Imagine a place where your hard-earned money is not burdened by tax obligations from exorbitant personal income tax rates, wealth, and gift taxes, allowing you to keep more of what you earn and pave the way for financial prosperity.
This article will unveil a collection of countries that have established themselves as tax havens or provide the lowest tax rate for those seeking favorable financial environments in tax-friendly countries. From offering competitive corporate tax rates to personal income tax exemptions and benefits, these countries have crafted attractive tax policies to attract individuals and businesses alike.
Whether you’re a globetrotting entrepreneur, a digital nomad, or an expat looking to reduce your living expenses by minimizing your tax burden to the IRS (Internal Revenue Service), keep reading as we list countries with low taxes.
How Taxes Vary from Country to Country
Taxes exhibit significant variations from country to country, reflecting individual tax jurisdictions’ diverse approaches and priorities. One of the critical factors influencing tax disparities is the structure of a nation’s tax system.
While some countries employ progressive tax systems that levy higher tax rates on individuals with a higher taxable income, others opt for flat tax systems that impose a consistent tax rate regardless of income level. Furthermore, the types of taxes imposed, such as income tax, corporate tax, Value-Added Tax (VAT), or property tax, can vary in terms of rates and applicability.
Countries also provide tax incentives and deductions to tax residents by offering allowances and exemptions for specific expenses or activities, such as travel costs, childcare, and social security contributions. Most countries recognize that a balance is needed to maintain and increase economic productivity and growth.
Additionally, international tax treaties and agreements influence how taxes are levied on cross-border transactions, non-residents, foreign income earned, and revenue generated by multinational corporations. These variations in tax systems highlight the importance of understanding the unique tax landscape of each country to manage personal and business finances in a globalized world efficiently.
No Taxes Over Low Taxes
While countries with low taxes typically impose reduced income tax rates compared to global averages, no-tax countries level zero income tax and eliminate other taxes, which may include wealth, capital gains, or sales tax. These countries generate enough income through alternative means, allowing tax residents and non-residents to avoid paying taxes.
You’ll often see popular countries among the wealthy, such as Monaco, the United Arab Emirates, and the Cayman Islands, in conversations about zero-income tax countries to consider for moving abroad.
12 Countries With Low Taxes
The Cayman Islands
Tax rate: Zero percent
The Cayman Islands has become synonymous with foreign investors and international corporations looking to avoid paying taxes. In addition to a zero-income tax rate, it’s one of the best tax-free countries for businesses, with a corporate income tax rate of nil.
The country is home to some of the most highly regarded foreign banks, and companies in the Cayman Islands are subject to a licensing fee, which generates income for the economy.
This appealing tax structure has enabled investors and international companies to increase their wealth significantly while simultaneously protecting it through the country’s well-structured and regulated banking system. While there may be a financial aspect to consider, residing in the Cayman Islands provides access to exceptional standards across various aspects, including healthcare, education, infrastructure, and the pristine preservation of natural surroundings.
Key benefits:
- Zero income tax, capital gains, wealth, gift, or property tax
- A stable government with a highly-regulated and safe banking system
- Adheres to international banking standards
- Permanent residence obtainable through buying property and earning a minimum income
United Arab Emirates
Tax rate: Zero percent
In the UAE, local and foreign-earned income, capital gains, and all other forms of personal wealth are tax-exempt. Beyond its advantages for each tax resident, the country has embraced trade liberalization within the Middle Eastern region and globally.
Significant investments in educational facilities, healthcare, business districts, public transport, and entertainment options have transformed the country into one of the most desirable places to live and conduct business without common obstacles.
Regarding businesses, countries in the Gulf Cooperation Council (GCC) implemented a new federal corporate tax system on 1 June 2023. The new corporate tax rate in the UAE has been set at nine percent; however, this is the lowest rate implemented in the GCC.
Key benefits:
- Zero income tax, as well as no capital gains, wealth, gift, or property taxes
- Corporate tax rate of just nine percent
- A Middle Eastern country with Islamic values that acknowledges and embraces Western cultural norms
- A Golden Visa program offering long-term residency to real estate investors, entrepreneurs, highly skilled and talented individuals, and high-achieving students
For more information on residency by investment in Dubai or Abu Dhabi, check out this article: Golden Visa UAE – The Ultimate Guide.
