Low Tax Residence in Europe: 11 countries with low taxes

Would like to relocate to Europe? But you’re afraid of taxes? Think again.  Even only one European state, the Principality of Monaco, is a zero tax jurisdiction, some European countries offer attractive fiscal benefits to their citizens and legal residents.

If you are only beginning your business career, you may be interested in relocating to Bulgaria or Czech Republic, for example. If you have been in business for a long time and you can be referred to as a HNWI, you can consider such countries as Great Britain or Monaco, for example. In any case, living in Europe is very comfortable and tax rates are quite acceptable in some countries on the continent.

Tax Residence in Europe

Best tax residence in Europe: the Old World should not be written off

Business people looking to lessen their tax burdens will sometimes think about acquiring tax residence in a foreign country. In most cases, however, they will consider low-tax jurisdictions located somewhere in the Caribbean basin or in the Middle East, or in the Pacific Ocean. It is true that some countries in these regions tax their residents at low rates but they are so remote!

The good news is that you do not have to relocate as far away as the Bahamas or Dubai, for example, because you can acquire tax residence in a European country without having to pay too much in taxes. Of course, there are countries on the continent where you would not want to move if your goal is to lessen your tax burden such as France or Germany, for instance. At the same time, some other European states are worth considering if you would like to pay less in taxes. Below, we provide a list of 11 such countries.  

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Andorra

Андорра

Under pressure from the EU authorities, Andorra introduced an income tax in 2015. However, it is still a sort of a ‘tax haven’ in comparison to the neighboring countries: taxes are high in France and Spain. Citizens of the two countries often seek to establish tax residence in Andorra in order to reduce their tax burdens.

You can acquire legal and tax residence in the mountain principality of Andorra if you invest in real estate there or some other types of assets. If you register a company in Andorra, you will also qualify for residence.

Andorra positions itself as a more affordable alternative to Monaco. It is not only a low-tax country but it also offers some relatively inexpensive residence-by-investment opportunities. This attracts many wealthy international investors to Andorra.

The country will suit perfectly well those people who obtain incomes from bank deposits or stock portfolios and those who pass their capitals from one generation to another. No wealth tax, nor gift tax, nor inheritance tax are levied in Andorra.

You will have to pay a capital gains tax if you sell Andorran property at a higher price that you paid when buying it. Besides, there is a personal income tax in the country that is payable if your yearly income exceeds 24,000 euros. The rate is progressive and if your annual income is more than 40,000 euros, you will have to pay the tax at the highest rate – 10%.

You can obtain legal residence in Andorra if you are a highly qualified professional in an area that is vital for the Andorran economy. If you are not, you can invest in real property or start a business company in Andorra to qualify for tax residence there. In any case, you will have to spend at least 90 days in the country per year and have a place to stay there (own it or rent it). Besides, you will have to have a medical insurance policy.

If you choose to set up a company in Andorra, you will have to supply a viable business plan to the local authorities and engage in active business operations in the country. That is, you cannot register a ‘sleeping company’ there. That means that you will have to spend a large portion of your time (if not all of it) in Andorra. If you choose to invest in real property and become a ‘passive resident’ of the country, you will have to purchase a house or an apartment that costs not less than 400,000 euros, but then you will not have the obligation to spend so much time there.

Bulgaria

Bulgaria

Bulgaria is a country with an Eastern European charm, sandy beaches at the Black Sea coast, and low taxes. The personal income tax is payable at a flat rate of 10%. This makes Bulgaria the country with the lowest personal income tax rate in the EU. Moreover, the corporate tax rate is also 10% in Bulgaria. Besides, the country has made a number of agreements of double taxation avoidance with other national states, which opens wide opportunities for tax planning if you are an international entrepreneur.

If you live in Bulgaria for more than 183 days per year and if you are able to show to the immigration authorities of the country that Bulgaria is the ‘center of your vital interests’ you can qualify for tax residence in the country. If you are a wealthy individual, obtaining a residence permit in Bulgaria is going to be easy.

