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The World’s Tax-Free Countries

by | Nov 18, 2019 | Offshore

Some people see income tax as a necessary evil. They might not be happy handing over a substantial
portion of their pay check every single month, but they don’t see any way out. And, to be honest,
they’re not even looking.
Not us.

Here at TaxFreeCitizen, we’re all about helping you shrink your effective tax rate or even get you to
pay no income tax whatsoever.

Do you want to take back control of all your money and do it all legally?

Then this article is just the ticket. In it, we will talk about:

  1. The Secret to Successfully Leveraging Tax-Free Countries
  2. How Tax-Free Countries Work
  3. Oil-Rich Countries Tend to be the Ones with No Income Tax
  4. Tourist Hot-Spots Often Have No Income Tax
  5. Tax-Free Countries in the World: The Ultimate List
  6. Countries Where Foreign Income Is Taxed at 0%
  7. The Challenges of Going Tax-Free
  8. Quality of Life and Other Cultural Considerations
  9. Social Taxes, Property Taxes, and Miscellaneous Taxes
  10. Things Can Often Change (Sometimes on Short Notice)

1. The Secret to Successfully Leveraging Tax-Free Countries

Are you ready to jump through hoops and deal with a foreign bureaucratic apparatus in order to achieve your dream of no taxation? We like your enthusiasm!
If you’re prepared to do the legwork, then we can let you in on a little secret – there are two ways you can go about this.
1. The straight-forward way: become a legal resident of a tax-free country (we will list them all later in the article). These countries do not impose income or capital gains taxes, so not only can you live and work there, but also invest tax-free.
2. The slightly more complicated way: become a legal resident of a territorial tax country (we will list them all too). While not exactly income tax free, these countries only tax income that’s earned within its borders. If the income or capital gains (e.g. dividends) are earned abroad, your tax rate will be 0%.
Obviously, this isn’t the only nuance when it comes to the world’s tax-free countries. Once you have identified where your revenue streams will be coming from, you can also make out which country will be best for you tax-wise.

2. How Tax-Free Countries Work

Yet, before you try to optimise your own tax rate, you might be wondering if there is a catch. As a citizen of a highly developed country such as the USA, the UK or Australia, it can seem suspicious that a country can afford to have no income tax.

After all, countries and governments are expensive to run, and that money must come from somewhere. The answer here is quite simple: there are other revenue sources that more than make up for the lack of income tax.

3. Oil-Rich Countries Tend to Be the Ones with No Income Tax

Qatar or Kuwait come to mind right away, among other Gulf States. These countries have enough of natural resources to not just survive but thrive. For example, Qatar is a county with a highly modern infrastructure and high levels of investment, with one of the highest GDPs per capita in the world, all thanks to oil. It’s also a country that’s peaceful and expat-friendly, with an option to also gain permanent residence if you so choose. However, many other Gulf States and oil-driven countries aren’t that expat friendly, and there are cultural compatibility considerations to be had as well.

4. Tourist hot spots often have no income tax

The Bahamas or Saint Kitts and Nevis are just a few of the paradise islands that ride the wave of extremely high tourism rates and have found that to be a good enough reason to cut their income tax rate to 0%.
The ‘natural resources’ that they monetize on include the beach, balmy weather and piña coladas. Tourists flock to the expensive resorts and spend, spend, spend…
Yet, not all is perfect in these otherwise idyllic-looking islands. There are tropical storms to reckon with – just think back to storm Dorian that completely destroyed the Bahamas earlier this year.
Add to that the eye-watering property prices in some of these tax-haven retreats – say the Maldives, for example – and it becomes a pipe dream to many.

5. Tax-Free Countries in the World: The Ultimate List

If you’re unphased by the drawbacks and still want to take the plunge to divorce the tax man, we’ve got the only thing you’ll ever need right here.
Here is the ultimate list of tax-free counties in the world right now, in alphabetical order.

