Where you can establish your tax residency to legally reduce your tax bill
We spoke about how establishing your tax residency abroad can dramatically increase your net income and some of the factors to consider when designing and implementing your tax residency strategy, and how CFC laws are ultra important in deciding where to be a tax resident.
Today, I want to discuss some jurisdictions with advantageous tax laws to establish yourself.
Remember that these letters are written for illustrative purposes and in no case, it is not, nor intended to be legal or tax advice. Before taking action, always speak with an attorney. We have a global network of attorneys and accountants we can refer you to in your relevant jurisdiction who can give you the proper advice according to your specific circumstances.
Where should I get Tax residency?
First, you want to move your tax residency in a country with low taxes or that does not tax foreign-source income.
Ideally, it should be a country with a double tax treaty (DTA) with your country of origin to have more clarity in your tax affairs and allow you to structure your business accordingly and avoid any potential double taxation.
If it does not have a tax treaty, make sure to get a tax residency certificate and pay some taxes in your new country and, record and save any documents that can be used to prove that you are lawfully residing in the new country.
Many countries have laws on tax residency that relate to your situation and state that if you intend to return you could be a tax resident.
So it might be wise to properly close down all affairs such as bank accounts and/or sell your assets located in your country of origin. However, this varies depending on the jurisdiction and it may not be required so the best thing you can do is to seek legal advice.
You will also want to move your tax residency to a country that does not have CFC laws. As we discussed in the previous email, CFC laws may tax income retained in your foreign company. Assuming you are applying an integral Flag Theory strategy and doing business through an international corporate structure, including offshore companies (more on that in the next letter), this factor is crucial.
Let’s take a look at some jurisdictions to consider when looking to establish a new tax residency.
United Arab Emirates
The United Arab Emirates does not levy personal income and corporate taxes (except some economic activities such as oil, gas and financial services). You can easily get a residency visa by setting up a tax-free 100% foreign-owned company in one of its more than 40 free trade areas. In addition, UAE has concluded more than 75 double taxation agreements (DTAs). We have written a comprehensive article on UAE residency, incorporation, banking and taxes.
Panama does not levy taxes on income earned abroad and has concluded 20+ DTAs.
Panama is an open country for immigration and banking as well as an international business hub. Its Friendly Nations visa program offers permanent residence to those who place a low bank deposit of $5,000 and have one “economic tie,” (usually a Panamanian company or the title deed to local real estate) in Panama.
Other options include investing in the country’s rainforests or obtaining retirement program Visa (Pensionado Visa). Check here on how to get residency in Panama.
Since 2014 Malta has been offering its economic citizenship program scheme for €1,150,000. But, it also has a global residency scheme that may be the most affordable in Europe.
The country isn’t exactly a low-tax jurisdiction but it does tax residents under this particular scheme on a territorial basis. It is also an attractive option for digital nomad types who want to base themselves in Europe but aren’t quite ready for residency in Monaco. In addition, Malta has an extensive tax treaty network with more than 70+ DTAs.
Check out how to get residency in Malta.
New tax residents who have not been taxed in Portugal as tax residents in the previous five years may qualify for the Non-Habitual Resident Regime. Under this regime, foreign-source pensions, dividends, royalties, interest income, and other investment income is exempted from taxation during a 10-year period.
Portugal has a wide variety of immigration programs where you can get residency by investing in real estate, stocks, bonds, venture capital or setting up a business.
This small nation with Black Sea coastline does not tax its residents’ personal income accrued outside the country. In addition, since an early 2017 tax law amendment, a company incorporated in Georgia is not subject to corporate tax until its profits are distributed. So, if you retain or reinvest profits in your company you won’t need to pay taxes. Georgia’s immigration policy is also quite liberal.
You can obtain a residency permit by incorporating a company or investing in an existing company. Citizens of 94 countries may reside or work in Georgia for one year visa-free. Check out how you can live in Georgia and pay no taxes.
Thailand is included on this list because it doesn’t have a CFC law and its cost of living is cheap. Also, if foreign source personal income is not remitted (or remitted one year after it is earned), it may be exempt from taxation. Its corporate tax policy is also relatively competitive for the region.
Overall, you could do worse than having residency in the Land of Smiles, especially since you can qualify for permanent residency after five years – or faster if you are married to a Thai national. There are a number of residency programs available, which include setting up a BOI Company, the Thailand Elite visa, Smart Visa for Entrepreneurs and High-skilled professionals and more…
Singapore has a relatively low tax rate. Taxes on corporate profits are between 0 and 17 percent. Startups generally pay nothing in their first three years as there are no taxes on profits under $150,000. There are lots of VC in the country, lots of entrepreneurs and co-working spaces and an exciting startup ecosystem. Mid-level workers and high-income earners on the S Pass and Personalised Employment Pass (PEP), respectively, face a flat 20 percent tax on their salary.
Entrepreneurs may want to look at EntrePass. Those who have around $4 million to invest can move to Singapore and get temporary residency with a special path to PR. Singapore categorizes those on the EntrePass or investment visas differently from those on “normal” passes. All citizens and residents enjoy no tax on interest, capital gains, or foreign profits.
Uruguay has several no-tax trade zones and offers residency (and a quick path to citizenship) to those who buy property or invest in a business there. New tax residents don’t pay taxes on foreign-source income for the first 5 years. If you are married you are eligible to gain citizenship there in just three short years. Uruguay is a place you can legally pay no taxes and get a citizenship in a short period of time.
You can get residency in Chile by proving $1,500-$2,000 regular monthly income or investing in Chilean stocks. Then, you’ll need to spend a half year there to qualify for a tax resident certificate. As a new tax resident, you are eligible for a 3-year tax-exemption on your foreign-source income, extendable for 3 more years.
And it doesn’t end here. There is a myriad of countries whereby establishing your tax residency and properly structuring your business you can legally slash your tax bill. Monaco, Bulgaria, Hungary, Macedonia, Qatar, Malaysia, Hong Kong, Macau, Philippines, Paraguay, Costa Rica, Nicaragua, and other well-known tax-free jurisdictions such as the Bahamas, British Virgin Islands, Belize or the Cayman Islands, to name just a few.
We have enabled an Immigration and Tax Residency portal, Residencies.IO, where you can intuitively compare more than 100 residency programs and tax frameworks to find the option that best suits your situation, needs, circumstances, and goals.
If you want to discuss options, we will be more than happy to have a call with you.
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