What better tax regimes does Europe offer to those who want to move?

The so-called non-dom regime is being abolished in Great Britain. Capital and people often migrate to Switzerland, Spain, Italy, Portugal, Cyprus for this and other reasons. What is appealing there?

Switzerland

PIT

Some cantons offer a flat PIT rate for people who do not work in Switzerland and are not Swiss citizens, without applying PIT on capital gains. PIT in this regime is applied as a % of shared expenses. For example, if the canton estimates that a person's lifestyle in Switzerland involves spending EUR 1m per year and the average such PIT is 20%, then the person will pay 200k. Typically, the lifestyle calculation includes: housing expenses, transport, clothing, food, insurance and health services, education and childcare, travel and entertainment, including hobbies and restaurants, etc. daily expenses. The canton compiles information from interviews, bank statements and market estimates.

Wealth tax

In addition, wealth tax must be paid. Its amount is 0.5%, and its base is 20x the person's lifestyle. In our example - 0.5% of 20x 1m = 100k.

Social

Additionally, social security contributions must be paid - around EUR 25k francs per year.

Summary

Then the total tax payment would be around 325k francs. If income outside Switzerland is significant, but lifestyle expenses are reasonable, this could be an interesting option.

Italy

Some time ago, the Italians came to the conclusion that their tax regime was inefficient and the tax burden was high. Wealthy people, ideas and investors did not come, and young entrepreneurs left. At that moment, politicians decided that more wealthy people should come to the country, which, in turn, would stimulate the economy with demand for real estate, design, gastronomy, etc. Therefore, a regime has been created in Italy, according to which wealthy and economically active people who move to this country are essentially exempt from Italian taxes for 15 years. Such people are subject to an annual payment of around EUR 100k per year, while the rest of their income is taxed according to the rules of the country where the income originates. This is a classic territorial regime. Of course, there are additional rules to prevent abuse that you should pay attention to before settling happily in Italy. The regime has proven so popular in recent years that in professional conferences many joke that Milan cannot accept new residents.

Spain

In Spain, the rules can vary depending on the region, but it is common for Spanish hotspots to use the so-called Beckham rule. It offers two advantages: up to EUR 600k of income earned is taxed at 24%, and income earned outside Spain is not taxed in Spain. The regime aims to attract people to the country who want to start or continue their business there. This applies not only to the wealthy, but to anyone who is commercially active and meets the minimum requirements.

Portugal

A new tax incentive system has been created for research and innovation - a list of professions that support research, education and innovation has been created. Qualified individuals must register with the state authorities and receive proof that they are actually working in this sector. These individuals pay 20% income tax on income earned in Portugal, and income earned from sources outside Portugal is tax-free.

Cyprus

If we open a map of Europe, we see that Cyprus is geographically very close to troubled spots - Israel, Syria, Lebanon. However, this has not reduced the influx of people and investment to this rocky island. Cyprus offers tax residency to individuals who stay there for at least 60 days a year, but do not spend more than 183 days in any other country and who are not considered tax residents by any other country. This is attractive to an internationally mobile society, as taxes are favorable and permanent presence is not required. In addition, Cyprus has a permanent non-resident regime, which provides for the non-taxation of PIT on interest and dividends earned by non-residents outside Cyprus.

Each case is individual

So, in Switzerland, a person whose income and living expenses are one million francs (i.e. a little over EUR 1m) would pay around 325,000 francs in taxes. In Latvia, a person who earns and spends one million euros would normally pay at least 285,000 euros in 2025, if we do not take into account social contributions. In turn, if the taxable income is two million euros, the tax would be at least 570,000 euros. Of course, here we will often compare apples with pears, but still..

This blog was made thanks to this article by my colleague Kart Kelder. She, by the way, was the very first guest to Tax Stories podcast.