I met a Swedish man a few years ago. He, on the surface, was doing well. He was earning about $425,000 a year.
However, when you factor in cost of living and tax, he was saving about $60,000 a year. That is better than most people, but he wanted to retire early.
He calculated that he needed about $5M, to live the life of his dreams in retirement.
$60,000 a year, even adjusted for capital gains, wasn’t going to do that anytime soon, as he didn’t start the process of wealth accumulation soon enough.
I have met countless entrepreneurs like this before; living in high tax + high cost of living countries.
As they are stressed with the day job, they often overspend, leaving them with a lower surplus than expected.
Something changed a few years later. His wife was British, and he spent 2 months in the UK, as his wife’s parents were ill.
To his surprise, his sales from his business activity didn’t decrease. They stayed stable. That got him thinking; if my business doesn’t depend on face-to-face communication, why can’t I live in a cheaper country with lower taxes?
Most countries have world-class wifi these days, and business is going online, so why not take advantage of that?
Whilst this option won’t be for everybody, reducing your taxes and cost of living, is an example of how the 80/20 rule can be applied to personal finance.
That aforementioned Swede is now saving and investing about $250,000 a year, with less capital gains tax, due to the fact he is living in a low-cost and tax country.
One of the biggest mistakes many businesspeople with online/international exposure make, is caring about prestige and status.
Earning $450,000 in New York or London, with $10,000 a month luxury apartments, might sound more prestigious than investing 80% of your income to be retired at age 45 by living in a developing country, but that doesn’t mean it is logical.
Which countries have no taxes or low taxes, or general low-cost of living, and allow for second residencies?
I have listed numerous options below and I have included developing and developed countries alike;
Many Canadian and Americans are interested in living in South America., but few consider Paraguy.
Paraguay has a great scheme, where for depositing
For those that want citizenship, it takes 3 years. Bare in mind though, that bureaucracy and a slow legal system, can complicate the process
Cambodia is an interesting place to live in. I should know, I lived there for about a year in the past!
It is still possible to get a business visa
It used to be possible to just extend your business visa forever, but immigration and visa agents are now giving the advice that you need to pay for a work permit if you want to further extend a visa.
The total yearly costs can be $400-$800 a year, which makes Cambodia one of the cheapest and easiest ways to get a second residency.
In other words, with money and the right paperwork, anything is still possible and meets the legal requirements.
Tax and cost of living is relatively low, but rising sharply. The main reasons for this are strong economic growth, and huge foreign direct investment from countries such as China.
I know what you are thinking….`Singapore isn’t cheap or
However, for high net wealth individuals who have $4m or more to invest, you can enjoy 0% tax on foreign income.
This means that many high-net-worth individuals are using Singapore as a low-tax base, in which to earn their overseas income.
Hong Kong used to have a similar scheme, but that has now closed. It is possible to set up a business in Hong Kong, but this puts you inside Hong Kong’s tax system.
One of the most popular “no tax” options. Panama has a Friendly Nations Visa program. If you deposit $5,000 in a Panama-based bank and establish a company, you can get near-instant second residency.
If you just want a residency, rather than citizenship, you can just spend a few days a year to keep that status.
Many other countries require you to spend 6 months or longer, to keep residency, so this is an excellent benefit.
Like Cambodia, Nicaragua is a a developing country which won’t be for everybody. It does have a low cost of living and getting residency is easy. In general you just need to show income of $750 a month, although you do need to live there for 6 months or more per year.
Few people in the West understand what a dem Malaysia is. Malaysia is `Singapore-lite` in many ways. It has great English and infrastructure, for a fraction of the price of Singapore.
The same is true of its residency program. The My Second Home or MM2H program is an extremely easy way to gain
If you are under 50 years old, you need to show proof of $2,300 of monthly income and deposit $70,000 into a bank account or purchase real estate.
The biggest negative? You won’t be able to touch the money for 10 years.
Macao often gets overlooked, in favour of Hong Kong and other nearby cities. such as Shenzhen.
