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Tax burden can be overwhelming, especially if your state levies high taxes on your profit as an individual or a company.
Fortunately, well-heeled individuals don’t need to be confined to the tax regime of their homeland. Countries worldwide attempt to appeal to investors by offering second citizenship combined with an attractive tax system in exchange for a financial contribution.
Albert Ioffe, Legal and Compliance Officer at Immigrant Invest, explains how it is possible to optimise your taxes by becoming a citizen of another country.
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How can they optimise taxes by becoming a citizen of another country?
Numerous countries globally present favourable taxation frameworks aimed at enticing investors. Some nations even offer citizenship by investment programs, facilitating tax residency. Moving to such a country, establishing a new business or relocating an existing enterprise to such jurisdictions can yield substantial tax benefits.
At Immigrant Invest, we help clients find the most suitable option to obtain citizenship in another country by investment. We focus on the investor’s main objectives but also consider other factors, such as freedom of movement and quality of life.
What are the best low-tax countries for individuals?
Several Caribbean countries, including Antigua and Barbuda, Dominica, Grenada, St Kitts and Nevis, and St Lucia, offer favourable taxation systems for their citizens.
Antigua and Barbuda and St Kitts and Nevis do not impose personal income tax on their residents. Additionally, these countries, along with Dominica and Grenada, have no withholding tax on dividends, interest, and royalties. St Lucia is an exception, as it levies a 10% tax on interest and royalties and an up to 30% tax on income.
Unlike the Caribbean countries, Vanuatu, an Oceanic country, also boasts an attractive tax system for individuals. Citizens and residents of this small island nation are exempt from paying personal income tax, capital gains tax, inheritance tax, and wealth tax.
Additionally, these countries provide citizenship-by-investment programs, enabling individuals to become tax residents.
To participate, the required minimum investments are as follows:
- $100,000 in Antigua and Barbuda, Dominica, and St Lucia;
- $130,000 in Vanuatu;
- $150,000 in Grenada;
- $250,000 in St Kitts and Nevis.
What are the best countries for companies seeking low taxes?
Vanuatu is also notable in this regard, with companies being exempt from corporate tax. Additionally, the VAT rate is comparatively low at 12.5%.
In Europe, Malta presents an option. Despite having an official corporate tax rate of 35%, the highest in the European Union, most companies can qualify for tax deductions. This reduces the actual tax rate to between 2.5% and 11.5% of profits.
Investors can register a company in Malta after obtaining citizenship for exceptional services by direct investment. They can become Maltese citizens by naturalisation after maintaining residency for either one or three years, depending on the specific criteria they meet.
The investment requirements include:
- a contribution of at least €600,000 to the National Development and Social Fund;
- a charitable donation of €10,000;
- renting real estate for five years at an annual cost of €16,000 or purchasing property for €700,000.
Is it mandatory to become a country’s citizen to pay taxes there?
Not universally. Legal entities are typically considered tax residents in the country of their incorporation, irrespective of the citizenship of their owners. As for individuals, they often qualify as tax residents after spending a minimum of 183 days per year in a country.
For Vanuatu and Caribbean nations, obtaining citizenship through investment is the most straightforward path to achieving tax residency. Conversely, the United Arab Emirates, which levies no personal income tax and no corporate tax on incomes up to AED 375,000 (approximately $100,000) annually, offers virtually no pathway to citizenship. Nonetheless, foreign nationals can obtain UAE residency and enjoy similar tax advantages.
A 2-year UAE residence visa is available to those who purchase real estate valued at a minimum of AED 750,000 ($204,000), and a 10-year Golden Visa can be obtained by investors who spend on property at least AED 2,000,000 (around $545,000).
In Malta, obtaining citizenship is also not a prerequisite for tax residency. Maltese permanent residence can be more affordably acquired by investment of at least €150,000. Such residents are granted the same rights as citizens to start a business and pay taxes within the country.
To conclude, for those looking to relocate or move their business to optimise their tax situation, the Caribbean nations, Vanuatu, Malta, and the UAE emerge as top choices for maximising investment benefits. If you are seeking further insights into these options and want to identify the one most suited to your needs, our team of experts at Immigrant Invest is available for consultation.
