If you feel that your tax burden is too heavy, you can change your tax residency. Many people living in the countries where the taxes are high look for jurisdictions where they could pay less in taxes thus keeping a larger portion of their income to themselves. These jurisdictions do not have to be tax havens located on small oceanic islands. If you look attentively, you can find several countries in Europe with relaxed tax requirements.
Countries in Europe with lower taxes
Many government agencies as well as some NGOs compile lists of countries that offer favorable tax conditions. Every agency and organization will have its own list of such countries that is a bit different from other lists. As far Europe is concerned, the following countries and territories in the region are listed among low-tax jurisdictions most often:
- Andorra;
- Gibraltar;
- Cyprus;
- Monaco;
- Liechtenstein;
- Montenegro.
In addition to that, you can find favorable tax regimes in such European countries as Bulgaria, the Czech Republic, and Georgia.
Tax Justice Network list of low-tax countries
Tax Justice Network is an independent organization that makes lists of tax havens, low-tax jurisdictions as well as countries that offer high levels of financial privacy. The following European countries and territories are found among the top ten countries in their Financial Secrecy Index for 2022:
- Switzerland;
- Luxembourg;
- Germany;
- The Isle of Guernsey.
Their Corporate Tax Haven index is something that corporations should be interested in but private individuals may also find it curious. The following European countries and territories are found among the top ten countries in this index for 2021:
- The Netherlands;
- Switzerland;
- Luxembourg;
- The Isle of Jersey.
We would like to draw your attention to the fact that Switzerland and Luxembourg are found on both lists. This is an indication of their attractiveness for those looking for tax reduction opportunities.
If you are thinking of changing your tax residence, the taxes in the country that you are considering should not be the only factor to take into account. Very often you can become a tax resident of a foreign country only if you physically reside there for a considerable amount of time each year. You want to feel comfortable and safe living in a foreign country for an extended period, don’t you? This is why you should also find out what social conditions the country offers, what healthcare services it provides, what educational opportunities can be found there (if you have children), and so on.
Are you looking for a European country with low taxes and comfortable living conditions? Please request a free consultation with our experts on the opportunities to change your tax residence.
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Top 15 countries in Europe with low taxes
Even though taxes in many European countries are rather high, low-tax countries can also be found in this part of the world. If you are looking to change your tax residence, we suggest that you should consider one of the fifteen European countries listed below. First, we will compare the personal income taxes levied in each country. Then we will describe the conditions that you have to satisfy to become a tax resident of one of these countries.
The most favorable personal income tax rates can be found in the following European countries:
| Country | Specifics of income tax charges | Standard income tax rate |
| Andorra | Tax residents of Andorra are taxed on their global income. However, inheritance tax, gift tax, and wealth tax are not charged there. The capital gains tax is payable only if you buy/ sell real property in Andorra. Progressive taxation has been in place in the country since 2015. The personal income taxes in Andorra are among the lowest ones in Europe: up to 24,000 EUR per year – 0% (10% for non-residents); 24,001 EUR – 40,000 EUR – 5%; from 40 001 EUR – 10%. If a married couple makes more than 40,000 EUR per year, the income tax is 10%. Bank deposit interests are taxed but only starting at 3,000 EUR. Capital gains are taxed at 15% but the tax becomes lower as the years of property possession pass. When you have owned the property for 13 years, no capital gains tax is charged if you sell it. | 10% |
| Bulgaria | Tax residents of Bulgaria are taxed on their global income. The personal income tax rate is flat in the country: the income is taxed at 10%, which is one of the lowest income tax rates in Europe. However, there are other taxes payable in Bulgaria in addition to the income tax. These include the social security tax of 24.7% to 25.4%, (the employer pays 14.12% to 14,82% and the employee pays 10.58%); and the medical insurance of 8% (the employer pays 4.8% and the employee pays 3.2%). There is no capital gains tax in Bulgaria but there is a real property tax of 0.01% to 0.45%. The low personal income tax makes the country especially attractive. | 10% |