Andorra
Tax rate: Ten percent
Nestled between Spain and France in the Pyrenees mountains, the Catalan-speaking microstate of Andorra is one of Western Europe’s prime low-tax jurisdictions. The nation’s low-income tax status is bolstered by an income tax exemption for residents earning under €40,000 (about $44,000 annually).
Corporations in Andorra are also in an advantageous position, with a tax rate mirroring personal income tax of just ten percent.
Concerning additional taxation, Andorra is amongst the lowest in VAT, imposing 4.5 percent on the sale of goods. And despite its location in the center of Western Europe, it has numerous double tax treaties with neighboring countries to maintain its favorable tax environment.
Key benefits:
- Low rate of ten percent tax on personal income and corporate earning
- High tax-exempt threshold of €40,000 for personal income
- Relaxed and peaceful life in a safe country
Bermuda
Tax rate: Zero percent (variable payroll tax imposed)
Located in the North Atlantic Ocean, the British Overseas Territory of Bermuda is the ideal foreign country for tax optimization. The Bermudan government doesn’t impose personal income taxes; however, employers and employees are liable to pay payroll taxes.
The tax rate ranges from 0.5 to 12.5 percent, with employees responsible for paying half.
Depending on the industry and position, an employer may absorb the entire payroll tax bill, meaning many working residents in Bermuda avoid paying taxes on their incomes altogether. Additionally, most businesses operating in Bermuda are exempt from corporate taxes.
Key benefits:
- No income tax and a low average payroll tax rate of eight percent, four of which is liable to be paid by employees
- High average salaries
- A long-term residence permit is obtainable through real estate investment
Bahrain
Tax rate: Zero percent
Another Gulf tax haven, Bahrain’s oil wealth has ensured it remains one of the best tax-free countries in Asia for residents and businesses. Unlike the UAE, there is currently no corporation tax in place in Bahrain for firms outside the oil and gas industry.
Corporation tax is still in the discussion phase. Bahraini residents avoid paying all income-related taxes; the only taxes imposed are on the sale and purchase of goods, such as VAT, import duties, and land tax.
Key benefits:
- Zero income tax, capital gains, wealth, gift, or property tax
- No corporation tax
- Residency by investment program for retirees who own property and earn a minimum income
- Cheaper cost of living than the UAE
St. Kitts and Nevis
Tax rate: Zero to five percent
St. Kitts and Nevis has established itself as the optimal choice when considering a location that offers a clear and uncomplicated route to low taxes and second citizenship.
Compared to other countries offering citizenship by investment programs, St. Kitts and Nevis is amongst the best for tax reduction. The government employs a territorial taxation system, taxing only locally-sourced income. Additionally, income is taxed at a flat rate of five percent.
Businesses also receive favorable tax treatment. Companies are subject to a high 33 percent corporate income tax rate; however, the rate can be reduced to one percent by paying an annual license fee. Additional tax concessions allow businesses with overseas partners to pay taxes on corporate earnings at a significantly reduced rate.
Key benefits:
- Zero tax on foreign income
- Zero capital gains, wealth, or gift tax
- Several tax concessions for businesses to legally avoid paying taxes
- Citizenship by investment from a real estate investment or government contribution
- A powerful passport with visa-free travel to 153 countries
For more information on obtaining citizenship by investment in St Kitts and Nevis, check out this article: St Kitts and Nevis Citizenship by Investment – The Ultimate Guide by Experts.
Bulgaria
Tax rate: Ten percent
Bulgaria has garnered a reputation as a country with low taxes due to its universally reduced tax rates, attracting individuals looking to reside in one of Europe’s lowest tax countries. With its flat personal and corporate income tax rate of ten percent, Bulgaria offers one of the lowest tax rates of any European country.
This advantageous tax system has propelled the country’s reputation as an attractive destination for entrepreneurs, investors, and digital nomads.
