April 1, 2024
Residency in Europe is not only an opportunity to move to another country with a higher standard of living, quality medicine, and a developed economy. Obtaining a residence permit or permanent residence permit in a European country can open the way for successful business development. In parallel, a resident can significantly reduce tax pressure from personal income or business.
Contrary to popular belief that European countries have some of the highest tax rates, some countries have special tax regimes, where it is profitable to do business or move personal capital there.
It is known that due to the abolition of the non-dom regime in the United Kingdom, over 68,000 financially well-off people are already forced to transfer more to the treasury than was previously established. This is pushing financially independent people to look for other alternatives and to consider countries in Europe with a more loyal tax climate.
Many people choose the UAE free economic zones, tax havens in Malta and Cyprus, the Caribbean, or the tax jurisdiction of Vanuatu as a "reserve airfield". All these zones have advantages and are well established not only among wealthy individuals but also among ordinary residents who dream of optimizing taxes.
At the same time, many affluent people have established connections in Europe and do not want to go outside the EU or European countries. What alternative options do they have? Specialists of the migration agency GARANT.IN have studied this question and analyzed the most loyal tax conditions of 7 European countries.
Next, let's look specifically at which European countries in 2024 you can become a member of a loyal tax program and minimize financial pressure.
According to local legislation, financially independent individuals can pay a flat tax of 100,000 €, regardless of the amount of worldwide income. Relatives included in the application can also benefit from tax relief and pay 20,000 € per year. At a high level of income, it is more favorable to remit a fixed amount than to pay taxes on a progressive scale, where the maximum rate is 44%.
To take advantage of the preferential regime, it is necessary not to be a tax resident of the country for 7 years out of 8. The regime has been active for 15 years. A tax credit is not available to the applicant, but in parallel, he is exempt from inheritance tax and any foreign assets. He can also omit worldwide income when filing his return.
Preferential tax treatment is available to new entrepreneurs and digital nomads. They can apply for a -50% discount on income tax. It is important that those who transfer tax residency from EU or ESA countries can apply. It is necessary to confirm the fact of doing business and prove the intention to stay in the country for at least 2 years. The applicant gets access to a foreign tax loan and is exempt from taxation on imputed income.
Foreign pensioners, upon registration of Greek tax residency, can remit a reduced income tax at a rate of 7%. This applies to income derived from any foreign source. Importantly, they must receive their pension in a country other than Greece.
The country's current tax regime allows individuals to remit tax liability only on income that they remit from abroad to Ireland. There are no minimum annual charges in the tax legislation. There is no time frame for the preferential tax regime. There are no minimum time requirements and no defined period during which the applicant must be in tax residency status. Family members cannot benefit from the tax relief.
To maintain a loyal tax regime, an individual should not take any action that indicates that he or she intends to make the country his or her permanent residence. Otherwise, the benefits may be canceled.
In addition, the topic of remittances should be thoroughly researched. The rules governing Non-Dom Remittance are quite extensive and a qualified lawyer should be engaged for a comprehensive analysis to avoid additional tax pressure.
A special lump sum tax regime was introduced 7 years ago and is aimed at financially well-off residents. Previously, the rates of the usual personal income tax were quite high, which did not arouse interest among wealthy applicants. Now, upon formalizing the tax residency status, the taxpayer can transfer a fixed amount of 100,000 € annually for 15 years on all worldwide income earned abroad (not within Italy). Family members can also benefit from this offer and pay annually 25,000 € per applicant.
Additionally, program participants are exempt from tax liability on donations, inheritance of foreign assets, and gifts. In addition, they do not pay wealth and financial assets tax.
An applicant utilizing the preferential tax regime does not have to pay regular remittance tax and transfer reporting on assets placed abroad. This allows individuals virtually unlimited access to any transaction.
Malta offers a special tax regime for applicants who are not permanent residents of the country but who are registered as taxpayers (res non-doms). Only income earned within the country and income received from abroad to bank accounts in Malta is taxable.
A tax resident res non-doms is also liable to pay an annual fixed payment of €5000. However, there are no complex residency and conditional domicile rules. All this leads to the fact that the duration of the loyal tax regime is indefinite. Also, according to local legislation, there is no requirement that the applicant be a tax resident of the country for a certain period before becoming eligible to receive benefits under the current regime.
To benefit from the loyal tax scheme, it is important not to take any action indicating an intention to make Malta your domicile.
Financially independent persons residing permanently in Switzerland, and not employed there on an official basis, have access to a simplified tax system. In this case, they need to transfer the so-called chord tax annually. The calculation is done by each canton separately, and the final amount is based on the applicant's living expenses, not on income as in other countries.
The total amount payable is approximately equal to 7 times the annual rental costs (or the approximate rental value if the applicant owns his/her property). Prospective residents who plan to take advantage of the annual tax liability can check the amounts with the local tax authorities in advance.
It is possible to take advantage of the favorable tax offer for an unlimited period. It is important not to have been a tax resident for the last 10 years before applying. The applicant's family members can also take advantage of the preferential rates, and submit the paperwork themselves. Currently, 6 out of 26 cantons have canceled the preferential tax regime, so this issue should be worked out in advance.
The tiny Principality of Monaco remains one of the most loyal tax havens. No income tax is levied here on residents other than French citizens. In Monaco, there is no tax on real estate, property ownership, and capital gains for foreign dividends. Inheritance and gifts of assets located in the Principality are subject to taxation. Exception: if the recipients are first-line relatives.
Financially independent people are almost completely exempt from taxation of global income, but it is quite difficult to become a resident of Monaco - it is necessary to buy or long-term rent real estate, which is very expensive, and to comply with strict rules of residence. For tax residents, it is important to live in the country for at least 183 days a year.
To encourage registration and doing business in Monaco there is a system of tax incentives. Companies registered on the territory are fully exempt from income taxation for the first 2 years. Further for 3 years, there are benefits.
Andorra is another mini-state with a loyal tax climate. All individual taxes are subject to a maximum flat rate of 10%, but the exact amount will depend on the size of the taxpayer's income:
Companies registered in Andorra are charged corporate tax, which is calculated at a progressive rate from 0 to 10%. The VAT rate is one of the lowest among European countries and is only 4.5%.
In Andorra, there is no taxation on inheritance, wealth, and gift, and there is no currency control. Foreign currency savings are taxed at the rate of 35%. To become a tax resident of the country, it is necessary to obtain at least the status of residence permit, to confirm material security and long-term rent/buy real estate.
There are other European countries with a favorable tax regime, we have considered the most popular locations. Which tax regime is suitable for your case? It all depends on your goals and the chosen basis - moving as a financially independent person, registering a business, or other request. To consider your situation and create a working strategy, make an appointment for a consultation with the specialists of the licensed agency GARANT.IN. Together we will choose the most optimal location, understand all the intricacies of the current tax legislation in this country, help with the registration and filing of papers to obtain the desired status, and find and help to rent/buy real estate from verified persons. With us, you will not only reduce tax pressure but also be able to move to a safe, economically developed European country with minimal effort.