The rich citizens of Europe could be on the move following elections in the UK and France that have brought centre-left and left-wing parties into the corridors of power.
A new Labour government in the UK and a French election in which far-Left parties supporting wealth taxes did well, means the political switch to the left comes at time when the rich are ready to move when challenged by overbearing taxes.
Wealth advisers, lawyers and accountants have been anecdotally reporting rising interest in how to shift wealth and residence once a tax regime become less favourable. The investment bank UBS issued a report this week that forecast a decline in the numbers of millionaires in major European countries in the coming years.
Paul Donovan, chief economist at UBS Global Wealth Management, said the global wealthy are constantly on the move regardless of specific election results, keeping an eye for the most favourable tax residencies, which include the UAE and Singapore.
"The non-indigenous millionaire population [Nimps], the global population, which is constantly shifting, will be looking for low-tax locations all of the time," he said.
Tax experts and advisers in France say they have been inundated with enquiries from the country's ultra-wealthy following a largely inconclusive and chaotic election.
partner at law firm Jeantet
No single grouping in the national parliament gained enough seats to govern alone in Sunday's poll, while a broad coalition of greens, socialists, communists and the hard-left France Unbowed party (LFI) won most seats in the vote.
It quashed the far right's goal of an absolute majority, even as Marine Le Pen's anti-immigration National Rally (RN) and its allies grew their seat tally in the National Assembly, from 89 in 2022 to 143.
In its campaigning, the New Popular Front (NFP) left-wing alliance promised an increase in the minimum wage and higher taxes on businesses and wealthy people. A senior leader called for a 90 per cent wealth tax after the votes were counted.
The wealth tax has a significant history in France. First introduced in 1982 under then-president Francois Mitterrand, it was tweaked and refashioned by several successive French governments over 30 years until its was axed by President Emmanuel Macron in 2017.
During the final six years of the wealth tax, those with a net worth of more than €1.3 million ($1.4 million) were levied at 0.5 per cent with a top rate of 1.5 per cent for those with a net worth in excess of €10 million.
![A shuttered Bulgari shop on the Champs-Elysees on the day of the second round of the French parliamentary election. AP](https://thenational-the-national-prod.cdn.arcpublishing.com/resizer/v2/LBWRHRSNHAYXSRAFYRCR2TBIF4.jpg?smart=true&auth=9cb21971f2d6a9917c89064058281bcdc5bf4e0858d1a60f2f10dedd9c4cd534&width=400&height=267)
One of Mr Macron's first actions in office was to exclude investments from the wealth tax, concentrating it on property assets, as well as instigating a flat rate of 30 per cent on capital gains.
But as well as reversing that, the NFP would also seek to widen the applicability of exit taxes on wealthy people who move their tax residence or businesses out of France, as well as raising the top marginal income tax rate to 90 per cent.
![French President Emmanuel Macron leaves a polling station in Le Touquet-Paris-Plage. Some wealthy French residents fear his scrapping of the wealth tax could be reversed. Reuters](https://thenational-the-national-prod.cdn.arcpublishing.com/resizer/v2/CQ5MEZA6BHKZZODODJ2KNQMFEM.jpg?smart=true&auth=12dfe01796c5a681e5cdb5e4d8830f4d1e60ac9090ae4b943b6f820f4c981adb&width=400&height=267)
The prospect of Mr Macron's measures being reversed has prompted many French ultra-high new worth individuals (UHNWIs) to consider relocating to more "tax-friendly" countries, within Europe and beyond.
Claudio Gristanti, head of tax for Italy at law firm Osborne Clarke, told The National the company has had a "couple of requests" from wealthy people who are French residents for tax purposes with "foreign structures (mainly non-French trusts)".
Xenia Legendre, Paris-based tax partner at Hogan Lovells, told The National of a "huge rise in enquiries about the relocation out of France".
"There are number of destinations – all depend on the personal situation and business purpose," she said.
"The relocation needs to be genuine and needs to be respected by the family, otherwise the tax authorities will challenge it. Destinations might be Italy, with the newly set up non-dom taxation regime, Dubai, Singapore or Florida.