Additionally, Bulgaria does not impose wealth or inheritance taxes, further contributing to its appeal. The combination of a reduced tax obligation and competitive business costs makes Bulgaria an appealing choice for those looking to optimize their finances while enjoying the benefits of living in a European Union member state.
Key benefits:
- Flat tax rate of ten percent, allowing high-earners to pay low taxes
- One of the cheapest EU countries to live in
- Residence by investment through several investment options, including investing in a Bulgarian company or purchasing units of an investment fund
Vanuatu
Tax rate: Zero percent (12.5 percent on rental income)
The island nation of Vanuatu is widely recognized for its picturesque tropical beauty and has gained prominence as a tax haven paradise in recent years. With a population of just 300,000, the country is small in size but large in character, and its tax policies make it an ideal country to set up shop.
Despite consisting of a group of small islands, the country generates enough money from alternative sources, such as tourism and industrial production, including beef and timber. Vanuatu has maintained its zero-income tax policies for all employees and corporations from those measures.
Key benefits:
- Zero income tax on employment income and corporate earnings outside rental income
- Citizenship by investment
- Relaxed criteria and low foreign investment amount to obtain a second citizenship
This article explains more about taxes in Vanuatu for individuals and companies.
Paraguay
Tax rate: Eight to ten percent
A country in South America often overlooked for its low tax environment but deserving of recognition, Paraguay’s tax incentives and residence options make it a serious contender for alternative residency. With its territorial tax system, Paraguay imposes taxes only on income generated within its borders.
Furthermore, the maximum tax rate on local income for individuals is capped at ten percent, placing it among the lowest tax countries in South America. Concerning corporation tax, the government imposes a flat rate of ten percent on Paraguayan businesses, one of the lowest in the region.
Key benefits:
- Maximum tax rate of ten percent on personal income and corporate earnings
- No tax on worldwide income
- One of the cheapest permanent residency by investment programs, along with a convenient ten-year installment payment structure
- Eligibility for second citizenship after just three years of permanent residency
Monaco
Tax rate: Zero percent
Home to the Monaco Grand Prix and some of the world’s wealthiest people, Monaco’s reputation as one of the lowest tax countries in Europe and around the world is unparalleled.
Monaco has no income or corporation taxes besides corporate taxes on businesses that predominantly operate and generate income outside the state.
While living costs in Monaco may be notably high and the prerequisites to establish residence are demanding, the country’s allure as an ideal destination for wealth preservation holds great significance, particularly for those with substantial financial assets.
Key benefits:
- Zero income tax, as well as no capital gains, wealth, gift, or property taxes
- Residency by investment through buying property and a bank deposit
- One of the few completely tax-free EU countries
Western Sahara
Tax rate: Zero percent
The African nation of Western Sahara is seldom found on travel bucket lists, much less one to consider for tax optimization. Nonetheless, understanding low-tax countries in-depth will broaden your inside into global taxation.
Despite the ongoing civil war, Western Sahara has managed to establish diplomatic relations with 42 countries and is recognized as a full-fledged member of the African Union.
Essentially considered a failed state, the country does not possess alternative sources of revenue to offset the absence of imposed taxes. Furthermore, the presence of territorial disputes, coupled with unstable governance, prevent it from establishing standard economic and criminal laws.
Key benefits:
- Zero taxes besides import duties and VAT
The Maldives
Tax rate: Zero to 15 percent
Beyond its heavenly attributes of stunning idyllic beaches and turquoise waters, the Maldives boasts a tax setupthat aligns with its paradisical appeal.
There is no oil wealth in the Maldives or the most desirable banking system for offshore banking, but the nation generates substantial income from tourism, thereby alleviating the need to impose heavy taxes on residents.
While it isn’t completely tax-free, the threshold for paying taxes is high at MVR 720,000 (about $47,000), and you will only pay 5.5 percent tax on additional income up to MVR 1,200,000 (about $78,000)
Key benefits:
- High-income threshold for taxes
- Idyllic beach life every day
- Long-term residency by investment through a bank deposit
Choosing a low-tax country to relocate to
The idea of moving to a country with low taxes has gained increased appeal amidst escalating tax rates. However, choosing a country with low taxes is more challenging than it may initially appear. There are numerous questions you’ll want to ask before deciding on relocating to a low-tax country:
- “Does it have a double tax treaty with my home country?”
