What are the countries with no taxes?
One of the main tenets of Flag Theory is that one should have a second citizenship, as it is an important part of international diversification. But just having a backup passport doesn’t end your tax obligations – far from it.
If you are a US citizen, you are liable to worldwide income tax, regardless of where you live or how many passports you have. US citizens are allowed to have as many passports as they want (I knew one guy who had five and was getting a sixth), but they will be liable to report (and sometimes pay) taxes to the IRS as American citizens.
Most countries (except the US and Eritrea) tax their subjects on a residential basis. This means that if you change your residency, it’s possible to change your tax status.
There are two legal strategies that you can adapt so that you can pay zero tax based on residency:
- Become a resident of a tax-free country that does not impose income, dividends and capital gains taxes, then move that income from the corporate to the personal level, tax-free.
- Become a resident of a territorial tax country that imposes only income taxes and other taxes on the income you earn within its borders (and that doesn’t have controlled foreign corporation (CFC) law, so you can retain profits within a corporation outside its borders, legally.
The Bahamas. The Bahamas imposes no income tax on its residents and receives most of its revenue from tourism and its robust offshore industry. Its residents pay zero tax, regardless of where they earn their income. The government application fee for Bahamas temporary residence is only $1,000, and it is renewable yearly. You can get a long-term or permanent residence if you invest $250,000 in real estate. The Bahamian passport is a surprisingly good travel document – just look at all that visa-free access!
The British Virgin Islands. Though typically recognized for its robust incorporation and fund management industries, the BVI is also home to a number of entrepreneurs from around the world who have planted a flag here to legally avoid high taxes and improve privacy and finance elsewhere. To get a residency permit, you will need to show bank statements that indicate your finance and personal wealth, and pay a $1,000 surety bond.
Brunei. You can obtain residence or permanent resident status in this small jurisdiction nestled on the island of Borneo. Brunei has great incorporation and banking options as well.
The Cayman Islands. This jurisdiction’s financial authorities have made incorporating into their state expensive, and generally, it is best used for fund management, not offshore companies that hold an active business. To live on Grand Cayman, you must have an annual income of nearly $150,000, and invest $500,000 in real estate or local companies (which could be your own company). These requirements are more relaxed if you choose to live in one of the smaller islands.
Monaco. I love this place. The principality has a special place in my heart and visiting there is always an adventure (just avoid the casinos!). The principality bordering France and Italy is part of the gorgeous French Riviera. It doesn’t have an airport, but you can easily get there by train or car, or if you are so inclined, boat or helicopter. We have the full breakdown of what it takes to get residency in Monaco here.
Oman. Oman does not tax personal revenues. Residency permits are limited, the two most common ways are through employment or through an Omani family member. Before applying for residency it is required to obtain a Non-Objection certificate, signed by both the sponsor and the government.
Turks and Caicos. Turks and Caicos have an economic residency program that offers quick residence permits to foreigners who either spend at least $300,000 building a new house or remodeling a distressed property, or who invest at least $750,000 in a company that is majority-owned by locals. Did we mention there is no tax here?
The 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 100% foreign-owned company in one of its more than 40 free trade areas. In addition, it is possible to set up an offshore company in the emirates of Dubai, Ajman and Ras Al Khaimah. With a Dubai’s offshore company you can even own real estate in certain Dubai’s development projects.
Vanuatu. Vanuatu is one of the few tax-free countries where one can obtain residency and citizenship through a donation. Economic Citizenship has been relaunched this 2017 and it also has a very straightforward residency program. Investing about $89,000, you will receive a one-year residence visa, which can be renewed annually. If you want a more permanent establishment, you will have to make a larger investment, which will grant you residency for three, five, 10, or even 15 years. Click here for further information about residency visas and second passport in Vanuatu. Vanuatu is also an offshore financial center, which stands out for its privacy policies. Is a trip to the South Pacific on your horizon? Bring your sunscreen.
Low Tax Countries
The following are not tax-free countries, but they tax their residents on a territorial basis, and to the best of our research, don’t have CFC laws. This essentially means that these countries tax only the income earned from activity within their borders, not overseas income. However, one would need to take precautions when remitting money, as it may be treated differently if it is held within a controlled foreign corporation that if it is brought in personally for use in the country.
The bottom line is that these jurisdictions have very favorable tax treatments, but if you are a legal resident there, you should make sure that any income you remit into the country isn’t taxable as local-sourced income. Also, you should always consult a tax adviser.
Anguilla. This British overseas territory in the Caribbean is a small but very savvy player in the world of offshore trusts and banking. It modeled itself after the BVI but offers services at a fraction of the price. Anguilla also offers residency and thus low-tax status to those who purchase property and have wealth that is earned legitimately.
Belize. Good offshore laws, territorial taxation, and warm sandy beaches make this English-speaking territory in Central America a hit with expat Americans. Belize once had an official citizenship program, but this has since been eliminated. Residency, however, is available with a small investment, and you won’t even need to learn Spanish. You may also want to set up an IBC or LLC in Belize as well.