In the shadows of Hong Kong, few consider this gambling-hub, as a candidate for second residency
For $375,000, you can obtain residency and the tax rate is 0%. As Macao is a Special Economic Region of China, however, you will never
8. Costa Rica
Costa Rica has long been a favourite of American and Canadian retirees for decades, due to the lifestyle and proximity to home.
Proof of $2,500 of monthly income is required to obtain Costa Rican residency.
Speaking about overlooked countries, few people speak about Georgia. It is one country in `emerging Europe` which has improved. a lot in recent years.
Considered by few people, this makes it a great option for those that want a unique experience at a great price.
There is no tax on foreign income, you can get a 360-day tourist visa on arrival and anybody can open a Georgian company or buy real estate to obtain residency.
Estonia is one of an increasing number of European countries, which has competitive tax rates.
They have a flat tax and e-residency system. The e-residency system isn’t a path to citizenship or living there.
11. The Bahamas
People who reside in the tax free islands of the Bahamas pay zero tax on worldwide income.
The government fee for temporary residency is $1,000, although if you want to settle for longer, you may need to purchase $250,000 in real estate.
Cyprus is known for its great lifestyle, efficiency and excellent English levels. Many people come to Cyprus as they want residency to lead to citizenship and second passports. The costs of getting citizenship isn’t cheap though.
The citizenship by investment program in Cyprus requires a €2 million investment in local property, government bonds or bank despots and you need to maintain a €500,000 home to keep your passport.
Like countless countries, however, Cyprus has been known to “move the goalposts” when it comes to these matters.
The costs of residency in Latvia are typically just over €500,000, if you include the processing fee. The Latvian program isn’t the cheapest, but it is one of the more convenient.
You don’t need to be physically in Latvia – apart from needing to spend 1 day a year to maintain your residency.
If you are interested in getting residency through real estate, Montenegro has one of the cheaper options.
There are no investment minimums, and many apartments are cheap, often in the $25,000-$75,000 range.
Going down the real estate route for residency, does makes you ineligible for citizenship though.
15. United Arab Emirates (UAE)
In a location ideally situated between Europe and the Far East, Dubai is a popular expat hub, with Abu Dhabi also maintaining a large number of expats.
As you may imagine, getting residency through investment isn’t always cheap in the UAE.
People who make a AED 10million investment can get residency if they invest in an investment fund or establish a company.
You can also purchase property, if it is a residential property (commercial properties are not eligible).
The value must be AED 1million or more. It allows for 2 year visas, whereas the 10m investments allows for 10 year visas.
As AED 1 million is about $272,000 on current exchange rates, UAE citizenship isn’t as ultra-expensive as you may have thought.
Even though Dubai is significantly more liberal than countless other Middle Eastern countries, the lifestyle is still relatively conservative, especially during Ramadan.
This isn’t for everybody, and so should be considered carefully.
Thailand is one of the more established retirement locations in South East Asia.
The Thai Government allows
However, often the fee needs to be paid upfront, in other words over $15,000 for 5 years visa. 20 years costs $65,000.
Thailand has a reasonable cost of living, but isn’t low tax,
Portugal’s Golden Visa Program used to be considered one of the best programs in the world, but has been getting some bad press recently.
It is still possible to invest 280,000 Euros into Portuguese property and qualify. However, getting approval is taking longer than before, and the tax rules are changing.
The benefits are the Portuguese lifestyle – if you wish to stay in Portugal that is. If you don’t wish to stay in Portugal, the residency permit means you only have to spend 1-2 weeks a year in the country.
18. Various other EU countries if you are married to an EU citizen
Free movement is a bit of a myth – many countries do enforce rules surrounding working in another country.
Besides, having the ability to move freely, doesn’t mean a residency with a tax identification number.
What is true, however, is that many British, Germany and Nordic entrepreneurs are considering Bulgaria, Romania, Hungary and other Eastern European countries.
Getting a residency permit for fellow EU, or even merely non-EU European countries, is much easier than for most countries outside of Europe.
Let’s also not forget if you are married to an EU citizen, one of you can declare residency and sometimes bring the other without needing to invest.