"But each case is very personal and requires careful analysis of the family lifestyle and connections."
However, some say their clients are taking a more sanguine approach and are by no means starting to panic.
"It is more a wait and see," Vincent Lazimi, a partner at law firm Jeantet in Paris told The National, "but people are worried and [are looking to] move some financial assets outside France".
Non-doms
Although it has yet to confirm its intentions, the UK's new Labour government will, more than likely, implement the changes to Britain's non-dom tax regime first announced by the Conservative chancellor Jeremy Hunt this year.
In March, the then-Conservative government said it would phase out the non-dom tax status that benefits at least 80,000 people who live in Britain but pay little or no tax on the money they earn overseas.
In its campaigning running up to last week's general election, Labour promised to end the use of offshore trusts that can be used to avoid inheritance tax.
Catherine de Maid, partner at law firm Burges Salmon, said while her largest clients would accept paying higher tax rates on earnings and capital gains, any attempt to tweak inheritance tax would be a "deal breaker" for at least three of them.
"Inheritance tax in the UK is high at 40 per cent and [clients] are not willing to pay this rate of tax on assets which were often acquired or earned many years before they had any connection with the UK. They would prefer to leave altogether," she said.
![London's ultra-wealthy favour shopping at Harrods but for how much longer?](https://thenational-the-national-prod.cdn.arcpublishing.com/resizer/v2/DMZAVVHD65G2JGX5I5BVAQQUQE.jpg?smart=true&auth=737d6c6119d53385cb01f87ceb1018ba4eee14507c776b6e39f0f3e4e862fe73&width=400&height=289)
Data from PwC shows there is no comparable inheritance tax in the UAE, Singapore or most Swiss cantons, while Spain and Italy impose rates of 34 per cent and 8 per cent, respectively.
Alexandra Hewazy, head of key clients and resident non-dom wealth advisory at Barclays Private Bank, said uncertainty was encouraging some to reduce exposure to the UK.
"This isn't just their asset base but can also be their physical presence and the intellectual capital which comes with this," she said.
Meanwhile, figures released this week showed non-doms paid £8.9 billion ($11.5 billion) in income, payroll and capital gains taxes in the 2022/2023 tax year.
The former Conservative government calculated that the scrapping of the non-dom status would raise £2.7 billon a year by 2029.
But evidence that the UK's rich are on the move is most stark in the London prime housing market, where by the end of June there were 25.8 per cent more houses priced at £5 million and above for sale than at the same time last year, real estate analytics company LonRes found.
At the same time, sales volumes were down 21.5 per cent in June, compared to the same month last year.
In its update to investors this week, estate agents Winkworth said while the UK general election had made little impact to the overall housing market, the prime, high-end bracket had been effected, "where a combination of the Conservative Party’s removal of non-domiciled status, the Labour Party’s stated intention of adding VAT to private school fees, and the higher cost of finance have weighed on this sector".
Italy an 'interesting opportunity'
According to the wealth intelligence company, New World Wealth, 60,000 millionaires left the country between 2000 and 2017 as a direct result of the wealth tax or the “impôt de solidarité sur la fortune” as it's known in France.
For the wealthy French looking to relocate within the EU, some may look no further than Italy, Mr Gristanti told The National.
"At this stage the Italian flat-tax regime represents an interesting opportunity for wealthy people who decide to stay in Europe obtaining an efficient taxation on the income coming from their estates located outside Italy.
"Indeed, all these amounts are covered under the umbrella of €100,000 per annum reduced to €25,000 for the accompanying wife and children. The regime also provides for an exemption from donation and inheritance taxes."
Italy's €100,000 flat-fee annual wealth tax has also appeal to many UHNWIs looking to leave the UK, given the upcoming scrapping of so-called non-dom status.
Mr Gristanti told The National his firm had received "a lot of mandates" from UK-based clients.
"We have submitted about 12 tax ruling requests to the Italian tax authorities to obtain confirmation that the applicants are eligible for the Italian flat-tax regime. Further contacts with potential clients are ongoing."