- “Are low taxes applied to local or foreign income?”
- “Is there a minimum residency requirement to remain a tax resident?”
- “Will I have to pay corporation tax?”
- “Will I be liable to pay taxes on investment income, such as dividends and rental property?”
- “Can I obtain residency by investment?”
- “Can I obtain citizenship by investment?”
- “How much is the investment program?
These are just a few questions you’ll ask when creating a shortlist of low-tax countries to move to. In addition to financial and residency considerations, you’ll need to consider factors such as political stability, legal framework, ease of doing business, personal safety, cultural compatibility, and quality of life.
How can Global Citizen Solutions help?
If you’re on a mission to move overseas and reduce the high taxes you currently pay, you’re not alone. Many countries now offer residency or citizenship by investment programs, enabling foreign investors to secure legal status in exchange for their investment. By obtaining residency or citizenship status through investment, you not only contribute to the country’s economic growth but gain expanded financial and personal rights for yourself and your family.
Global Citizen Solutions is a boutique global citizenship and residence advisory firm providing international clients with citizenship, residency, and tax solutions. Contact us today to begin your journey to global citizenship.
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Frequently Asked Questions about Countries with Low Taxes
What country has the lowest taxes in the world?
There is no official lowest tax country, as numerous countries have low or even no taxes. Some countries with low taxes for exapts and citizens include the Cayman Islands, Bulgaria, Bermuda, Paraguay, Monaco, and countries in the Middle East like the UAE, Oman, Bahrain, and Qatar.
Why is Dubai tax-free?
The UAE has traditionally depended on oil companies to sustain its economy. Substantial reserves in oil and gas, in addition to significant overseas investments, allow the state adequately invest in the country’s infrastructure, education, healthcare, and other quality-of-life factors without increasing its low tax-to-GDP ratio. As a result, this enables major cities such as Dubai to maintain their tax-free status.
Which country is the best to not pay taxes?
There is no one-size-fits-all answer when it comes to finding the best country to not pay taxes. The best depends on individual circumstances and criteria. Several countries are known for their favorable tax systems, such as Monaco, Andorra, the Cayman Islands, and the United Arab Emirates. However, the best option comes down to which taxes you want to avoid; Are you worried about tax on foreign-earned income? Do you own a business and want to eliminate corporation taxes? Are you looking for employment overseas in a zero-income tax country?
These are all factors to consider as taxation across low- and no-tax countries will vary, and the tax regime in one jurisdiction may align better with your specific circumstances than another.
Which EU country has the lowest income tax?
Bulgaria has the lowest income tax rate in the European Union, with a flat tax rate of ten percent. However, Monaco is one of Europe’s few countries with no personal and corporate income taxes for foreigners and citizens.
Which country has the best taxation system?
When it comes to determining the best taxation system, no single solution fits all situations. One taxation system may favor corporations and entrepreneurs, while another will appeal to local employees and retirees. Taxation systems differ across countries, and specific systems may better suit your particular circumstances than others.
Which country has the simplest tax system?
There are numerous ways a country can have a simple tax system. For example, Bulgaria has a flat tax rate for both individuals and businesses, meaning there’s less confusion about what percentage of income is owed in taxes; Other countries, such as the UAE and Monaco, have adopted a tax setup that exempts individual residents from tax obligations, so their tax systems could be considered the simplest as it alleviates the need for residents to file taxes altogether.
A simple tax system in countries with low taxes can also encompass the provision of online tax filing options that require minimal steps and prerequisites to avoid unnecessary tax penalties or back taxes. Streamlining the online filing process with the fewest requirements adds to the overall simplicity of the taxation system.
Which country has the highest taxes in the world?
The country with the highest taxes in the world is the Ivory Coast, which imposes a 60 percent income tax.