Costa Rica. This vacation spot for Americans offers residency visa to those who can prove a US$ 2,500 monthly income (or US$ 60,000 bank deposit for a two-year visa) and to retirees with a monthly pension of at least US$ 1,000. Investments of US$ 200,000 in real estate or securities also qualify. Costa Rica levies personal income tax on a territorial basis, so you may get a tax free residency, provided that no income is earned within Costa Rican borders. Read more on residency visas and companies in Costa Rica.
Georgia. This tiny land bathed by the Black Sea does not tax its residents’ personal income accrued outside the territory. In addition, since 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 quite liberal. A residency permit incorporating a company or investing can be obtained. And even citizens of 94 countries may reside or work in Georgia for one year visa-free. Check how you can live in Georgia and pay no taxes.
Gibraltar. Gibraltar has for centuries sat strategically at the crossroads of Africa and Europe. The cost of admission is high – you’ll need at least $3 million to be eligible to become a resident. Residents under the investor-friendly Category 2 visa pay a maximum tax of approximately £30,000 per year, in exchange for permission to live in a territory on the tip of the Mediterranean. This option for residency in a highly respected European jurisdiction is very comparable to similar programs in Malta, Switzerland or the UK.
Guatemala. If you crave the adventure of Mayan ruins and a life in Central America, Guatemala is one of four countries in the region that offer territorial taxation. Obtaining residency is easy if you can show proof of a monthly income of $1,000, but you must reside there for a good part of the year, or they’ll cancel your visa. You will be eligible to get citizenship after five years if you live in the country full-time.
Hong Kong. If you want to see what the future looks like, take a trip to Hong Kong. The city has it all, from pristine sandy beaches to towering skyscrapers, and is one of the best places in the world to do business or open a bank account. If they accept you, that is. Its popularity has made it much harder to open a bank account, obtain residency, or even get a corporate debit card there. That being said, where there is a will, there is a way. Technically, you can get a Hong Kong passport through residency, though you’ll need to have spent a significant amount of time in the territory and have the right connections for this to happen.
Macau. Macau is the epitome of wealth and excess emanating from China. The city is four times bigger than Las Vegas and makes its American counterpart look like the kiddie pool. The special administrative region of China has a good banking system (for depositing those casino earnings) and does not tax foreign earnings. Foreign investors can obtain residency investing roughly $375,000. The city has great food, gambling, and banking, and it is the epicenter of global growth.
Malaysia. While it does help to have connections in Malaysia, the Malaysian’s My Second Home (MM2H) program is straightforward enough for you to apply on your own without an adviser. In fact, is a retirement-oriented program, but everybody can apply provided that certain requirements are met. You will have to submit the proof a monthly income of at least $2,300, and deposit approximately $70,000 (at today’s exchange rates) into a Malaysian bank to get a 10-year visa. Keep in mind that you can’t withdraw or use the money for a period of 10 years or until you cancel your visa, although you can use the funds to buy real estate. Like Thailand, Malaysia desires you more if you’re over 50 years old – it cuts your bank deposit in half.
Malta. Malta has since 2014 been offering its economic citizenship program scheme for €650,000, 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. Check how to get residency and the 2nd passport in Malta.
Nicaragua. Nicaragua has a territorial taxation policy. Revenue from abroad is usually tax-exempt. To obtain residency in Nicaragua, you are required to only show proof of income, which can be as low as $750 per month. You will have to reside there for at least six months each year, or risk getting your residence permit and tax benefits revoked.
Panama. Panama has been following the Singapore model and has become an open country for immigration and banking, as well as an international business hub. Its Friendly Nations visa program offers instant 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). Another option is investing in the country’s rainforests, as well as any other pathways, as its retirement program “Pensionado Visa”. However, bear in mind that Panama’s economic citizenship program has been halted, so beware of anyone peddling an “instant passport” in Panama. Check how to get residency in Panama.
Paraguay. Paraguay offers what is probably the least expensive passport in the world. Foreigners can obtain permanent residence with a mere $5,200 bank deposit and the law does not state any minimum residency requirement. After just three years of residence, and if you can prove your fluency in Spanish, you may be eligible to apply for a Paraguayan passport. Tax rates on local-sourced income are quite low, at just 10 percent, and the country typically does not levy taxes on foreign-sourced income, except certain income derived from investments. Although there have been rumors in recent years that this would not continue. Check how to get a residence permit in Paraguay.
Qatar. Qatar only taxes local source business income at a 10% rate. Employment income is not subject to taxation. Foreigners who want to apply for residency in Qatar must be sponsored. There are a few visa options for Qatar, such as work residence permit, sponsored by an employer, family residence permit for dependents of a work residence permit holder and Real Estate visa, available for foreign owners of real estate properties in designated developments.
Singapore. Singapore has the relatively low tax rate. Taxes on corporate profits are between 0 percent to 17 percent. Startups generally pay nothing in their first three years, as there are no taxes on profits under $150,000. There is a boon 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.
Thailand. Thailand is included on this list because it doesn’t have CFC law, and its cost of living is cheap. Also, if foreign source personal income is not remitted during the first year after received, 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, or the Iglu program.
Uruguay. Uruguay is, in my opinion, one of the most progressive and intelligently run countries in the world. Recently, the government legalized marijuana in an effort to seize power from drug traffickers. The country 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 may pay no 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.
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