Remittancebasis
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.
- 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
In plain words
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.
Who the regime interests
How the remittance basis works
- Foreign income
- Tax on remittance
- No tax before remittance
- Non-dom residents
- Domicile in another country
- Mostly in the UK
- A possible fixed charge
- For long-term residents
- The rules change
- A careless transfer
- Creates a liability
- Flows need tracking
How to use the regime
- 01Check non-dom status
- 02Separate income flows
- 03Keep foreign income abroad
- 04Observe the remittance rules
- 05A lawful relief
What you need to know
- Foreign income is taxed only when brought into the country
- The classic example is the British non-dom regime
- As long as the money is abroad, there is no tax on it
- Long-term use may carry a fixed charge
- 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
What this means for a BRIDGES client
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.
Frequently asked questions
01 /What is the remittance basis?
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.
02 /Who is the regime available to?
Classically, non-domiciled residents (non-doms), above all in the United Kingdom. The key condition is a domicile in another country.
03 /Is it full exemption from tax?
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.
04 /Is there a charge for the regime?
A fixed charge may be levied on long-term residents. The conditions and amounts change periodically and are checked in advance.
05 /What is the danger of a careless transfer?
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.
06 /Is it connected with non-dom status?
Directly: the remittance basis is the mechanism that makes non-dom status advantageous. One is usually not considered without the other.
See also
Read next
This material has undergone editorial review by BRIDGES.
Using the non-dom regime?
We will arrange income flows under the remittance rules, so that foreign money stays abroad lawfully and without tax.