| Hungary | The income tax rate is 15% in Hungary. In addition, a social security tax of 13% is payable as well as medical insurance (18.5%). The inheritance and gift tax rate is 18% in the country. If residential property is inherited or gifted, the tax rate is 9%. If property is transferred between close relatives, no tax is charged. | 15% |
| Gibraltar | The personal income tax rate depends on the chosen taxation system: allowance or gross income. If the allowance system is chosen, the income is taxed after the allowance has been deducted. The rates are as follows: first 4,000 pounds – 16%; next 12,000 pounds – 19%; more – 41%. If the gross income taxation system is chosen, the following tax rates apply: first 10,000 pounds – 8%; next 7,000 pounds – 22%; then up to 25,000 pounds – 30%. When the income exceeds 25,000 pounds, the following rates tax apply: first 17,000 – 18%; next 8,000 – 21%; next 15,000 – 27%; next 65,000 – 30%; everything above – 27%. Social security taxes are also payable in Gibraltar at the following rates: 10% of the worker’s gross income, but minimum 12.10 pounds and maximum 36.30 pounds a week; 20% of the employer’s gross income, but minimum 28.00 pounds and maximum 50.00 per week; 20% of the self-employed person’s gross income, but minimum 25.00 pounds and maximum 50.00 pounds per week. The wealth tax, inheritance tax, property tax, dividend tax, and gift tax are not charged. An income of 11,450 pounds per year or less is not taxed in Gibraltar. In addition to that, various tax deductions are available in the British overseas territory that can lessen the tax burden greatly. Gibraltar has been a true low-tax European jurisdiction for a long time. | from 8% to 30% |
| Georgia | The personal income tax is rather high in the country – 20%. However, only locally made income is taxed. The tax on dividends is 5% and only the dividends paid by Georgian companies are taxed. Besides, there are two tax opportunities in Georgia that make the country attractive for tax residence. If a person is registered as a sole proprietor, he/ she doesn’t have any employees, and his/ her annual turnover does not exceed 30,000 laris, no taxes are due. A sole proprietor whose turnover does not exceed 500,000 laris pays only a 1% income tax on his/ her gross income. The availability of such tax opportunities in Georgia allows listing the country among low-tax European jurisdictions. | 20% |
| Cyprus | Cyprus is a country with an extremely low corporate tax (by the European standards) – 12.5%. Progressive taxation is applied in the country and the income tax rates are as follows: up to 19,500 EUR per year – 0%; 19,501 EUR — 28,000 EUR – 20%; 28,001 EUR — 36,300 EUR – 25%; 36,301 EUR – 60,000 EUR – 30%; from 60,001 EUR – 35%. In addition to the income tax, Cyprus tax residents pay a defense tax. It is levied only on dividends (17%), interests (30% in most cases), and income from rent. If a resident of the country has the status of ‘non-domiciled tax resident’, he/ she doesn’t have to pay the defense tax. No inheritance tax is charged in Cyprus, nor property tax. The capital gains tax is charged only when real estate is sold. The tax reduction schemes available in Cyprus make the country attractive for foreign nationals acquiring tax residence there. | From 0 to 35% |
| Monaco | The dukedom has been charging zero income tax, zero property tax, and zero wealth tax since 1870 (this doesn’t apply to citizens of France, however). The property rent tax is 1%. Monaco is the jurisdiction with the lightest tax burden not only in Europe but also in the whole world. You have to bear in mind though that acquiring tax residence in Monaco is extremely difficult unless you are an ultra-rich person. | 0% |
| Latvia | Progressive taxation is applied in Latvia and the income tax rates are as follows: up to 24,004 EUR per year – 20%; from 24,004 EUR to 78,100 EUR – 23%; above 78,100 EUR – 31%. The income tax on dividends, royalties, interests, and capital gains is 20%. The tax rates do not make Latvia a low-tax country but taxes are even higher in many other European countries. | from 20% to 31% |