1. The Bahamas

Luscious beaches, a stable economy and a thriving tourism industry all make the Bahamas a highly attractive option.
It’s got quite a reputation as a tax haven – no income tax, no capital gains tax, no gift or inheritance tax.
Getting a temporary residence is as easy as pie, and with a flat fee of around $1,000 for renewal each year, there sure is merit to having your residency there. And if you want permanent residence, you’ll need to invest at least $250,000 in property.

2. Bahrain

Continuously in the top 10 of the HSBC Expat Explorer survey conducted annually, Bahrain is a bit of a hidden gem when it comes to 0% taxation.

Sure, getting permanent residence comes with a threshold of a property investment of $135,000 or an investment of $270,000 in a Bahraini company. And getting a Bahraini citizenship is near-impossible, when one’s required to live there for 25
consecutive years and to be fluent in Arabic. However, it’s relative safety, sizeable expat community and wealth have allowed it to become one of the top destinations in the Gulf.

3. Bermuda

Although many might think of Bermuda as yet another island in the Caribbean, it is not. Located in the North Atlantic Ocean, Bermuda is a British Overseas territory, but stands as an independent country on the international scene.
Filled with fancy restaurants and pink-sand beaches, and with English as the official language, it’s appeal is obvious. Add to that their 0% income tax and 0% capital gains tax, and you have a very attractive proposition indeed.
However, be prepared to shell out for housing and food. The prices are quite extortionate, though completely logical given the fact that it’s a tiny island in the middle of the ocean.

4. The British Virgin Islands

There is something exclusive and sexy about the name itself – British Virgin Islands have long been a tax-free haven for many entrepreneurs and businesses.
It is probably the world’s most famous tax-free haven, with no income tax, no sales tax/VAT, no profit tax and no corporation tax.
The country consists of 60 islands, filled with stunning beaches and resorts, so if one island gets too cramped, you can always move on to the next – tax-free, of course!

5. Brunei

This country carved out a tiny bit of land for itself on the island of Borneo, Malaysia, and is run by a Sultan. It is also a curve-ball. The same family has been ‘managing’ Brunei for the past 600 years and there is no surprise that the ‘government’ can seem authoritarian. It is.
So, while there is no income tax, no VAT and no social security taxes, there is also no certainty that your wealth and, indeed, yourself will be dealt with in a democratic way.

6. Cayman Islands

In much the same way the other island paradise states that levy no income tax, the Cayman Islands have plenty of white sandy beaches to rake. And they rake in the tourism dollars while they’re at it.
Yet, it sure isn’t for the general public. The sense of exclusivity that Cayman Islands exudes carries through to its residential requirements:

Your salary must be $150,000 per year to become a resident
You’ll need to invest at least $500,000 in real estate or local businesses too
The wait for permanent residency is at least 8 years

We’d advise that you go for some of their smaller islands, at the expense of less infrastructure. If you wish to live on Cayman Brac, for example, the requirements are halved.

7. Kuwait

Like it’s Gulf neighbors, Kuwait has no income tax due to its large oil reserves.
However, unlike the United Arab Emirates or Bahrain, it doesn’t have that friendly-to-expats vibe. In fact, it was named one of the worst countries for expats a few years back.
Although its population is two-thirds foreign, dig deeper and you’ll find that the majority of said foreigners are people from Asia ‘imported’ as cheap labour.
Not many can stand behind that, nor can they understand why everyone visiting or living in Kuwait would need to provide a DNA sample.
Sure, there is no income tax in Kuwait, but we wouldn’t recommend it as part of your tax-reduction strategy.

8. Maldives

An island-state in the South Pacific, Maldives conjures up images of bungalows with glass floors and turquoise-clear waters all around. It sounds dreamy. And no income tax? Even better.
The Maldives generate most of its revenue from tourism, thanks to luxurious resorts and exclusive villas reserved for the crème de la crème of the world. Unfortunately, your fantasy might just be cut short, because it’s near-impossible to stay there long- term.
To obtain a residence visa, you need to have work there or have a Maldivian spouse (and need to have converted to Islam for that).
For these reasons, we doubt that anyone will be traveling to the Maldives for residence and tax reasons anytime soon.
Although you can thoroughly enjoy your honeymoon there, no doubt.

