In Germany, France, Spain, and many other European countries, taxes for the wealthy range from 35% to 50%. However, there are countries on the continent where tax rates are significantly lower. Below, we present five European countries you might consider moving to in order to lighten your tax burden.
Andorra
When applying for residency in the Principality of Andorra, the main requirements include financial stability, no serious incurable diseases, and a clean criminal record. Residency is granted without the right to work in the Principality. The minimum investment amount, including real estate in Andorra, deposits, and other financial instruments, must be EUR 400,000. Applicants need a bank deposit in Andorra of EUR 50,000 for the principal applicant and EUR 10,000 for each family member (these amounts count towards the total required investment of EUR 400,000). The deposit is refundable, but it’s returned only when the applicant decides to withdraw from the residency program. Buying property isn’t mandatory; renting is an option.
A significant drawback of residency in Andorra is that it doesn’t allow free movement across all Schengen countries. Andorra only has agreements with Spain, France, and Portugal. To maintain residency status in Andorra, the applicant and their family members must physically be in Andorra for at least 90 days each year. It’s worth noting that many foreigners who effectively live in Spain hold documents issued in Andorra. The main reason is that the income tax in Andorra is levied at a flat rate of 10%, and specific tools can bring the practical or real rate down to zero. In Spain, the upper limit of the progressive scale for the wealthy exceeds 40%.
Bulgaria
Bulgaria has a flat income tax rate of 10% for all personal incomes, the lowest in the European Union. Another plus for Bulgaria is the low cost of living.
Switzerland
Political and economic stability, combined with a high standard of living, developed infrastructure, low crime rates, and many other advantages, have made Switzerland a desirable place to move to and live. Switzerland is a confederation, with each canton setting its own tax rules, leading to competition among cantons to attract wealthy citizens and their capital. So, Swiss tax policies are not uniform. Income tax rates in Switzerland are high, as the scale is progressive (the higher the income, the higher the tax rate).
However, legislation in all cantons, except Zurich, allows wealthy foreigners to enter into a “tax deal,” where, in exchange for residency in Switzerland, the applicant agrees to pay a fixed annual tax. This type of taxation is known as lump-sum or forfeit tax. For citizens from non-EU countries, each canton has minimums, starting from CHF 200,000 to CHF 300,000 a year, depending on the canton. The forfeit tax doesn’t depend on the size of the annual income (whether it’s 10 million or 100 million, the tax amount remains the same) and is deemed tax. Paying a fixed tax of this size only benefits individuals with multi-million dollar annual incomes, who would pay more if they remained tax residents of the country they moved from to Switzerland.
Swiss citizenship can be obtained after 12 years of residence. However, remember that after gaining citizenship, staying on such taxation will no longer be possible; it’s only available to foreigners living in Switzerland under residency status (B permit) or permanent residence (C permit).
Gibraltar
Residency in Gibraltar is granted under the so-called “Category 2 Status.” This is the official name of the immigration scheme. In more familiar terms, it can be called permanent residence in Gibraltar. To participate in the program, the applicant must have sufficient funds to support themselves and their family, and their net assets must be at least £2,000,000.
To obtain permanent residency, the applicant must buy or rent an “approved” home in Gibraltar, which will be used exclusively for personal purposes and cannot be rented out to third parties. Annual tax obligations are capped at £80,000 (a maximum tax of £29,880 applies to this income). If you earn less than £80,000, your tax will be lower. If you earn significantly more than £80,000, the tax will still not exceed £29,880. Residency is granted indefinitely (in this sense, it can be called permanent residency). Still, the residency certificate must be renewed every three years (in this sense, it more closely aligns with the term temporary residency).
There’s no specific legal requirement regarding the length of stay each year. Still, it’s essential to understand that permanent residency in Gibraltar won’t protect its holder from being a tax resident in another country. For example, suppose a holder of Gibraltar permanent residency lives more than six months in Russia. In that case, they will have dual tax residency and pay income tax in Russia and Gibraltar. To obtain the “ordinary tax resident certificate of Gibraltar,” one must reside in Gibraltar for 300 days every three years, which breaks down to 100 days a year. However, if the certificate isn’t needed and having residency is sufficient, there are no requirements for actual residency in Gibraltar.
Malta
Since 2013, Malta has had an immigration scheme for residency for tax purposes called the Global Residence Scheme. This scheme is intended for citizens of non-EU countries. The applicant must buy property in Malta worth at least €275,000 (or rent for €9,600 a year). Suppose the property is in Gozo or southern Malta (not Valletta). In that case, the purchase amount must be at least €220,000, and the rental amount must be at least €8,750 a year. As a result of the program, foreigners receive residency in Malta, which is granted without the right to work.
The annual tax obligation is capped at a fixed tax of €15,000 (the exact amount applies to individual applicants and families). The law doesn’t specify the minimum residency required for the annual residency renewal in Malta. However, Malta must be the “main home of the applicant,” meaning they can’t spend more than six months a year in any other country besides Malta. This residency scheme without the right to work is very similar to lump-sum tax agreements made in Switzerland. Just like in Switzerland, a fixed annual tax is stipulated in Malta, and the issued residency does not imply the right to employment in the country. In other words, you can live in Malta and spend money earned in different countries. Moreover, the Maltese scheme is significantly cheaper (several times) than the Swiss one.
A mandatory condition for participation in the Maltese program is that the applicant must have conversational English skills. An interview is conducted before the residency is granted.
Want to Pay Less in Taxes? Then Consider Relocating to One of the Countries We’ve Mentioned Above.
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