Eastern Europe in general and Bulgaria in particular seem to be underestimated by international business people. As a matter of fact, Bulgaria is open for business, bank accounts can be set up promptly there, the tax rates are low, and foreign investors will find many other incentives in the country. Quite a large number of forward-looking entrepreneurs from other countries have already established presence in Bulgaria.  

Czech Republic

Czech Republic

Prague – the capital of the Czech Republic – is one of the biggest tourist attractions in Europe as the city is beautiful indeed. At the same time, the cost of living in the Czech Republic is comparatively low. Taxes are also low in the country and you can acquire legal residence there by applying for an investor visa.

Taxes were a bit too high in the Czech Republic before, but they were reduced some time ago to attract more foreign direct investments. Besides, the fiscal mechanisms were simplified and adapted to the modern requirements.

Bearing in mind that Prague is one of the most beautiful European cities, you may want to consider relocating to the Czech Republic and acquiring tax residence there. The country is especially welcoming to citizens of the EU countries. European entrepreneurs engaged in business activities in the Republic pay the corporate tax at a flat rate of 15%. In addition, they skillfully use the lump-sum deduction mechanisms that allow reducing the tax by 40% or even 60%. As a result, the effective corporate tax rate can be as low as 9% or 6% in the Czech Republic.

Please bear in mind, however, that if you decide to relocate to the Czech Republic and engage in business in the country, you will have to do some serious tax planning as you would in any other European country. You will have to acquire economic substance in the country – buy or rent a real office (not a virtual one). We will repeat at this point that the cost of living in the Czech Republic is lower than it is in most neighboring states so it is not going to cost too much to acquire ‘substance’ in the country.

Georgia

Georgia

Georgia is a Caucasian country located in the outskirts of Europe. At the same time, it is the only European country with a predominantly territorial taxation system. This means that residents of Georgia deriving incomes from foreign sources do not have to pay taxes on them, in most cases. Please bear in mind that acquiring legal and tax residence in Georgia is very simple.

If you are a legal resident in the county, you can set up international companies and pay zero in taxes on your profits in Georgia. Moreover, you can become a tax resident of Georgia even without living in the country. To achieve the goal you will have to demonstrate having considerable funds and high incomes in the country. Needless to say, your sources of income have to be legal.

The capital city of Tbilisi has a long history and its central part is a UNESCO world heritage site. Living in Georgia is extremely inexpensive and crime rates are low in the country. You can consider registering a gambling company in Georgia, for example, as the applicable regulations are much more relaxed than they are in other overly regulated European jurisdictions.

Gibraltar

Bulgaria

Gibraltar is not an independent state but an overseas territory of the British Crown located at the southern end of the Iberian Peninsula. However, it is a self-governing territory and the local authorities have their own tax policies. Some time ago, Gibraltar was popular with citizens of the UK acquiring legal and tax residence there. Today, people from many other countries of the world choose to do the same.

There are two ways of acquiring tax residence in Gibraltar: by setting up a company there or by making a large bank deposit. The first way is less expensive while the second one is less troublesome.

As far as taxes are concerned, the High Executive Possessing Specialist Skills (HEPSS) scheme allows paying a fixed salary tax. If you are an executive of a Gibraltar-registered company, you can pay a salary tax on GBP 120,000 pounds (of  GBP 29,940) regardless of how high your salary is. That is to say, nothing that is above GBP 120,000 per year is taxed.

At the same time, you have to take into account the corporate tax that you will have to pay. Besides, you have to own or rent real property in Gibraltar to be able to use the HEPSS scheme.

Alternatively, you can obtain a Category 2 visa to Gibraltar that will serve as a residence permit in the territory. You have to put 2 million British pounds in a Gibraltar bank to qualify for this type of visa.

When making the deposit, you will have to prove the legality of your sources of income. In addition to that, you have to have a place to stay in Gibraltar (owned or rented) to be eligible for a Category 2 visa. Besides, you will not be able to engage in any financial operations in the territory. The tax that you will be liable to is going to be between 22,000 pounds and 28,360 pounds per year.  