The catch is that to qualify to become an Italian tax resident, an individual has to have lived in the country for a minimum of 183 days, meaning that even if a wealthy French person moved to Italy today, they would not qualify to be resident for tax purposes until early next year.
This is only one aspect of relocating for tax reasons that shows what a complex manoeuvre it can be, with issues such as selling property, uprooting the family and resettling in a new country all thrown into the mix.
Also, those wealthy French citizens looking to flee to foreign climes should be aware of exposing themselves to potential financial risks such as double taxation, where levies can be incurred in two different jurisdictions.
"We have a doubt around the application of the double-tax treaty between France and Italy for people who benefit from the flat tax of €100,000 in Italy," Mr Lazimi told The National.
Dubai would be worth exploring, said Ms Legendre, though relocation rules should be respected. "For a Dubai tax residency to be respected by the French tax authorities, the family needs to really spend time in Dubai and this is a big constraint on personal life. If this matches genuine set up, this is an interesting location," she told The National.
![Dubai Marina Beach. UHNWIs are drawn to places such as the UAE because of the low-tax regimes. AFP](https://thenational-the-national-prod.cdn.arcpublishing.com/resizer/v2/E4GQZOYFIRWDCOBG7QCE4VJ3C4.jpg?smart=true&auth=0d766600d82435e2050114c7016c5900215d857f064640031467ccb197de0b2e&width=400&height=266)
'Looking for low-tax locations all the time'
However, the fact remains that a coalition government in France will require much horse-trading and, as such, the chances of the wealth tax being reintroduced in full are nowhere near guaranteed.
Aside from this, going through the upheaval of relocation exclusively for tax reasons doesn't make sense to Ms Legendre.
"Relocation needs to match the lifestyle, professional and personal connections," she told The National. Tax is only one element of this."
Likewise, in the UK the scrapping of the non-dom tax status by itself may not be enough to coax huge numbers of the country's wealthy elite to move.
James Whittaker, head of UK wealth management and the chief executive of DB UK Bank, noted that most UHNWIs were keeping their powder dry before making any major decisions for themselves and their families.
"There's an enormous amount to weigh up when switching from one jurisdiction to another," he said. "We continue to talk to people who want to move wealth [to the UK], particularly from the United States, but they want to see detailed legislation first."
Nonetheless, Chris Ball, founder and managing partner at UK and Dubai-based Hoxton Capital Management, told The National that because the global rich are "increasingly mobile, political changes can have a sizeable impact on financial decisions and will influence where a person chooses to be tax resident".
"Many of our clients are looking for stability and the UAE is seen as a safer bet when compared with some of the erratic policy-making overseas," he added.
According to the UBS Global Wealth Report for 2024 published on Wednesday, Britain is likely to lose nearly one in six of its US dollar millionaires by 2028.
The UBS report forecasts that by 2028, the number of dollar millionaires in the UK would fall 17 per cent from just over three million today to about 2.5 million in 2028. The only other country in the UBS study to lose millionaires was the Netherlands, which is expected to see a fall of 4 per cent by 2028.
![](https://thenational-the-national-prod.cdn.arcpublishing.com/resizer/v2/RVJCBJDLXJATTHMPQ4KXVKAQB4.png?smart=true&auth=44f3619fe94383eefebcba3e1aa9cd080f05d02e978d74c1100c5c19b58bcfc6&width=400&height=322)
However, Mr Donovan noted that the two countries had attracted more than the average number of millionaires in recent years and while in the UK's case the non-dom tax issue had had a "small effect", the nomadic nature of global wealth and other geopolitical events played a greater part in the fall in the number of millionaires.
Meanwhile, UBS also forecast a 47 per cent surge in millionaires in Taiwan, driven by the island's semiconductor industry.
The study also found that overall, in dollar terms, global wealth grew by 4.2 per cent last year, following a 3 per cent decline in 2022.
The US hosts the highest number of millionaires in the world according to the UBS analysis, at nearly 22 million. China is in second place with just over six million, roughly double the number of the third market, the UK.
Right at the top of the world's wealth scale are 14 people who between them own close to $2 trillion.