People choose to move abroad for a wide variety of reasons. It could be anything from an exciting new job, an improved quality of life, or you could just have an avid interest in other cultures. There are some significant tax implications that should be kept in mind though, which may influence your choice of country to move to.
American’s who choose to become expats will still have to file US taxes on any income they earn worldwide, no matter where they live. This has the potential to cause double taxation in both the US and the country that an expat is now living in.
While most countries do have similar taxation systems to one another, there are some countries which either have no income tax at all, or only warrant taxation upon income that is made within that country. Therefore, if your income is sourced from another country, then you won’t pay any tax within that country of residence.
The countries on this list will be those which a digital nomad or expat could make their ideal base for the future, and there are a wide variety of cultures and environments to choose from.
The Bahamas is a zero tax country, where you can easily obtain a temporary residency visa for only $1,000 per year. The cost of living in the Bahamas is quite high though. However, this country is often highly listed on countries with a high quality of living
British Virgin Islands
The British Virgin Islands (or BVI) is another Carribean Paradise which you could move to and gain a tax benefit. The BVI offers a residency visa to anyone who can provide evidence that they are economically self sufficient, as well as provide a $1,000 surety bond in the process.
There is no ‘fee’ technically to become a Paraguayan resident. However, you will need to deposit $5,200 into your Paraguayan bank account upon arrival. Once you have spent a minimum of 183 days in Paraguay over a three year period, you will be able to obtain your citizenship. Paraguayan citizenship also gives you the ability to live in other culturally deep countries such as Brazil, Argentina and Uruguay. Therefore, this may be a perfect option for expats wishing to get a large amount of cultural diversity. However, other options on this list will likely provide better taxation benefits.
Income taxes are only due on income which is generated within Costa Rica. Therefore, if your source of income is still within the US, you will not have to pay double tax. The residency within Costa Rica is open to anybody who can evidence earnings of over $2,500 per month in income. This is arguably the most achievable option without a recurring fee (such as in the Bahamas).
European countries which have low or no tax generally have quite a high requirement of investment to become a resident of. This makes the barrier of entry for expats wishing to move to European countries quite high, if they’re seeking minimisation of taxes.
Bulgaria has a relatively low flat rate income which sits at 10%. However, Bulgaria also requires an investment of over $500,000 in state bonds if you wish to become a residence. The only way to avoid this is if you happen to have a European passport, in which case residency is free.
Monaco requires a $500,000 bank deposit, as well as a further $500,000 investment in real estate. If you do some research on real estate in Monaco, you will soon realise that $500,000 doesn’t go very far either!
Andorra’s requirements are a little less significant, with a $350,000 investment requirement. However, considering the other options on this list within the Americas or Asia, it is difficult to put forward an argument for low taxation countries within Europe unless you have your heart set on Europe (and a large bank account to match!)
The gate of entry to Mauritius is straightforward initially. If you are employed and earning over $1,000 per month OR have an income of over $100,000 per year, you can obtain what is called an Occupation Permit, which is essentially temporary residency for 3 years. However, on top of the above, you will then also have to invest $500,000 in real estate – Which makes little sense, as those earning $1,000 per month are unlikely to have the money for $500,000 in real estate.
The requirements for Malaysia are quite favourable for entry. You will earn residency if you earn over $2,500 per month, and make a bank deposit of $70,000 if you are under 50, or $35,000 if you’re over 50. However, the catch here is that you are not able to touch your deposit for 10 years. That means Malaysia should only be considered by expats if you are certain of moving to Malaysia, and want to be there for the long term. It is clear that moving here as an expat is more appealing for those over 50.
Dubai is famous (or infamous?) for being a low tax haven, and located in the Middle East. It is notably easier to get residency if you are fully employed by a firm within the country. However, it is also possible if you’re self employed, although significantly more difficult. In order to gain residency as a self employed person, you will need to enlist the aid of someone local to help set up a local firm within Dubai.
This list only includes a small selection of the very best options for expats looking to limit their tax obligations. None of the countries on this list will tax you on your income generated abroad (except Bulgaria at 10%). If you do decide to move to one of these countries, it is essential that you still file a US tax return, and get the advice of an expat specific tax accountant. It is also worth looking into the Foreign Earned Income Exclusion which can be beneficial for those earning up to $100,000