The UK resident non-domicile system is being scrapped, but for those seeking alternatives, Italy and the UAE are worth considering, argues the author of this article.

As readers know, the way that countries such as the UK, Italy, and the United Arab Emirates treat high net worth and ultra-HNW individuals born overseas has changed considerably, with the end of the UK’s resident non-domicile system; its replacement by a new system, is just one of the changes taking place. In the following article, Carmen Kiavila, who is attorney-at-law and founder, Kiavila Avocates, and Of Counsel at Eptalex, explains the situation in Europe and the Middle East, looking in particular at Italy and the UAE. 

Kiavila was the winner of Most Prominent New Entrant in the 11th annual WealthBriefing Swiss Awards 2024. The editors are pleased to share these insights; to comment, please email tom.burroughes@wealthbriefing.com and amanda.cheesley@clearviewpublishing.com

“Non-domiciled” or “non-dom” refers to an historic British tax regime that permitted UK tax residents to benefit from not paying tax on their foreign income and gains, provided that these income and gains were not repatriated (remittance basis). This status was based on the legal concept of domicile, which differs from tax residence. Therefore, a person could reside in the UK while still being regarded as having a “domicile of origin” in another country.

This system provides:

-- Taxation based on repatriation means that non-domiciled individuals only paid British taxes on income and gains effectively brought to the UK. Income maintained abroad was not subject to taxation.

-- An exemption from inheritance tax applies to foreign assets. Therefore, assets that non-doms hold outside the UK were exempt from IHT, even if the taxpayer died (1). 

The UK announced eliminating the non-domiciled tax status in the Spring Budget 2024 and the Autumn Budget 2024.

Effective April 2025, this change replaces the domicile-based system with a tax. Beginning on 6 April 2025, UK tax residents will be taxed on their worldwide income and gains. The remittance basis will require non-doms to declare only the income transferred to the UK.

However, individuals relocating to the UK after a 10-year absence will benefit from a four-year transitional Foreign Income and Gains (FIG) regime. 

During this time, eligible individuals’ foreign income and gains will be completely exempt, even if they are repatriated (2).

A Temporary Repatriation Facility will allow former non-doms to repatriate income and gains before 2025 at reduced rates of 12 per cent from 2025 to 2027 and 15  per cent from 2027 to 2028 (3) . 

In certain jurisdictions, such as Italy and the United Arab Emirates, there are similar tax schemes that offer various advantages. 

I. Italian system

In Italy, foreign pensioners enjoy a uniquely favourable tax regime. A flat rate of 7 per cent is imposed on income from foreign sources.

To be eligible, the pensioner must:

-- originate from a country that has an administrative cooperation agreement with Italy; 

-- reside in a municipality with fewer than 20,000 inhabitants in the southern part of the country; and   

-- and not have been a tax resident in Italy for at least five years before the application.

Certain exclusions and limitations apply.

Regime for inpatriate 
The “impatriati” tax regime for inpatriate workers permits a 50 per cent reduction in the taxation of income comparable to that of salaried employment and income generated from professional activities conducted in Italy, with an annual limit of €600,000 ($674,379). 

This scheme is subject to several conditions:

-- Workers must commit to being residents in Italy for tax purposes for at least four years. They must not have been residents in Italy for tax purposes during the three years before their transfer; and  

-- They should primarily conduct their activities in Italy. And they must have high or specialized qualifications.

The regime would apply for the year of the transfer and the subsequent four years. However, if tax residence in Italy is not maintained for at least four years, the benefits are revoked and recovered with interest.

This scheme is compatible with other tax benefits, enabling the accumulation of multiple schemes if their conditions are met. An additional reduction is available for workers with minor children. Their income is taxed at 40 per cent if the transfer to Italy included a minor child or if a child was born or adopted during the application period of the scheme.

The child must live in Italy during this time to benefit from enhanced advantages (4).

Before 2024, this same regime was in effect with different characteristics and with a reduction of 70 per cent instead of 50 per cent.

Regime for neo-domiciled individuals 
Italy provides an appealing tax regime for affluent individuals who relocate their tax residence to the country. Introduced in 2017 under Article 24-bis of the TUIR (Consolidated Income Tax Act), this regime aims to attract high-income earners and encourage foreign investments in Italy.

To qualify, applicants must meet several conditions. They must not have been tax residents in Italy for at least nine of the 10 years preceding their transfer. Additionally, they must establish residency in Italy, which involves fulfilling the criteria for tax residency as defined by Italian law, including spending a minimum of 183 days per year in the country.

This regime allows new residents to benefit from a flat tax of €200,000 annually on their foreign-sourced income, regardless of the total sum, for the individuals who transferred their residence to Italy after August 2024. The fixed tax amount is determined by the date of residence transfer. If the residence is transferred before August 2024, the fixed tax is €100,000 euros per annum.

