Beyond its favorable non-dom provisions, Cyprus offers an attractive tax environment for all residents, supported by a stable political climate that fosters growth. With a corporate tax rate of just 12.5%—one of the lowest in the EU—and an extensive network of double taxation treaties, Cyprus is an appealing destination for individuals seeking both residence and business. This is further enhanced by the island’s strategic location, EU membership, and high quality of life.

The UK government’s decision stems from growing domestic pressure to address perceived inequalities in the tax system. Critics argue that the non-dom regime unfairly favors the wealthy, allowing them to contribute less to the UK’s tax revenues compared to ordinary taxpayers. By abolishing this regime, the government aims to close these loopholes and increase the tax base.

For current non-doms, the abolition raises urgent questions about their future tax liabilities. Without the protections offered by the non-dom status, these individuals will be subject to the same tax obligations as UK residents, including on their worldwide income and gains. This shift could lead to a substantial increase in their tax burden, making it essential for affected individuals to seek expert legal and financial advice to navigate the transition.

Moreover, the end of the non-dom regime could have broader implications for the UK’s attractiveness as a destination for international investors. While the UK has long been a favored location for HNWIs due to its favorable tax environment, the abolition of the non-dom regime may drive some investors to seek alternative jurisdictions with more favorable tax policies.

In response to these changes, it is crucial for investors to reassess their residency and tax strategies. Countries within the European Union, as well as other international hubs, may become more attractive as they continue to offer favorable tax regimes for foreign investors.

In conclusion, while the abolition of the non-dom tax regime marks a significant change, it also presents an opportunity for investors to re-evaluate their global investment strategies. By staying informed and proactive, individuals can continue to protect and grow their wealth in this evolving landscape.