9. Monaco

The crown-jewel of Europe and the playground of the rich and famous, Monaco certainly has the (sex) appeal.
One of the easiest tax-free countries to gain citizenship in, it is a perpetual lure of the tax-averse businessmen and women.
The bureaucracy is simple, the location is gorgeous and the weather is fine in the French Riviera. Yet,
how much will you have to shell out?
You will need to deposit €500,000 in a local bank and purchase €500,000 in real estate (which is a tall-order in Monaco – let’s be frank). Still, with such a fabulous location, easy connections to the rest of Europe and it’s tax-free status, many still opt to set up in Monaco.

10. Oman

Largely due to its gas and oil industry, Oman has absolutely no need for an income tax. It’s a Gulf state that’s a great choice at the moment because its government has been pushing for economic diversification, realizing that the reliance on oil and gas in the world won’t last forever.

However, Oman is a bit vague when it comes to permanent residence as they aren’t exactly out there waiting for foreigners with open arms. Quite the opposite. You need to have a job or family ties to gain residence, and you must think hard before you even start the journey.
Oman is notoriously conservative, and you need to apply for a police licence to buy a can of beer. Is the tax gain worth it?
We’d choose another Gulf State.

11. Qatar

Qatar is a popular expat destination because it focuses its taxation on business rather than individuals. With a 0% income tax rate, it seems attractive.
And although it’s not that much different from the other Gulf State neighbors, it’s been in the news more often recently. That’s due to the fact that it will be hosting the FIFA World Cup 2022 that’s surrounded by major controversy, from the allegations that the bid was won illegally, to the fact that underpaid and exploited Asians are building the stadiums.
In any case, permanent residence is extremely hard to come by – you must have spent 20 consecutive years in the country and speak decent Arabic.

12. Saint Kitts and Nevis

An idyllic set of islands in the Caribbean, Saint Kitts and Nevis, enjoys income tax-free status.
So, if the Gulf States with their large buy-ins can seem quite daunting, Saint Kitts and Nevis is one of the more affordable options.
For example, after surviving through Hurricane Irma in 2017, Saint Kitts and Nevis was seen handing out permanent residencies and passports for a mere $150,000 investment.

13. Saudi Arabia

In recent years, Saudi Arabia has worked hard to attract a few large international companies and has thus created plenty of attractive employment options.
But is it worthwhile knowing that the country is extremely conservative in its ways, which added to the desert environment can cause quite a shock to someone from abroad.
In fact, Saudi Arabia has just last year granted women the ‘permission’ to drive – a point that clearly illustrates just how un-democratic it is.
However, it doesn’t tax individuals and this year, it introduced a permanent residency program with hopes of attracting foreign investment. It goes for $213,000.

14. Somalia

Out of all the countries on this list, we are least likely to recommend Somalia for tax residence. Even though it has no income tax, it is also a failed state that has been in a civil war for decades.
At the very least, the country is highly unstable. At most, it’s fundamentally unsafe to foreigners, negating any benefit of claiming tax-free status – owing zero tax won’t matter if you’re dead.

15. Turks and Caicos

Enjoying no income tax, capital gains tax or corporation tax, Turks and Caicos is a Caribbean tax haven. Many of those around.
So, what’s especially appealing about this one?
Well, Turks and Caicos has launched their residency program, that specifies that you must spend $300,000 on a property or invest $750,000 in a locally owned business to gain a residence permit. The buy-in is quite big, but for some, the charm of Turks and Caicos and the white sand under their feet will be worth it.

16. United Arab Emirates

Arguably one of the most liberal of the Gulf States, the United Arab Emirates is also the 10 th -freest economy globally (Index of Economic Freedom). It’s safe and developed enough to offer most Western amenities to its large expat population.
It draws a lot of its income from oil exports, but it also has a vibrant tourism scene in cities like Dubai and Abu Dhabi.
Unlike many of its neighbors, the UAE welcomes foreign investment as a way to diversify its oil- dependent economy.
The country is also one of the easiest in the Gulf to earn permanent residence; it grants 10-year residence visas quite easily now.