This option can also be extended to family members for an additional fee of €25,000 per member. The maximum duration of this regime is 15 years, offering long-term tax stability. Moreover, beneficiaries of this regime are only liable for inheritance and gift tax on assets situated within Italian territory (5) .

Policy for educators and researchers
Italy offers a favourable tax regime for teachers and researchers who move their tax residence to the country. This regime, established under Article 44 of Legislative Decree No 78/2010, aims to promote the return or relocation of academic talent to Italy as part of the "brain gain" initiative.

To qualify, teachers and researchers must meet several conditions:

-- They need to hold a university degree or an equivalent qualification, recognised in Italy through a "declaration of value" issued by Italian consular authorities;  

-- Furthermore, they must have been tax residents abroad on a non-occasional basis for at least two consecutive years;  

-- Additionally, they should have carried out documented teaching or research activities abroad for at least two consecutive years in public or private research centres or universities; and  

-- Once in Italy, they must engage in similar activities and obtain tax residency in the country, which they must maintain for the entire duration of the regime.

This tax regime offers a 90 per cent exemption on income derived from teaching or research activities. The initial duration of this exemption is six years, including the year of transfer. However, this period can be extended up to 13 years depending on certain conditions, such as the number of dependent children or the purchase of a primary residence in Italy (6)  .

II. United Arab Emirates
The United Arab Emirates remains one of the most attractive destinations for companies and foreign investors.

A simplified territorial tax 
In contrast with the legacy UK “non-dom” system and Italy’s targeted flat-rate regimes (e.g. 7 per cent for pensioners, €100,000 foreign-income cap, and partial reliefs for inpatriate and academics), the UAE offers an incentivising territorial tax environment with zero personal income, capital gains, inheritance or withholding taxes, combined with a simple, low corporate tax of 9 per cent only above AED375,000 ($102,110).

One hundred per cent foreign ownership permitted across nearly all mainland sectors following the implementation of the Federal Decree-Law no (32) of 2021 on Commercial Companies eliminating the legacy need for UAE national shareholders (with slight exceptions remaining for specific captive industries and sensitive activities to the UAE), extensive free-zone incentives (0 per cent corporate tax on qualifying income), a growing network of 137 plus double tax treaties the most recent of which is the double taxation between the UAE and Russia of 17 February 2025, and cutting-edge incentives (small businesses relief and 2026 research and development credits) make the UAE one of the most competitive and investor-friendly jurisdiction globally. (7)

The UAE’s corporate tax regime is straightforward: profits up to AED375,000 are taxed at 0 per cent, whilst amounts above that threshold incur a 9 per cent rate only. Free-zone enterprises (as distinct from the UAE mainland) that qualify as Free Zone Persons pay no corporate tax on their qualifying income whilst non-qualifying income is taxed at the standard 9 per cent. (8) (9).

Individuals benefit from a pure territorial system that does not impose personal income tax and so salaries which rank amongst the highest worldwide per industry are not taxed in the UAE. (10)

Granted, the UAE does not share Italy the UK’s traditional taxation DNA (albeit to variable extents depending on the European jurisdictional regimes and nexus) that is otherwise omnipresent across Europe. Rather it is a young country that has been built on entrepreneurship from all around the world coupled with the flow of oil-based industries’ income.

The latter has been deployed across diversified strategic sectors which, with the new 2031 vision, positioned the UAE to attract foreign direct investments from interested funds and institutions. (11) 

It is therefore against a greenfield background of raw taxation that the UAE current system should be understood and appreciated for maximum benefits to be derived from it.   

Prevention of double taxation
The United Arab Emirates has concluded more than 142 international agreements to avoid double taxation of foreign investors.

In addition, 111 treaties signed by the Emirates to encourage and protect investments can benefit foreign investors.

Footnotes 

1, Gov.uk "Tax on foreign income."

2, HM Revenue & Customs "Reforming the taxation of non-UK domiciled individuals,” published 30 October 2024. 

3,  LexisNexis "Temporary repatriation facility," updated 21 March 2025. 

4,  Ministero dell’Economia e delle finanze "Lavoratori impatriati – nuovo regime (dal periodo d’imposta 2024) - Che cos'è" updated 11 March 2025. 

5,  Ministero dell’Economia e delle finanze “Tax regime for new residents.”

6,  Agenzia delle entrate “tax incentives for attracting human capital in Italy,” published February 2018. 

7, UAE "Corporate tax (CT)" updated 6 June 2024. 

8, PricewaterhouseCoopers (PwC), "United Arab Emirates – Taxes on corporate income," updated 21 February 2025.

9, Klynveld Peat Marwick Goerdeler (KPMG), "Corporate Tax in the UAE."

10, Klynveld Peat Marwick Goerdeler (KPMG), "Doing Business in the UAE," published 2024.

11, UAE Ministry of Investment, "UAE Matures Into a Global FDI Magnet," released 24 January 2025.