| Lithuania | Tax residents of the country pay a 20% income tax if their annual income does not exceed 101,094 EUR. They pay a 32% income tax on any amount that exceeds the threshold. The tax applies to the income derived from employment of any kind. Dividends are taxed at 15% but tax reductions are available to some companies. The country doesn’t charge any capital gains, gift, or wealth tax. The inheritance tax is not levied if the property goes to close relatives. There is a social security tax in Lithuania of 19.5% that covers medical insurance as well. | from 20% to 32% |
| Liechtenstein | Liechtenstein can be rightfully referred to as a low-tax jurisdiction. The taxation is progressive and the income tax rates are amazingly low – between 0% and 8%. A single person making 15,000 CHF a year, a single parent making 22,500 CHF a year, a married couple making 30,000 CHF a year pay no income tax. The income tax is payable at the highest rate (8%) if the annual income of a single person exceeds 200,000 CHF, if the income of a single parent exceeds 300,000 CHF, and if the income of a married couple exceeds 400,000 CHF. However, there is a communal tax in Liechtenstein that can be much higher than the income tax (by 150% to 180%). The amount of the communal tax is different every year and the rate depends on the current communal needs. No inheritance, gift or property tax is charged in the dukedom but the capital gains tax can be substantial (3% to 22.4% depending on the amount of gains). Besides, there are social security taxes (4.7% goes to the pension fund and 0.5% goes to the unemployment insurance fund). | from 1 to 8% |
| Slovakia | If the Slovakian tax resident’s income exceeds the poverty threshold by not more than 176.8 times (that is, if it is not higher than 38,553.01 EUR per year), the tax is 19%. Any income above this amount is taxed at 25%. Dividend tax – 7%; capital gains tax – 19%. No other personal income taxes are payable in the country. Again, the tax rates in Slovakia are high compared to some countries but they are low compared to some other countries. | 19%/25% |
| Montenegro | Residents of Montenegro pay taxes on their worldwide income and non-residents pay taxes only on the income made in the country. This includes royalties and the income from the lease of Montenegrin-based property. Beginning January 1, 2022, progressive taxation has been applied in the country. The income taxes are as follows: up to 700 EUR per month (over the year) – 0%; from 701 EUR to 1,000 EUR – 9%; above 1,001 EUR – 15%. Entrepreneurs pay taxes at the following rates in Montenegro: income from 8,400.01 EUR to 12,000 EUR – 9%; income above 12,000 EUR – 15%. Only a couple years ago a flat income tax rate of 9% was applied in the country, which was very low by the European standards. Now Montenegro has lost part of its charm but not all of it: taxes are still comparatively low in the country. | 9%/15% |
| Czech Republic | Progressive taxation has been applied in the country since 2021. The personal income tax rates are as follows: if the annual income does not exceed 1,867,728 korunas (~78,420 EUR) the tax rate is 15%; everything above the threshold is taxed at 23%. 15% is an average personal income tax rate in Europe. | 15%/23% |
| Switzerland | We cannot say that taxes in Switzerland are low. The tax legislation in the country is quite peculiar. Personal income is taxed at three levels: the federal, the cantonal, and the municipal. The direct federal tax depends on the amount of income and it varies between 0.77% and 11.5% (the highest tax rate is applied if the income exceeds 769,700 CHF). Different cantons and municipalities in Switzerland, however, tax incomes at different rates. There are places where the income tax is relatively low. For instance, the tax burden for residents of Zug is 22.22%; Appenzell Innerrhoden – 23.82%, and Obwalden – 24.3%. On the other hand, the personal income tax in Geneva is simply huge – 44.75%. | from 22.22% |
| Estonia | As is the case in most other European countries, residents of Estonia are taxed on their worldwide income while non-residents are taxed only on the incomes from local sources. The standard rate of the personal income tax in the country is 20% | 20% |
How to qualify for tax residence of low-tax European countries
You have to meet certain requirements to qualify for tax residence of one of the European countries that we are discussing here to be able to pay less in taxes. Acquiring the tax residence of a foreign country may not be an easy task. For example, you are normally required to spend more than 183 days in the country to qualify for tax residence. However, sometimes the requirements are not so tough. Let’s see what conditions you have to meet in order to become a tax resident of a low-tax European country.
