Taxes give lots of headaches to entrepreneurs, especially in the western world. Income taxes can be very high, sometimes you feel like you spend lots of time working for the government of your country. This is a big reason why many business people decide to get a residency and passport in a foreign country. However, it’s important to break the common belief that you can stop paying taxes just by getting the second passport. Different countries have different systems on how do they tax their citizens and residents.
If you are an US citizen, for example, you are liable to worldwide income tax, regardless how many passports do you have or where do you live. American citizens are allowed to have multiple passports, but they always have to report their taxes to the IRS.
However, this is not the case for most countries. Many countries tax their subjects on residential basis. This means if you change your place of residency, you’re not obligated to pay taxes in your home country any more.
There are two legal strategies that you can adopt 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
- Become a resident of a territorial tax country that imposes only income taxes and other taxes on income you earn within its borders, so you can retain profits within a corporation outside its borders, legally.
Countries without income tax
There is no income tax in Bahamas for its residents. This country makes most of its revenue from tourism and offshore industry. It’s important to note that if you are resident of Bahamas you will not pay taxes no matter where do you make your income! You can obtain a residency permit simply by paying a fee of 1000$ and it’s renewable each year. If you invest 250 000$ in real estate you can obtain longer term residency permit. The more expensive the property that you have bought is, the faster you will obtain your permanent residence.
British Virgin Islands
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. Even though this country might be a synonym for tax heaven immigration has become very difficult. The government grant only 25 residency permits per year and these require a minimum residence of 270 days out of the year on the islands. In order to obtain permanent residency you would have to live in the country for 20 years!
This is a small country nestled on the island of Borneo, surrounded by Malaysia. They are not really open to foreigners and since they make lots of money thanks to oil, they really don’t need foreign investors in their country.
If you want to become a resident of this paradise country it comes with a high price. With an annual income of around 125 000 EUR and an investment of 500 000 EUR of which 250 000 EUR must be spent on real estate, you can obtain a residence permit on the island of Grand Cayman. The smaller islands in the archipelago only require an annual income of around 80 000 EUR and half of the investment (250 000 EUR).
The principality bordering France and Italy is part of the gorgeous French Riviera. It is well known synonym for wealth and carefree luxurious life. Income tax was abolished in 1869. However, if you are a French citizen residing in Monaco, you will have to pay tax to the French government.
As you already know Monaco is playground for mega rich people, and in order to get residence you need to be a multimillionaire. In order to obtain residency permit you will need to deposit at least 500 000 EUR in Monaco bank and purchase real estate for at least 500 000 EUR, although I can say that it’s virtually impossible to buy property for that low. You’ll need much more than half a million to buy property in this tiny but rich country. Besides that, you will need to go through an individual interview in order to get a residency permit.
After all, if you want to keep your residency you will actually need to live in Monaco, at least 6 months in a year.
This country does not tax personal revenue, however an income tax is often imposed on expatriates. They only have limited number of residency permits, and two most common ways are employment or residency through a family member.
Turks and Caicos
This country offers quick residency permits to foreigners who are willing to invest in the country. You will either need to spend 350 000$ to build a new house, or to remodel a distressed property or invest at least 750 000$ in a company that is mostly owned by locals.
United Arab Emirates
This country does not have any income nor corporate tax, even though Value Added Tax (VAT) is imposed in 2018. Despite zero tax income regulations UAE is considered to have one of the most stable economies in the world. You can fairly easy get residency visa by setting a foreign owned company in one of its free trade areas. Needless to say, this rich country has lots to offer, and is visited by numerous tourists each year.
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. By investing about 89 000$, you will receive a one-year residence visa, which can be renewed each year. If you want to obtain permanent residency you will need to make a higher donation.