Whether you’re a digital nomad, a crypto investor, a successful entrepreneur or just plain old wealthy, there are plenty of reasons to reach for your suitcase in 2024.
While it’s true that travel broadens the mind, it’s no less accurate that being prepared to get up and go can also be financially enriching.
Deciding where to go, on the other hand, can be the complicated part, not least because so many jurisdictions compete to lure high-net-worth people to live and invest there in return for low, or even no, taxes.
The word ‘unpack’ is used so often these days it’s become a bit of a cliche. But unpack we must, especially when it comes to understanding the pros and cons of zero-tax countries around the world. Only then can we compare how different countries apply tax policies to encourage people to go there.
These days, there are many different ways and countries in which you can legally reduce your tax bill to as little as zero. But some people still prefer the clean-cut, old-school, no-holds-barred, tax-free countries where you don’t pay tax on income, capital gains or wealth.
There are only about a dozen of those left, so let’s explore some of these options.
Zero-Tax Options Around the World
Typically, these are places to reduce your taxes – maybe not for the rest of your life, but for as long as the benefits suit your lifestyle. However, the idea of a tax-free country, as a back pocket residence permit or a back pocket citizenship, is attractive.
Let’s look at some of the tax-free countries you could choose.
In short, you’ve got Brunei, Monaco, the Gulf countries and some Caribbean islands. In terms of the popularity or best-known locations, these are essentially what you’re looking at.
Most people would agree that Brunei and Monaco are not typically places you’d want to live in.
If you’re looking for a diverse, cosmopolitan environment with greater cultural and social freedoms, there are better options than Brunei.
Meanwhile, Monaco has long been a playground of the ultra-rich and one of the wealthiest countries in the world, which allows access to France, Italy and the rest of Europe. But Monaco’s an expensive option, and many of its benefits can be achieved more cost-effectively elsewhere. The Monaco Golden Visa requires a minimum investment of €500,000, and the state is tiny – 1.1 square kilometres can get old pretty quickly.
That leaves the Gulf states or tax-free islands such as the Bahamas, Bermuda, The British Virgin Islands, Vanuatu, Antigua, St Kitts and Nevis, the Cayman Islands and so on.
In these locations, you can make a one-off investment or donation, buy real estate or start a company to avail of zero taxes. You can learn more about tax-friendly Caribbean Islands in this video.
However, it’s important to factor in your desired lifestyle.
Much of what we know about these tax-free islands is sourced from the ranks of lawyers and accountants who are all focused on reducing tax as much as possible.
But there are other important considerations. Most people would rather pay a little bit more for a lifestyle they like. Put simply, if you opted to invest your money and time in somewhere like Antigua, you’d have to enjoy beach life.
That doesn’t sound too bad and Antigua really is an excellent place for a holiday. But are you prepared to spend the rest of your life there? Even the most dedicated sun worshippers are liable to develop cabin fever after a few years on any of these islands. Being far away from everything familiar to you can take a toll.
In general, tax-free countries are losing a little of their lustre precisely because there are so many good deals available in other countries which don’t require a massive cash injection to get started.
That leaves us with the Gulf countries. For most people, the easiest choice would be to go to the United Arab Emirates (UAE). But things are changing there, too – the UAE has started imposing a 9% tax on onshore companies, though freezone companies with qualified income remain exempt in some circumstances.
In short, the UAE is no longer a straightforward tax-free option. Moving or starting a business there requires holistic offshore and tax planning, now more than ever.
It’s not all bad news in Dubai and Abu Dhabi – with proper planning, it’s still possible to pay low taxes in the UAE and enjoy the benefits of an advanced, business-friendly country with all the modern conveniences you need.
Alternative Low-Tax Destinations
With so many changes worldwide, it’s a relief to know there are still numerous countries where you can pay zero tax, even in places that don’t ostensibly have zero taxes.
You can go to a country with territorial tax – a system where you pay tax at local rates if you have a job or run a local company. It’s the same with stocks or real estate – if they’re local, you’ll pay tax at the local rates. However, if you have foreign-sourced income somewhere else, it’s not taxed.
Let’s say you have investments or a company in a jurisdiction that’s zero tax but live in a territorial tax country where the overseas company is not taxed – you are effectively paying zero anyway.
Now, it’s not always as straightforward as setting up a company overseas, as there are specific rules to territoriality. For example, if you work from a territorial tax country while operating a business elsewhere, you have to prove you’re not deriving income locally.
For more information, read our list of the 10 Best Countries with a Territorial Tax System.
One destination that Nomad Capitalist founder, Andrew Henderson, recommends is Malaysia. In principle, Malaysia is a territorial tax country, meaning it taxes what you make locally at standard rates and leaves everything else alone.
There is one caveat – they tax what you bring in on a remittance basis. Simply put, a remittance is money you bring into the country, typically for living expenses, by transferring it into your bank account.
For high earners, however, this still means relatively low taxes because the proportion of money being remitted to live on is usually a relatively small sum in the context of their overall earnings.
For example, if you earned US$2 million overseas and brought in US$200,000 to live on, you’ll pay US$50,000 in tax on a remittance basis. That’s only a 2.5% effective tax rate on the US$2 million you earned.
So, in Malaysia, you can earn money offshore and only bring in what you need to live on. If you plan this carefully, you end up paying very little tax. To discover more, read our new article on How to Pay Zero or Low Taxes in Malaysia.
There are also countries where you can get tax exemptions.
For example, Switzerland is a high-tax country with tax exemptions for wealthy foreigners via its lump-sum tax program. Lump-sum taxation is expenditure-based for foreigners domiciled in Switzerland but not gainfully employed there. For more, see our article on Taxes in Switzerland for High-Net-Worth Individuals.
Go Where You Are Treated Best
There are numerous different ways that you can structure your personal tax situation regardless of what the country offers overall. There are only so many tax-free countries, but plenty of countries you can make tax-free. If you want to totally exempt yourself from taxes on income, capital gains and wealth, there are fewer places to go.
The Nomad Capitalist lifestyle is all about ‘going where you’re treated best’ and planting flags in different countries that serve you better than any other. It’s what we call our Trifecta Strategy. You can find out all about it in this video – How to Live in Three Places and Save Taxes.
The Trifecta Strategy is for people who can afford to rent or buy quality properties in different locations around the world – potentially three, hence the trifecta – in order to establish bases in which they can live for a certain amount of time without becoming tax resident in any of them.
It might be Kuala Lumpur, Malaysia, in January through March, followed by Tbilisi, Georgia, in the spring and early summer. From there, perhaps you could winter somewhere like Bogota, Colombia.
This allows you to be in Asia, Europe and the Americas over the course of a year, with bases where you can create the conditions to achieve the lifestyle and tax benefits that most people can only dream about. By spending roughly 90 days in each of your base countries, you can avoid being deemed a tax resident in any of them and instead pay zero taxes.
Your Bespoke Tax and Lifestyle Strategy
If you want to live all over the world, you can legally arbitrage tax residency rules to your advantage in emerging countries that are off-radar but are great places to live and invest in. These locations actually want you to spend four months a year there and not pay taxes.
However, you’ll need to plan this carefully, and that’s where Nomad Capitalist comes in. We help seven- and eight-figure entrepreneurs and investors create a bespoke strategy using our uniquely successful methods. We will help you keep more of your own money, create new wealth faster and be protected from whatever happens in just three steps.
At Nomad Capitalist, we have a network of lawyers, estate agents, accountants and tax and company formation specialists all around the world. All that expertise and real-world experience come together when we advise your holistic, bespoke action plan. Discover how we do things here.
