Residence permit for FIP - which country to choose?

Obtaining residency in another country is an opportunity to move to a country with a developed economy, high standard of living, comfortable climate, and new opportunities. Residents with the status of residence permit and permanent residence permit can get an education in prestigious educational institutions, use the latest medical achievements, buy liquid real estate, and even optimize taxation. Even though persons who received a residence permit as a Financially Independent Person (FIP) can not do business in the territory of the chosen country, they can become tax residents here. 

Despite the existing opinion that many countries, including European countries, have some of the highest tax rates, some states have minimal taxes, and somewhere there is no taxation on certain types of profits at all. Residency status in such countries allows financially independent individuals to significantly reduce taxation costs. What kind of countries are these? What tax benefits apply here? These and other questions are analyzed in detail by the lawyers of the migration agency GARANT.IN in a new review. 

Residence permit for FIP: how to become a tax resident in another country?

The first thing to do is to choose the basis for relocation - employment, opening a business, family reunification, marriage to a foreign citizen, investment. Choosing a residence permit for financially independent persons, the resident will not be able to open a business in the chosen country or get employed.

After obtaining resident status, the applicant needs to stay in the territory of the state for at least 183 days a year, and only after that, he can apply to the tax service to confirm and transfer the payment of taxes.

"Tax havens" - what are they?

Tax rates on domestic and worldwide income can vary significantly from state to state. Taxation on worldwide income can be minimal to zero. Also, a minimum or zero rate may apply to inheritance, worldwide income, and profits earned from rental property. Tax credits and deductions are often available for existing businesses.

Such a system is not common in all countries. And those countries that use it are called "tax havens". Such countries include Cyprus, Vanuatu, UAE, Malta and others. Often residents pay taxes only on income received in the country. 

What are the tax rates for FIP in different countries of the world?

Switzerland

A special taxation system applies to persons who have obtained residency as a wealthy person. Holders of a residence permit must remit an annual chord tax of between CHF 450,000 and 1,500,000 (approximately €400,000 to €1,380,000). The amount is calculated depending on the canton and income level. This type of residence permit can be issued in any canton of the state, except Zurich. In advance, the applicant formalizes an agreement with the authorities of the canton, where he indicates all sources of official income and assets that he owns.

Registration of the new status in Switzerland takes up to 5 months. Initially, the application is approved by the tax police of the canton, and then - the federal authorities. Obtaining a residence permit in Switzerland is chosen by really wealthy people, as life here is quite expensive.

Vanuatu

You can become a citizen of the island state for money. Having invested in the economy of the country from 130000 $, in 1-2 months you can get a passport. You can become a tax resident after living in the country for 183 days a year. Individuals are exempt from most tax obligations: on wealth, inheritance, income, ownership of real estate and personal property, export, and capital gains. 
VAT is already included in the price of goods and services and does not have to be paid separately. The basic rate is equal to 12.5%. There are favorable economic conditions for legal entities, as the state is interested in attracting foreign capital. When registering a legal entity in the jurisdiction of Vanuatu, the company is exempt from paying taxes for 20 years. Instead, it will have to pay an annual fee of $300.

When opening a bank account in Vanuatu, the applicant does not have to worry about the disclosure of their business information. Banks strictly observe the rule of confidentiality and do not share information with third parties. At the same time, the rules in the fight against illegal income and money laundering work here.

Turkey

Individuals can become tax residents if they live in Turkey for more than 183 days a year. Also, foreign citizens who have obtained Turkish residency through the purchase of real estate or investments in the economy of the country can be tax residents.
Tax rates for individuals are calculated at a progressive rate of 15%-40%. Legal entities pay corporate tax at the rate of 23% if they are companies registered in one of the 18 economic free zones. Tax residents are also entitled to a refund of a part of the transferred tax amount. Legal entities can become a tax resident of Turkey if their main office or branch is registered in Turkey. Also, those firms whose main activity is concentrated in the territory of the country can claim tax residency. 

France

Holders of French residence permits as financially independent persons can choose whether to become tax residents of the country or not. To apply for tax residency status, it is necessary to live in the country for at least 183 days a year. In this case, they will be exempted from certain types of taxation, such as income tax due to the double taxation treaty.

Also, holders of a Visiter visa (analogous to the residence permit card) do not pay taxes in France on income received outside the country. This applies to all family members included in the application. According to the requirements, financially independent persons are not entitled to be employed and run a business in France. 

Portugal

Foreign nationals who reside in Portugal for more than 183 days per year automatically become tax residents and are entitled to preferential taxation. To obtain the special tax status of RNH (Residente Não Habitual), a petition must be submitted. Holders of the status are entitled to tax benefits, including a reduced income tax rate of 20%.

From 01.01.2024 it is no longer possible to obtain such status. In case a foreign citizen has managed to obtain Portuguese residency until December 31, 2023, he/she has the right to apply for RNH until 31.03.2024.

Residents who have obtained the status of financially independent persons are exempt from taxation on income earned outside the country. They are also exempt from having to pay tax liabilities on inheritance, property, and gifts received. They are allowed to transfer funds to Portugal and abroad without commissions. 

Spain

A foreign national who has obtained residency based on material independence can optimize taxation by residing in Spain for more than 183 days per year. Transferring the tax residency status to Spain will avoid double taxation.
If the applicant pays duties and fees on profits earned in the country where his business is registered and operates, and Spain has an agreement with that State, it will be possible to maintain the transfer of fees to the same treasury. 

Italy

Residents who have obtained status in the country as financially independent persons become taxpayers in Italy and must pay taxes on worldwide income. They can also apply for a special tax regime and pay a flat tax of €100,000 annually.

Andorra

Residency in Andorra is allowed for investments or as a financially wealthy person. The country offers incredibly attractive tax benefits for wealthy residents. To formalize tax residency status, a request must be submitted to the tax office and authorization must be obtained. Many types of income are completely exempt from taxation:

• Income from the country's government bonds.
• Dividends and other investments invested in Andorran companies.
• Capital gains tax is withheld on any investment worldwide. An asset held for more than 10 years is exempt from capital gains tax. There is no double taxation. Corporate tax is 10%. 

Greece

Greece has a special tax regime for financially independent residents and investors who have obtained a residence permit through the Golden Visa. They are charged a tax of 100,000 € annually on the worldwide profits earned. Relatives of the resident can additionally pay a flat tax of 20,000 € annually. With a high income, this ends up being cheaper than paying tax liability on a progressive scale at a rate of up to 44%. 

To activate the tax residency status, it is necessary to reside in Greece for at least 183 days per year and not to have been a tax resident for 7 out of 8 years. The tax exemption lasts up to 15 years. Additionally, the applicant is exempt from inheritance tax and is not obliged to enter income earned abroad in the Greek tax return.  

St. Lucia

It is possible to obtain a Saint Lucia passport for investment, thereby optimizing taxation. Citizens of the country do not pay taxes on capital gains, inheritance, and dividends. Legal entities are exempt from paying tax obligations on dividends and capital gains, and sometimes VAT.

A tax resident must spend a minimum of 183 days per year in the country. A legal entity is recognized as a tax resident if it is registered in the state or managed through an official permanent establishment. 

This is by no means a complete list of countries with preferential taxation for financially independent persons, tax residents, and investors. Which country is suitable in your case? It all depends on the purpose, income level, type of business, and other factors. To analyze your case and make a personal work case, make an appointment for a consultation with the lawyers of the licensed agency GARANT.IN. We know all about the intricacies of taxation, and tax havens and advise on other immigration issues. Don't miss the opportunity to reduce tax pressure on your business and personal income.