Updated
GL-R-04
Glossary · Taxes and residency
Remittance basis - Remittance basis (UK)
A UK regime under which foreign income is taxed only when brought into the country (remittance). The basis of the tax relief for non-dom residents.
01 / In 30 seconds
The short answer
- What it is
- A regime under which foreign income is taxed only when it is brought into the country
- Where it applies
- Classically in the United Kingdom, for non-dom residents
- How it works
- As long as the income stays abroad, there is no tax on it
- The basis for
- The tax relief for non-domiciled residents
- Can you prepare
- Yes: plan income flows and observe the rules
02 / In plain words
What Remittance basis means
The remittance basis is a principle of taxation under which a resident’s foreign income is taxed only when it is brought into the country of residence (remitted). As long as the money stays abroad, no tax on it arises in the country of residence.
The classic example is the United Kingdom, where the remittance basis is available to non-domiciled residents (non-doms). They are taxed on local income in the ordinary way, and on foreign income only when it is transferred to the UK. This is the mechanism that makes non-dom status attractive: part of worldwide income can be kept abroad without UK tax.
The regime is lawful but has nuances: a fixed charge may be levied on long-term residents for using it, and the rules change periodically. The key is to plan carefully which money is brought in and where: a careless transfer into the country can unexpectedly create a tax liability.
A case from practice
A non-dom resident of the United Kingdom keeps income from foreign investments in an account outside the UK. As long as they do not bring this money into the country, no UK tax arises on it. As soon as they transfer part of it to the UK, that part becomes taxable — which is why they plan the flows in advance.
Who the regime interests
- Non-dom residents of the United Kingdom
- Wealthy people with foreign income
- International entrepreneurs
- Those holding assets abroad
- Long-term tax planning
- Structuring worldwide income
03 / What it covers
How the remittance basis works
Principle
- Foreign income
- Tax on remittance
- No tax before remittance
Who it is for
- Non-dom residents
- Domicile in another country
- Mostly in the UK
Conditions
- A possible fixed charge
- For long-term residents
- The rules change
Risk
- A careless transfer
- Creates a liability
- Flows need tracking
04 / How it works
How to use the regime
Check non-dom status
Separate income flows
Keep foreign income abroad
Observe the remittance rules
A lawful relief
05 / Key facts
What you need to know
01
Foreign income is taxed only when brought into the country
02
The classic example is the British non-dom regime
03
As long as the money is abroad, there is no tax on it
04
Long-term use may carry a fixed charge
05
A careless transfer can create a tax
Common mistakes
- Carelessly bringing foreign income into the country
- Mixing “clean” and taxable money in one account
- Not accounting for the fixed charge for the regime
- Treating the regime as full exemption from tax
- Ignoring changes to the rules
06 / Expert advice
How to prepare in advance
The regime requires careful planning of flows: foreign income is kept in separate accounts abroad, not mixed with money that is brought into the country, and what is transferred where is worked out in advance. Non-dom status, any fixed charge and the current rules are checked. Then the relief works lawfully and without unexpected liabilities.
What we do for you. We help use the remittance basis lawfully: we check non-dom status, arrange income flows so that foreign money stays abroad without tax, and follow changes to the rules so that the relief is sustainable.
Dmitry NagyTax consultant, international taxation and compliance (ex-Big4)
07 / Questions
Frequently asked questions
A regime under which foreign income is taxed only when it is brought into the country. As long as the money is abroad, there is no tax on it in the country of residence.
Classically, non-domiciled residents (non-doms), above all in the United Kingdom. The key condition is a domicile in another country.
No. Local income is taxed in the ordinary way, and foreign income when it is transferred into the country. It is a deferral or relief, not full exemption.
A fixed charge may be levied on long-term residents. The conditions and amounts change periodically and are checked in advance.
By bringing foreign income into the country you create a tax liability on that very sum. That is why flows and accounts are carefully separated.
Directly: the remittance basis is the mechanism that makes non-dom status advantageous. One is usually not considered without the other.
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