Malta

Malta

Malta is one of the four countries on our list that are signatories to the Schengen agreement and one of the three countries that are members of the European Union. The Maltese authorities offer some attractive tax incentives: attractive by the European standards. The incentives are available both to private individuals and to corporate entities. The corporate tax in Malta is only 5% and even non-resident companies can be taxed at this rate in the country. If you derive income from foreign sources while being a resident of Malta, you have to pay a fixed duty instead of an income tax.  

Malta administers several residence programs and one of them – the Malta Global Resident Programme – is especially attractive to wealthy individuals who would like to reduce their tax burdens.

Unlike Andorra and Monaco, Malta does not require that the applicant for the Programme physically reside on its territory. So you can become a tax resident of the country without having to spend any time there. In addition, the bureaucratic processes involved in obtaining legal residence in Malta is not overwhelming at all.  

Tax residents of Malta do not have to pay taxes on incomes made abroad if they are not transferred to the country. Other types of incomes such as pensions, for example, are taxed at 15% thanks to the large number of tax agreements that Malta has signed.

The cost of retaining legal residence in Malta is fixed at 15,000 euros per year. This is the ‘minimal tax’ that you have to pay in the country. With some shrewd fiscal planning, you may have to pay even less. Please also bear in mind that Malta administers a citizenship-by-investment program so you can acquire an EU passport in exchange for an investment. The required investment amount far exceeds a million euros. The Maltese citizenship acquisition timeframe is 12 months or more.

Monaco

Monaco

Monaco has levied no personal income tax on its residents since 1869. Today, it is the only European country that does not levy any income tax. There are other advantages that can make Monaco attractive to relocate to especially if you are a HNWI.  

The country is not an EU member but it is a signatory to the Schengen agreement anyway so the Monegasque residence card holders can freely travel across Europe. Monaco is located at the very heart of Europe and it offers a luxurious lifestyle.

However, the tiny principality is not a tax haven – or so the local authorities claim. Legal residence can be granted to those foreigners who can demonstrate having sufficient capital that has been acquired in a legal way. Normally, a bank deposit of 500,000 euros and purchase of some property in Monaco will qualify you for tax residence there.

You should realize that only extremely wealthy individuals can afford living in Monaco. A parking space can cost as much as one million euros to say nothing about the prices of residential accommodation.

At the same time, you have to spend a lot of time in Monaco if you want to retain your residence permit. Over the first nine years of holding a temporary residence permit, you have to stay in Monaco for at least three months every year. After the period expires, you may qualify for a permanent residence permit but this document will require spending the best part of every year in Monaco. If you fail to do so, you will lose your permanent resident status.

If you are interested in relocating to the country, please find out about one possible way of acquiring legal residence in Monaco.

Montenegro

Montenegro

Montenegro is a young European country that came into existence as recently as 2006 when it separated from a federation with neighboring Serbia. The cost of living in Montenegro is low, the living standards are quite acceptable, the nature is wonderful, and the taxes are not high at all. Besides, Montenegro administers a citizenship-by-investment program (that is going to be closed by the end of 2021).

Montenegro is not an EU member state and this fact allows the local authorities to levy low taxes on the people. Both personal income tax and corporate tax are 9% each, flat rate.

Similarly to its neighbors in the Balkans, Montenegro strives to attract foreign capital to facilitate its economic development. The population of the country is only a bit more than 620,000 people and such a small economy really appreciates foreign direct investments and qualified specialists from other countries. The local authorities stimulate the inflow of both by charging less in taxes, among other things. Almost all Eastern European states have reasonable tax rates but Montenegro outperforms them in that matter: the taxes are the lowest there. Coupled with the low cost of living and the level of comfort that you can find in the country, Montenegro is a place where you may well want to stay.  

The country is called ‘Crna Gora’ in the local language but the international name of Montenegro (Black Mountain) is much more pleasant to the ear. Indeed, you can find wonderful ski resorts in the mountains occupying the northern part of the country. In the southern part, you will find fantastic beaches of the Adriatic Sea where you can enjoy the sunsets and the local seafood.

