3 LOW TAX COUNTRIES WITH A WORDLWIDE TAXATION SYSTEM TO MOVE TO (AND TRANSFER YOUR TAX RESIDENCE)
In these times of emergency that has lasted for years, it is increasingly clear how much the problems facing Westerners are greater than those who live in many other countries.
For all these reasons, more and more people are looking for a better country in which to move (and transfer their tax residence) where to carry out their business, perhaps even remotely and in smart working, saving on taxes and at the same time ensuring a better lifestyle.
Some have no idea of the correct procedures to follow to move and above all underestimate the real tax advantages that the transfer entails.
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As for the choice of the Country to move to, a fundamental element to take into consideration if you intend to move abroad is the tax jurisdiction present.
For the sake of explanation, we can summarize by saying that tax systems around the world are structured on the basis of 3 main taxation systems.
THE RESIDENCE BASED MODEL (“WORLDWIDE TAXATION”);
THE MODEL BASED ON CITIZENSHIP;
THE TERRITORIAL MODEL.
1) The residence-based tax model, which represents most of the world included European countries, is based on the Woldwide Taxation principle and links the tax obligation to residence. For this reason, it obliges all those who reside in the country that applies this tax model to pay taxes regardless of whether they are produced within the state of residence or outside it.
2) The model based on citizenship, where the obligation to pay taxes is detached from residence but connected to the citizenship possessed. The typical case is the American one (which is in practice the only state in the West that applies this type of principle, applied in substance only by some African countries in addition to the USA).
3) In the territorial model, on the other hand, subjects resident for tax purposes in a country with a territorial system only taxes on income produced within the country of residence.
Territorial Tax System or WorldWide Taxation?
As you have seen, the differences between the 3 systems are significant. The territorial system ensures considerable savings on taxes (if not, in some cases, a zeroing) but adherence to a privileged tax jurisdiction is not immune to risks.
The tax opportunities of each system must be assessed on a case-by-case basis. This is why we recommend that you contact an international tax lawyer, who will be able to provide you with the necessary assistance in your personal case.
Note that there are also many WorldWide Taxation countries that have low or very low taxation.
Here are some examples of WorldWide Taxation Countries that ensure advantageous taxation are as follows.
ANDORRA.
Why move to Andorra?
This miniature state located in the Eastern Pyrenees is famous for its low taxation and is, in fact, notoriously considered a European tax haven that applies some of the lowest tax rates in the world. Despite this, the move to Andorra is totally legal. Andorra, in fact, is no longer included in the OECD black list countries and has also joined the agreements on the exchange of tax information with numerous European countries.
Its economy is in a phase of continuous growth, especially in the banking, insurance and tourism services (which constitutes 80% of GDP).
Andorra ensures a very high lifestyle and at the same time a very affordable cost of living.
In addition, it boasts an efficient health system, managed by the Caixa Andorrana de Securetat Social (CASS).
Taxation:
Andorra applies the WorldWide Taxation Principle, but nevertheless its taxation is very convenient. The rate applied is in fact around 10%.
How to move to Andorra?
Once you have landed in Andorra, after your first period of stay, you will have to regularize your presence.
You can obtain tax residency through three ways:
- obtain a work permit: applying for and obtaining the issue of a work permit will allow you to have tax residence. Unfortunately it is not very easy to get one, but an European citizen will have more chances.
- have a Business Plan and open a business: an advantageous way to obtain residency in Andorra is to start a business and start it up within 9 months in Andorra. But be careful: you will have to prove that you have at least 35,000 euros, and 12,000 euros for each family member.
- make a financial investment: have a capital and create a bank account in Andorra. This is an option that will allow you to obtain residency without working or setting up a business (the so-called Passive Residence) in Andorra. However, consider that this is an important investment: equal to at least 400,000 euros as well as demonstrating that you have 300% of the minimum wage plus 100% for each family member.
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HUNGARY.
Why move to Hungary?
Moving to this Eastern European country could be really advantageous. Just think that in 2016 it was classified (* research carried out by "Internations") among the 20 countries in the world that ensure the highest standard of quality of life.
Taxation:
The Flat Tax for individuals is 15% and 9% for businesses.
For this reason, in recent years it has become a very popular destination for European entrepreneurs (but not only).
Furthermore, Hungary is among the signatory countries of the Convention against double taxation with many countries and therefore, if you move to this country you will not have to pay taxes twice.
How to move to Hungary?
Once you have landed in Hungary, after the first period of stay, after 3 months, you will have to regularize your presence, apply for Hungarian residency, register with the Registry of Hungary and complete the change of tax residence also in your country.
Consider that Hungary is part of the Schengen zone and for this reason Europeans enjoy the same conditions as Hungarian citizens with regard to work and services.
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MONTENEGRO
Why move to Montenegro?
Moving to this multicultural and contaminated country can prove to be really satisfying.
In fact, Montenegro offers a lifestyle equipped with all needs at a very affordable cost.
Although it is not (yet) part of the European Union, the official currency of this country, which has recently become independent, is the euro.
Taxation:
Residents permanently in Montenegro pay both state and foreign income taxes, however, non-residents are subject to taxes produced only in Montenegro.
Personal and corporate income tax is 9%
How to move to Montenegro?
To obtain permanent residence in Montenegro, certain requirements related to the absence of criminal convictions, the length of residence and the presence of a stable source of income are necessary.
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Remember that laws change all the time and this article may not necessarily take into account the law in force at the time you are reading it; therefore it is essential to contact an international tax lawyer in order to check the law in force when you decide to relocate or move abroad.
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It is always very important that you speak to your international tax attorney before starting any type of tax planning or relocation of your business.
Do not hesitate to contact us if you would like us to provide you with the contact information of highly qualified international tax lawyers who are specifically qualified to help clients in your situation.
Disclaimer: Always speak directly to an attorney; blog posts are not a sufficient source of information to make decisions, may not be appropriate for your situation, may not be well researched, and may not be current at the time you read them, always speak directly with an attorney.
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