17. Vanuatu

A forward-thinking island that’s located in the South Pacific Ocean will not be everyone’s cup of tea. Yet, what if we said there is no income tax? That’s a decent start.
It’s a safe island drawing most of its income from tourism and offering a quick-and-easy citizenship by investment program, where you must invest approximately $89,000 to qualify.
The island accepts Bitcoin, if you’re so inclined.
When compared to similar programs in the Caribbean, for example, it’s easy to see the appeal. You should factor in the travel costs, however, as the island is far away from most destinations and it’s only easy to get to from certain Asian hubs.

18. Western Sahara

Otherwise known as Sahwari Republic, Western Sahara is a disputed territory in north-western Africa.
We’ll forgive you for not knowing anything about it because it’s only recognised by a handful of countries in the world.
Nonetheless, it’s half-a-million population enjoys an income tax-free status, but we don’t suggest you go for it.
It’s certainly no undiscovered touristic paradise, nor does it have the natural resources to warrant no income tax.
The territorial disputes between the local tribes and Morocco are probably the cause of Western Sahara’s economic stance, so we’d give this (alleged) country a wide berth for now.

6. Countries Where Foreign Income Is Taxed at 0%

We couldn’t write this article just about tax-free countries and forget about a collection of others: the territorial tax countries.
As far as you – the foreign earner and investor – are concerned, these countries have an effective income tax of 0%, even though ‘on paper’, they might not.
These are the countries that will not charge you if your income comes from abroad, be it in form of salary, capital gains or dividend, gifts or inheritance.
Still, you should keep in mind that if you were to want to rent out property or invest in local businesses or funds, you will be held liable to pay any applicable tax.

1.Anguilla

A British Overseas Territory, Anguilla has played their cards perfectly. They are like a mini version of the British Virgin Islands as in they have similar no-taxation set ups, yet for a smaller up-front price.

2. Costa Rica

Costa Rica has made a splash in international circles for not having a standing army and having one of the best levels of education and healthcare in the region.
However, there is much more to Costa Rica than that: low living costs, amazing climate, diverse flora and fauna, loads of things to do…
And no taxation on your foreign income, whether it’s earned, in the form of capital gains or from a retirement fund.

3. Georgia

More and more people are starting to discover Georgia and all of the opportunities it has to offer, so
hurry up and get there already!
The government has really set foreigners up for success there. Everyone gets a 360-day visa upon entering and can open a business or buy a property without major issues.
All of this foreign investment has helped Georgia keep income taxes on foreign income at 0%.
This means that an ever-increasing number of foreigners are spending money, which is being directly funnelled into Georgia’s economy – genius move.

4. Gibraltar

The English enclave at the very southern tip of the Iberian Peninsula, Gibraltar has long been a tax haven. Taxing its corporations rather than individuals, it has earned this title and all persons can enjoy paying no income tax on their income that’s made abroad. Add to that the highly pleasant weather and the proximity of Spain and Morocco, there is little wonder that Gibraltar is so popular among those looking to decrease their tax burden. Some uncertainly remains in relation to Brexit, however.

5. Guatemala

Lake Atitlan has long been an expat favourite, even before you factor in the favourable tax rates. Life in Central America is low-key, yet there are plenty of things to do, whether that’s climbing volcanos, enjoying water sports or hiking. You must show an income of at least $1,000 per month to be granted residency and must spend at least 6 months out of the year in Guatemala to get it renewed.

6. Macau

The state that’s basically all luxury hotels and casinos, Macau is one of the most densely populated places on earth. However, it’s an important financial offshore center that happens to have a subtropical climate, which adds to the appeal.

7. Malaysia

Want to live in Singapore, but can’t quite afford it? Then Malaysia is the next best thing, keeping you in Asia too. We’ve kept it on the down-low, but you should really know that obtaining a Malaysian residence is extremely straightforward and easy. Provided you have the funds. If you’re under 50, you’ll need two things:

Show proof of a monthly income of $2,300
Deposit approximately $70,000 into your account at a Malaysian bank

There are more nuances, such as the sums are cut in half if you’re over 50, but Malaysia is really a great choice – trust us.