The natural beauty of the country as well as the tax incentives attract many foreign investors to Montenegro. Quite a number of houses and apartments in the country belong to foreigners. The Montenegrin legislation allows foreign real property owners to acquire temporary residence permits in the country. These permits need to be extended once a year. If you spend less than 183 days in Montenegro per year, you will not be considered a tax resident of the country. Otherwise, you will have to pay the personal income tax of nine percent.

Of course, Montenegro is not a zero-tax jurisdiction but we can safely call it a low-tax jurisdiction anyway. Acquiring tax residence in Montenegro may be especially attractive for Europeans who would like to reduce their tax burdens without having to relocate to a remote region of the world.

Portugal

Portugal

Let us make it clear from the very beginning: Portugal is NOT a low-tax jurisdiction. However, there are some fiscal opportunities that you can make use of if you relocate to Portugal and acquire tax residence there.

In particular, there is a non-habitual tax residence scheme in Portugal that can make your foreign income exempt from several Portuguese taxes for the period of ten years. Please note, however, that in case the income is derived from a blacklisted country or territory, it becomes taxable in Portugal. So the profits of your BVI or Hong Kong company are going to be taxed anyway.

The country offers one more attractive opportunity to foreign investors. The Portuguese ‘Golden Visa’ program allows acquiring a legal residence permit in the country without becoming its tax resident. You do not have to spend more than one week a year in Portugal in order to retain your residence permit and the required investment amount is comparatively small. After holding the permit for five years, you will become eligible to apply for full citizenship of Portugal thus acquiring a European passport.

Switzerland

Switzerland

Without doubt, Switzerland has become less amicable both to immigrants and to bankers over the recent years. Nevertheless, the country remains one of the most reputable and most secure jurisdictions in the world. Swiss residence card holders feel extremely comfortable wherever they go.

You can establish tax residence in Switzerland in two different ways. First, you can register a company in the country and hire personnel. The company will have to pay the corporate tax and the company CEO is going to be taxed on his/ her personal income.

The second method of acquiring legal residence in Switzerland is more popular with wealthy foreign nationals. You can acquire legal residence in Switzerland by a tax agreement. You can consent to paying a fixed sum every year and acquire residence cards for yourself and your family members in exchange. The sum will not depend on the amount of your income so it should not be referred to as a ‘tax’, actually but that is how the agreement is called in Switzerland.

Depending on the canton that you sign the agreement with, the ‘tax’ can be anywhere between US$ 15,000 and US$ 1,000,000. If your annual income exceeds a million dollars, having a house in Switzerland and tax residence of the country will let you pay a moderate amount of money in taxes. If you earn ten million dollars per year or more, the tax rate can go below 10% in Switzerland. The country is quite expensive to live in but the level of comfort that it offers is superb.

Great Britain

Great Britain

No one would even think of referring to the United Kingdom as a low-tax jurisdiction, of course, but there are some fiscal opportunities that may be of interest to wealthy people. It is possible to legally reside in the UK with a non-dom (non-domicile) status, which makes its holder exempt from most British taxes.

Many Russian and Middle Eastern billionaires are happy to use this opportunity because they derive incomes from somewhere else but they love living in London. On the non-dom scheme, only the part of the profits that they transfer to Great Britain is taxed in the country while the rest of the profit is not.

Clearly, acquiring legal and tax residence in Great Britain comes at a considerable cost, but the tax benefits that wealthy foreign investors can use compensate for the expenditures.

We have to note at this point that many citizens of the UK are currently looking for opportunities to legalize their stay in continental Europe as Great Britain has ceased to be a member of the European Union. If you are one of those people, you are welcome to consider the opportunities that we have described above.

If you are interested in acquiring legal and tax residence in Georgia, Great Britain, Switzerland, Portugal, Montenegro, Monaco, Malta, Gibraltar, Czech Republic, Bulgaria or Andorra, please contact us without hesitation. You are welcome to write to info@offshore-pro.info or use any other means of communication that you prefer (please see the ‘Contact us’ icon above).

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