| Country | Conditions of acquiring tax residence |
| Andorra | Residence in the country for more than 183 days per calendar year. A center of interests (a business company) in the country. |
| Bulgaria | A permanent address in the country. Residence in the country for more than 183 days per any 12-month period. You can become a tax resident of Bulgaria in the calendar year when you reach the level. A center of interests in the country (family, property, job, business, etc.). |
| Hungary | Residence in the country for more than 183 days per calendar year. |
| Gibraltar | Residence in the country for more than 183 days within a fiscal year and more than 300 days within three consecutive years. |
| Georgia | Residence in the country for more than 183 days per any 12-month period. However, wealthy individuals can acquire tax residence of Georgia in an accelerated manner. If you can prove owning property that is worth at least 3,000,000 laris (not necessarily located in Georgia) and having an income of at least 200,000 laris per year over the last three years, you can become a tax resident of Georgia much faster. |
| Cyprus | Residence in the country for more than 183 days per calendar year. Please note that the day of departure from Cyprus is not included in the sum while the day of arrival is. There is also a ’60 days rule’ in Cyprus. You can be considered a tax resident of the country if you meet the following conditions: you live in Cyprus for more than 60 days per year; you do not spend more than 183 days per year in any other country; you are not a tax resident of any other country; and you have economic interests in Cyprus (residential accommodations or a business company, for example). |
| Monaco | Residence in the country for more than 183 consecutive days and proof of a high personal income or ownership of a business company in the dukedom. |
| Latvia | You can qualify for tax residence of the country if you meet any of the following two conditions: you have a registered residential address in Latvia; or you spend more than 183 days in the country within any 12-month period. |
| Lithuania | Alternatively: Residential accommodations in the country. Personal, social, and/ or economic interests in Lithuania. Residence in the country for more than 183 days in total over a fiscal period. Residence in the country for more than 280 days in total over consecutive fiscal periods on the condition that 90 days are spent in Lithuania over each period. |
| Liechtenstein | A legal residence permit in the dukedom. Residence in Lichtenstein for more than 6 months per year with disregard for short periods of absence. |
| Slovakia | Physical presence in the country for more than 183 days per calendar year. |
| Montenegro | Residence in the country for more than 183 days per fiscal year. Residential accommodations in Montenegro. Personal or economic interests in the country. |
| Czech Republic | Presence in the country for more than 183 days per calendar year. A permanent residential address in the Czech Republic. |
| Switzerland | In accordance with the Swiss legislation, tax residence of the country can be granted to a foreign national in the following cases: if he/ she has a permanent address in the country and a center of interests; works for a pay in Switzerland for at least 30 consecutive days (with disregard for short periods of absence); lives in the country for at least 90 consecutive days (with disregard for short periods of absence) without having a job there. |
| Estonia | Residence in the country for more than 183 days per any 12-month period. |
As you can see, there are jurisdictions in Europe with close-to-zero taxes, Liechtenstein and Monaco in particular. But exactly due to the fact that these are tax havens, acquiring tax residencies there can be a challenging task. Besides, the cost of living in both dukedoms is higher than in most other European countries. Thus, even if you could save on taxes acquiring tax residence there, your day-to-day expenditures would be significant.
In our opinion, the following low-tax European countries deserve your attention in the first place:
- Latvia;
- Lithuania;
- Bulgaria;
- Czech Republic;
- Montenegro;
- Georgia.
These countries offer some special tax reduction schemes that will let you lessen your tax burden if you become a tax resident of one of these countries.
In any case, however, changing your tax residence is a demanding enterprise. You have to study the fiscal legislation of each country that you want to consider and find out about all the requirements that you have to meet in order to qualify for tax residence in a foreign country. Besides, the laws constantly change and you do need assistance from professionals who ‘keep an eye on the ball’ and monitor all the changes that happen regularly.
Offshore Pro Group experts will be happy to provide assistance to you in changing your tax residence. Please write to info@offshore-pro.info or use the chat box to contact us and we will help you choose the best country – in Europe or in another part of the world.
