European Countries with Favorable Tax Systems

Twenty-seven European countries have formed an international organization – the European Union. They act jointly on many issues but each country has its own tax system. Each national Government decides who it is going to tax the country’s residents. The authorities have to ensure that the national budget receives enough revenue and that the citizens do not feel overtaxed at the same time. If they do, they will want to relocate to another country and pay taxes there.

This is exactly what we are talking about in the text below: the opportunity to change your tax residence. You may have never thought about it but if you feel that you are paying too much in taxes in your home country, you should consider becoming a tax resident of a country where the fiscal regime is more beneficial.

It is not very difficult to become a tax resident of a European country. Without doubt, you have to learn about the requirements and read the relevant laws but the point that we would like to make is as follows: if you look well, you can find a country where taxes are lower than they are in your home country. At least, there is a good chance that you can find such a country. Professional assistance from International Wealth experts would facilitate the search.

What European country should you choose for tax residence?

There are a few countries that charge zero taxes on their residents’ global incomes. Such countries are usually referred to as tax havens but we are not going to talk about them here. Instead, we are going to speak about some European countries that charge lower taxes in comparison to some other European countries.

If you are a citizen of an EU country, you can live, work, and pay taxes in any of the countries that we discuss below. If you are not, you have to acquire legal residence in one of the countries before you can become its tax resident. Solving this task is difficult in some cases and it is expensive in some other cases but it is solvable anyway.

Let us point out the EU countries with the most beneficial tax conditions.

Cyprus

In many respects, Cyprus is the most attractive EU country as far as taxes are concerned. If offers the following benefits:

• No tax on passive income;
• No tax on income obtained in other countries;
• Multiple double taxation avoidance treaties;
• An opportunity to become a citizen of Cyprus;
• Lack of requirement to live on the island around the year.

You can register a company in Cyprus or buy some real property there to qualify for legal residence. After you have lived in the country for two months, you will be exempted from taxes on dividends, sale of securities, and rental income.

Monaco

Monaco attracts people from other countries by the absence of personal income tax. No capital gains tax is charged in the Principality either. To become a tax resident of Monaco, you have to become a legal resident there first. You have to do the following to qualify for residence:

• Buy or rent residential accommodations;
• Put a million euros in a local bank.

You have to live more than 183 days in Monaco to qualify for tax residence in the Principality. If you want to remain a tax resident of Monaco, you will have to physically reside there for more than 183 days in each calendar year. Why do so many wealthy individuals live in Monaco? Because life is fun there and because they don’t have to pay any taxes on their personal income.

Malta

Malta has both a citizenship-by-investment program and a residence-by-investment program. The first program is rather expensive while the second one is more affordable. You have to buy a piece of property for at least 275,000 euros or rent residential accommodations for at least 9,600 per year to qualify for legal residence in Malta. To keep your residence permit, you have to spend more than half a year in Malta every year. You residence permit will not serve as a work permit.

As far as taxes are concerned, there is an opportunity to pay a fixed tax of 15,000 euros per year. This is a way that the Maltese Government uses to attract wealthy foreigners who have passive incomes in other countries.

Latvia

The income tax is 15% for corporate entities in Latvia and 23% for individuals. The rates are not high and what is more, registering a company in Latvia is extremely easy. If you invest at least 50,000 euros in a business venture in the country, you will qualify for legal residence there.

Another advantage that Latvia boasts is lack of legislation on CFC.

Switzerland

Switzerland is not an EU member state but we have included it in the list because it is a well-developed country that offers attractive fiscal conditions to wealthy foreigners.

You can become a legal resident of Switzerland if:

• You have purchased or rented residential accommodations in the country; and
• You can prove your solvency. может подтвердить финансовую состоятельность,

You have to spend more than half a year in Switzerland to be a tax resident there.

As far as tax residence is concerned, many countries disregard what part of the world the foreigner comes from when making him or her a tax resident. He/ she can be a citizen of an EU country or some other country. At the same time, in some European countries, foreigners can get excess to preferential tax treatment at least for a period.

Fiscal advantages found in some other European countries

The countries that we have listed above have beneficial tax systems and becoming a tax resident there can help you save on taxes. However, some tax benefits can be found in other European countries too. For example, Great Britain makes it possible for a foreigner not to pay taxes on incomes made in other countries on the condition that the person does not transfer the money to Great Britain.

Italy also offers preferential treatment to wealthy citizens of other countries who live there. If you put at least 100,000 euros in an Italian bank, you can pay a fixed income tax that does not depend on how much money you earn. This benefit is available for 15 years only.

Who wants to be taxed twice?

Some people mistakenly believe that when they become tax residents of a foreign country, they automatically cease to be tax residents of their home country. This isn’t so. You may continue to be taxed at home unless you file an official application for renouncing your tax residence.

We have to make a special note of the US citizens. They cannot renounce their tax residence even if they move to a foreign country to live and work there on a permanent basis. Americans have to pay taxes to Uncle Sam regardless of the place where they make money – in the USA or another country. The only way to renounce tax residence in the USA is to renounce citizenship of the country.