Reform of the ‘non-dom’ regime in the UK: Why Andorra is the best alternative in Europe ?
The UK is preparing for significant reforms to the taxation of resident non-domiciled (‘non-dom’) individuals, removing the concept of ‘domicile’ and replacing it with a residence-based tax system under the new Foreign Income and Gains (FIG) model.
These reforms, which will come into effect from 6 April 2025, will affect thousands of non-doms and their tax treatment in relation to their foreign source income and assets located abroad. From that date, individuals, as well as settlors of trust structures that cannot benefit from the new FIG regime, will be taxed on their UK and foreign-source income and gains in a similar way to UK domiciled residents. In addition, the foreign assets of long-term residents will be subject to Inheritance Tax (IHT).
In view of this reform, those affected will have to rethink their tax and estate planning. In this context, Andorra emerges as a strategic alternative within Europe offering a combination of quality of life and an exceptional tax framework, ideal for high net worth individuals seeking to efficiently structure their tax burden without compromising their wealth stability and personal situation.
Andorra vs. UK Comparison:
Andorra | UK | |
Income tax | Max rate: 10% | Max rate: 45% |
Dividend tax (wealth income) | -Andorran dividends: 0 % -Foreign dividends: max rate 10 % | Max rate: 39,35 % |
Capital gains tax | Max rate: 10%* * Capital gains from the sale of shares in an Andorran or foreign company are exempt under certain conditions. | 10%/20% (+ 8 % surcharge on certain gains). |
Wealth tax | None. | None. |
Inheritance & Gift Tax | None. | IHT (Inheritance Tax) of 40% on inheritances over the £325,000 threshold; for gifts, a seven-year rule applies before being exempt from IHT. *The surviving spouse or civil partnership is exempt from IHT. |
Focus on income and capital gains from foreign trusts | Andorra does not recognise trustsunder its legislation. In certain cases, income and capital gains generated by these vehicles may not be subject to taxation. | In the UK, the FIG removes previous tax protections for foreign trust income and capital gains. As a result, these may now be subject to taxation. |
Corporate tax | 10 % | 25 % |
Value added tax | Max rate: 4,5% (IGI) | Max rate: 20 % (VAT) |
Given the tax changes in the UK, Andorra stands out as a strategic alternative, offering a more favourable fiscal environment for individuals with significant wealth (HNWI and UHNWI) who want to reduce their tax burden and secure their financial stability.
This information is provided for informational purposes only and does not constitute legal advice. It is based on the regulations in force at the time of writing.
At Carlota Pastora Advocats, we are available to address any queries related to geographic mobility and its legal and tax implications.