8. Nicaragua

If you’re after minimizing your living costs, then Nicaragua is a great option. The country is one of the cheapest to reside in the region. However, do keep in mind the relative instability of its government before you go claiming their residency (which is extremely easy to do). You will be expected to live there for six months every year to retain the no tax benefit, however.

9. Panama

Beaches, high-rises and the Panama canal… Panama has long been one of Latin America’s main offshore strongholds.
It’s a highly liberal and open country, specifically towards Western country citizens, such as Americans, Brits and Australians.
All you must do is complete a bank transfer of $5,000+ into a Panamanian bank and have one tie to the land, such as a property or a company.

10. Paraguay

A landlocked nation that’s often called ‘the heart of South America’, there is definitely merit to living in Paraguay. Not only are many other countries easily accessible if you want to explore the region further, your foreign income won’t be charged. You can get a permanent residence with a measly $5,200 bank deposit and you can be a proud citizen of Paraguay in just three years. And if you start dabbling in local business, the tax rate for in-country income is as low as 10%.

11. Uruguay

We’ve included Uruguay here because it can be a good, albeit temporary, solution to your tax woes. For the first five years of your residence, Uruguay will not levy income tax on your foreign income. Plus, you can get fast-tracked to a citizenship, which has plenty of benefits. Add to the fact that Uruguay is a highly progressive and forward-thinking country in the world, and
you’ve got yourself a winner.

7. The Challenges of Going Tax-Free

We just ran through 29 countries that have a 0% income tax either overall or for foreign income. Out of those, only a handful will stand out to you personally – everyone’s circumstances and reasons for seeking out no income tax countries are different.
Yet, the challenges of going tax-free are pretty much universal. You may be an EU citizen trying to escape the Scandinavian income tax rates of 50%. Or you might be an American desperately trying to find a place that could provide you with a second citizenship (which could then allow you to relinquish your USA citizenship and cut all taxation ties). Everyone looking to shrink or eliminate their tax burden will need to consider the following.

8. Quality of Life and Other Cultural Considerations

While many of the countries that we mentioned above are wealthy nations that can offer decent quality of life and plenty of ‘western’ amenities, others are not. The road quality might not be great, the tap water might not be potable, the healthcare might be subpar… And these are just a few issues. Then, the cultural nuances come into play. Could you forego some of your freedoms to live tax-free in a Gulf State? Tax-free isn’t an end-all if you’re concerned about your quality of life and the available amenities. To avoid unpleasant surprises, we suggest that you visit the country in question at least once before you remit any of your money there.

9. Social Taxes, Property Taxes and Other Taxes

Even though there might not be any income taxes or capital gain taxes for foreign income in a country, that doesn’t mean there aren’t other taxes. Countries usually lure investors in by way of purchasing property, so you must be aware whether property taxes exist. If not, would you get taxed if you sold it? For example, Monaco will levy a 33.3% tax on profits when you sell any real estate. Think through all the possible scenarios, even if they seem implausible at the moment. You’ll never know what the future holds.

Social taxes for pensions, insurance and health, also exist in many of the ‘tax-free’ countries when their tourism and/or natural resource dollars aren’t enough. Therefore, you need to do your due diligence before taking the plunge and probably work with a tax advisor/accountant to tick every box and avoid unpleasant surprises.

10. Things Can Often Change (Sometimes on Short Notice)

Nothing in this life is set in stone. Even governments that have been relatively stable and favourable to foreign investment can take a turn for the worst, seemingly overnight. For example, Chile has long been a preferred place for foreigners to move, but the recent protests that have become violent and destructive, and have caused a total reshuffle of the cabinet, is probably not such a safe bet anymore. Places that have zero percent income tax can change their mind next year, due to some natural
disaster or based purely on a whim of a few people in power. Obviously, as a foreigner yourself, you should keep an ear to the ground in relation to all the country’s affairs, not just governance and politics. This is necessary so that you can pull your money out in full and in time. Achieving a tax-free or a low tax life comes at a price of relinquishing some control. So, if you can
handle some uncertainty, more power to you.

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