Europe’s multimillionaires are restless. In the UK, the new Labour government’s decision to axe a non-domiciled tax regime that benefited wealthy foreigners has led to a flood of reported relocations.
In France, the lack of political clarity following snap parliamentary elections in July, which left an alliance of leftwing parties as the largest bloc, has prompted many wealthy people to make contingency plans to leave should a divisive wealth tax be reinstated.
Since changes to Norway’s wealth tax and capital gains tax regime in 2022, a steady stream of millionaires and billionaires has decamped to Switzerland.
It has never been so easy for the super-rich to relocate. As a result, the competition to attract wealthy people using tax sweeteners as well as citizenships or paths to residency has also intensified. Newer jurisdictions such as Dubai and Singapore are muscling in on traditional territories such as the UK, Switzerland and Monaco.
Before its recently scheduled abolition, the UK’s “non-dom” system was the world’s longest-lasting tax-privileged regime, with roots going back two centuries to the colonial era. It allowed foreigners who reside in the UK but consider themselves domiciled overseas to avoid paying UK tax on overseas income and capital gains for up to 15 years.
But in March, the previous Conservative government announced it would replace the regime with a new four-year system. Its Labour successor has indicated it will additionally remove non-doms’ ability to permanently shield foreign assets held in trust from inheritance tax. Labour has also vowed to close the lucrative “carried interest” loophole widely used by private equity partners, many of whom are also non-doms.
The second most well-established regime of tax privilege is Switzerland’s, which has been around for more than a century. It operates a lump-sum taxation or “forfait” system, whereby wealthy individuals reach bespoke agreements with local cantonal authorities regarding the tax rates they pay. The most recent national figures show over 4,500 people paid tax in this way.
But over the past couple of decades, several new contenders have introduced tax-privileged systems purposely designed to entice wealthy foreigners, including Cyprus, Greece, Italy, Malta, Portugal and Spain.
Further afield, city-states Dubai and Singapore have also been vying to attract wealthy expats with offers of low or, in the case of Dubai, no income or capital taxes for individuals. That has reinforced a trend for millionaires and multimillionaires to up sticks and relocate, according to research by Henley & Partners, a global migration advisory firm. Tax is often a key factor in the decision of such wealthy émigrés.
The firm tracks the movement between countries and cities of more than 150,000 high net worth individuals. It forecasts that in 2024, a record 128,000 millionaires will relocate, eclipsing the previous record of 120,000 set last year.
€200,000New flat annual income tax for those taking Italian tax residency
Dominic Volek, head of private clients at Henley & Partners, described the great millionaire migration as “a canary in the coal mine” for profound shifts in the global wealth landscape that could have significant effects on the countries they leave or adopt.
Government’s value the wealth and consumption that the rich bring, but there are also risks of a backlash from local populations if an influx of wealthy foreigners pushes up local property prices, puts strains on public infrastructure or results in over-gentrification.
In the past year alone, three of Europe’s most popular tax-privileged regimes have tightened their offers in response to political pressure. In addition to the UK’s overhaul of the non-dom system, Portugal shut its original non-residents programme last year and launched a new system this year that is no longer available to those whose income comes from pensions. Nordic nations had complained that the old system lured retirees, who stopped paying tax in their home countries.
Last week, Italy suddenly doubled an annual flat tax on the foreign income of new residents to €200,000.
One international tax adviser privately admits that tax-privileged schemes are always likely to attract political ire from locals unless they successfully manage to keep out of the spotlight.
“They may be difficult to justify politically — because at the end of the day you’re giving a favour to rich people,” the adviser says.
The wealth and spending that the super-rich bring to a country is the main motivation for rolling out the fiscal red carpet. But some countries do also require wealthy foreigners to pay some tax. Often the amounts paid are not insubstantial. For instance, the latest figures show £8.9bn was paid by 74,000 non doms in the UK.
“The main benefit is these people will consume more than the average person,” says Sean Bray, director of European Policy at Tax Foundation Europe. “So governments are willing to give some relief on the income tax side to gain more on the consumption tax side.”
He adds that the three main approaches are to create millionaires, retain millionaires or attract millionaires from other countries. In practice, many countries try to tick off all three.
However, wealth managers report that the competition to attract rich migrants seeking to avoid potential higher levies elsewhere is particularly fierce at the moment, driven partly by clampdowns in rival jurisdictions.
Advisers in countries including Italy, Switzerland and the UAE say they have been fielding more and more inquiries from UK-based non-doms to relocate. “There are plenty of territories that see the UK’s non-doms as up for grabs,” says Tim Stovold, partner at Moore Kingston Smith, a UK-based accountancy firm.
Anthony Richardson, a barrister at London-based Church Court Chambers who regularly handles international tax matters, says many wealthy individuals are concerned about the general direction of travel in western countries.
“As a result of the massive amount of debt that governments took on as a result of the pandemic, we started to see an exodus of the millionaire and billionaire classes out of the UK and other places to places like UAE,” he says.
“What they see as a danger is that their wealth will be seen as readily available cash,” he adds. “I wouldn’t say the efforts to attract those people have intensified, I would say the exodus has intensified.”
Paul Donovan, chief economist at UBS global wealth management, adds that the migration of millionaires is also being driven by “structural upheaval in global wealth” including the impact of sanctions on many wealthy Russians and the desire of many business owners to live closer to where their businesses are located.
Last month, UBS published a report forecasting the UK and Netherlands would lose the most millionaires by 2028 — falling by 17 per cent and 4 per cent respectively. The two countries bucked a worldwide trend in which the number of millionaires is set to rise in 52 out of 56 countries that the bank monitors. Its data includes those who have become millionaires through wealth creation as well as émigrés.
