If you are a contractor considering leaving the UK for Europe or beyond, setting up a limited company before becoming a non-tax resident of the UK could be a strategic move. This could potentially enable you to contract through your limited company from abroad without worrying about IR35 while taking advantage of more favourable tax regimes elsewhere.

IR35 explained 

IR35 is a UK tax legislation, introduced in 2000, which targets workers considered by HM Revenue & Customs (HMRC) to be “disguised employees”. The idea is that if you are treated like an employee, you should be taxed as one. 

Changes to IR35 legislation introduced in April 2021 saw the responsibility for determining IR35 status shift to the company that hires the contractor, but only if the client is a medium or large business.

Small businesses are exempt from this rule, meaning contractors working for small businesses continue to determine their own IR35 status.

Does IR35 apply if you are non-tax resident in the UK?

If you are a non-UK resident, and the location in which the duties of the contract are carried out is outside the UK, then the services that you provide are not subject to the IR35 legislation.

Non-resident personal service companies who engage with UK-based end-clients/users should not be subjected to the IR35 legislation.

Which countries offer tax-advantaged schemes for new residents?

Portugal 

Portugal's new Fiscal Incentive for Scientific Research and Innovation (IFICI) Programme, based on the Non-Habitual Resident (NHR) programme, offers significant tax benefits for new residents. 

The IFICI programme is designed to attract highly skilled professionals such as IT specialists, doctors and engineers.

It offers them a flat tax rate of 20% on their income for 10 years. There is also an exemption on foreign-sourced employment income or self-employment income as opposed to the usual 14%-53% progressive rates.

Who can benefit? 

  • New residents in Portugal who have not lived there in the past five years.
  • Individuals who have not participated in the previous NHR regime or the other “ex-residents” programme.
  • Professionals in sectors like technology, healthcare, and renewable energy.

Greece

Greece's Non-Domicile Tax regime exempts new residents from taxation on foreign-sourced income for up to 15 years. 

You can pay a flat tax of €100,000 annually on your global income, regardless of the amount, for up to 15 years. An additional €20,000 covers each dependant.

You don’t need to declare your foreign income to the Greek government.

Who can benefit? 

  •  Individuals who have not been a Greek tax resident in the last seven out of eight years.
  • Those who have invested at least €500,000 in Greek real estate, businesses or financial assets.
  • Those who hold a Greek Golden Visa.

Malta

Malta’s Highly Qualified Persons (HQP) scheme offers a flat tax rate of 15% on income for highly qualified individuals working in sectors such as IT, financial services and aviation. 

The scheme can benefit professionals contracting through their own company while living in Malta.

Who can benefit? 

Individuals who work in one of the qualifying sectors and earn a minimum salary as specified by the government.

Have an employment contract subject to the laws of Malta and at least five years of professional work experience.

Those whose annual income meets a minimum salary threshold.

Consulting with a tax adviser is a good idea when trying to navigate the complexities of these different regimes and to ensure compliance with UK and local tax laws. If you need advice, contact us at accounting@sableinternational.com or call +44 (0) 20 7759 7553. 

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