Donovan says this is partly because there were a disproportionately high number of millionaires in the UK and Netherlands relative to the size of their economies. As a result, any structural upheaval affecting nomadic millionaires would be more likely to have an outsized impact in both countries.
Others point to changes in the international financial landscape during the past decade which have had an impact on the ability of the super-rich to shelter their wealth.
“Historically people would stay in their own country and stash their money abroad in tax havens,” says Pascal Saint-Amans, a former head of tax at the OECD. “But the end of banking secrecy and the increase in the exchange of information . . . has meant if you don’t want to be taxed in a country, you leave the country.”
Relocation decisions are not just about tax rates.
Emma Chamberlain, a UK-based adviser on international tax issues at Pump Court Tax Chambers, says factors such as security, education, business infrastructure, stability, culture and community are also important — and that individuals often move where colleagues, friends or relatives are based.
Philippe Pulfer, who as a partner at Swiss-based law firm Walder Wyss helps high-net-worth people decide where to live, stresses that for many, economic and political stability is very important.
“The trend that we see is that families are no longer that static and they may change place of residence more easily than they did in the past. But even when that is the case, they like stability,” Pulfer says. “They want to relocate to a country that is not subject to rapid political changes.”
The UK’s decision to withdraw from the EU was one such change. According to Henley data, the country suffered a net loss of 16,500 millionaires between 2017 and 2023.
China is also suffering from an exodus of super-wealthy citizens following its draconian zero-Covid policies and President Xi Jinping’s “common prosperity” agenda of redistributing wealth.
Bray agrees that “economic stability and tax stability” are highly prized by wealthy people looking to relocate. However, he adds that while tax may not be the sole driver of their decisions, it is certainly a bigger factor than it would be for low- to middle-income workers.
“High net worth capital owners are highly mobile. They tend to respond to incentives and have the means to take advantage of them.”
Chamberlain adds that Europeans working in private equity have until recently liked the UK and are now gravitating to Italy, especially Milan, while Dubai and more recently Singapore are places often of more interest to those from Asia.
Switzerland “anecdotally seems to be more popular with German, Nordic and French speakers,” she says, though she cautions that these are broad generalisations. Much may depend on whether children are still in school or their parents have retired.
Peter Ferrigno, director of tax services at Henley & Partners, says Cyprus and Malta appeal because they do not tax foreign dividends.
He adds that for Europeans “who need to be closer to their home markets”, Greece and Italy remain popular because of their maximum flat tax rates. In Greece, this is €100,000 a year — which he says for anyone earning over around €250,000 is very attractive.
Marco Cerrato, a partner at Maisto e Associati, a law firm with offices in Italy and the UK, reports that this year the top three destinations for wealthy expats to want to relocate to have been Italy, Switzerland and Monaco.
However, certain other countries have also fallen by the wayside. “When Portugal ended its regime for new residents, all eyes turned to Italy. Now they’ve just decided to put the price up which no doubt will limit the number of people who will take up the regime,” says Stovold, of Moore Kingston Smith.
Wealth managers say such sudden changes illustrate the risks of moving country based on tax sweeteners — they can change swiftly if the political wind shifts.
Pulfer adds that there is little schadenfreude in Switzerland about the changes to the UK’s non-dom regime. “For a long time, the two obvious countries for wealthy individuals, the two blue-chip jurisdictions, were the UK and Switzerland,” he says. “I don’t think it’s to the advantage of Switzerland that this [non-dom system] is going away in the UK.
“Competition [between jurisdictions] is healthy and it tells the authorities to keep taxes at a reasonable level.”
Giorgia Meloni, Italy’s prime minister, says the country’s sudden decision to double the price of entry to its flat-tax regime is because the government wanted to “mitigate a measure that seemed extremely generous”.
Her government also says the country wanted to avoid a race to the bottom with other nations in trying to lure individuals and companies through tax breaks.
Finance minister Giancarlo Giorgetti, nodding to Italy’s high sovereign debt levels, says that “if this competition starts, countries like Italy — which has very limited fiscal space — are inevitably destined to lose.”
There has also been disquiet in Milan, the business city in the north of the country that has become a magnet for the super-rich thanks partly to the flat-tax regime, which has been dubbed “svuota Londra”, or “empty London”. Over 2,700 super-rich individuals have moved to Italy since it came into force in 2017, but some Milanese complain of soaring property prices.
In Switzerland, between 2009 and 2012, some cantons voted to abolish the use of the forfait system, including Zurich. The Swiss voted in a 2014 federal referendum to keep lump-sum taxation rules, but there are ongoing debates about whether levies, specifically inheritance taxes, should be increased on the wealthiest.
Pulfer and other advisers, along with their clients, are well aware that other countries could introduce more restrictions on existing tax-privileged systems, and not only because of local pressure.
At the global level, discussions at the G20 have centred on whether a worldwide minimum tax on billionaires should be introduced, similar to the OECD’s effort to set a minimum corporate tax rate.
While the plan has not yet garnered sufficient support for implementation some see it as a sign that there will be increased activity in this area.
“I think you’ll have calls for international tax rules to try and deal with this issue,” predicts Grant Wardell-Johnson, global tax policy leader at KPMG International.
Volek says demand from the super-rich for stable, convivial and financially lenient havens remains as high as ever and that many jurisdictions are willing to cater for it. “The countries that adapt and innovate will be the ones that thrive.”
But Saint-Amans, formerly of the OECD, says that while tax competition among countries is still “fierce”, it is probably reaching its peak.
“The UK move is probably a signal that something is happening. Big countries that have benefited massively from these regimes are getting cold feet . . . and that’s a reflection of the populism they’re facing.”