Portugal even recognizes partnerships that aren’t based on marriage, which opens up the doors if one of you is an EU citizenship.
Frequency asked questions
Below I will deal with some FAQs.
Do you think these rules will change?
Like everything, rules change. Residency visas are no different. It regularly happens where schemes are closed down.
The UK, recently, closed down its residency program. So before seeking a second residency it is always good to check for updated rules.
How about for Americans?
It has to be remembered that getting a second residency doesn’t help Americans avoid US taxes. Renouncing US citizenship is needed in this case, if you want to be a non-US taxpayer.
Are there any 100% tax free countries in the world?
There are many countries, including many of the ones above, which have no income and capital gains taxes. Most countries do apply some form of tax, however, including sales tax.
Even the United Arab Emirates introduced a new sales tax recently. Moreover, it has to be remembered that many countries with zero, or close to zero taxes, are more expensive than some of the low-tax countries.
Ask any expat in Qatar or United Arab Emirates what they think about the cost of living, and you will realize that the higher cost of living eats up the tax benefits.
What are the political risks?
Nobody knows what governments will do in the future. Foreign investors are a great target for populist governments.
Not only that, but priorities change. When Portugal was reeling from the financial crisis, for example, real estate investments was welcomed.
Things have changed, and things are now taking longer. This is one reason why many entrepreneurs are getting 4-5 residencies and passports – they are using residencies like insurance policies.
Things may change, so having numerous residencies is lower risk.
What should be considered beyond cost?
The political, social and economic landscape should be considered. If you are a global business person, personal safety, wifi reliability and political stability are all likely to be of high importance.
Having traveled to numerous developing countries, and lived in a few, it is a misconception that all are dangerous or inefficient.
Many now have fast and reliable wifi. Many aren’t dangerous. However, the legacy of past political regimes still exists, when it comes to bureaucracy.
I especially noticed this issue in Eastern Europe, Egypt and other countries which have had leftist regimes in the past.
It isn’t uncommon for small paperwork issues to take months, with numerous trips to immigration.
Can’t you also get residency in places like Canada, Australia and the US?
For example, many wealthy Chinese investors like the US, Canadian and Australian real estate and schooling system, and want their kids to grow up in a native-English language environment.
In this case, the decision was therefore not made to reduce costs and taxes. It was more of a social and personal decisions.
For those that are in a similar situation, countless countries offer residency or even citizenship for a price.
Do you offer residency services?
It isn’t my core business area- my focus is on investments for international business people and others. These investments include lump sum and monthly investments.
On an ad hoc basis, I have helped clients with second residencies, including putting them in contact with the necessary experts.
Are higher interest rates always a good thing?
No. This is a huge misconception. Many people think living in an emerging market is great, because you can get 5%, 10% or even higher interest rates in the bank.
Whilst it is true that the risk is lower if you actually live in that country, many high-interest rate countries also have high inflation and have experienced currency devaluations in recent times..
Take Argentina as a recent example. 20%+ interest rates but a falling currency with massive inflation.
It is far safer to have your assets in a broad-based international bond and stock portfolio.
What are some of the other misconceptions?
Many people assume that residency can automatically lead to citizenship, and that the process is easy and/or never changes.
Beyond that, many entrepreneurs do assume that most developing countries are always dangerous, lacking in infrastructure or hard to live in.
This is the case for some places, but not everywhere. In the last 10 years, I have noticed a huge improvement in infrastructure.
For example, the public transport in Malaysia, in Kuala Lumpur at least, is better than London.
The WIFI in Bulgaria and Hungary, is often better than in some parts of the US, and the list could go on.
A final misconception is that rising GDP always means increasing real estate and stock markets.
Just look at China in recent times – great GDP results but falling Stock Markets. At the same time, the US with just 2%-3% growth, has had an excellent period of rising stock markets.
What are some of the biggest mistakes people make?
When getting a second residence, or indeed passport, many people fall into two extremes; either procrastination or making decisions without thinking through the ramifications.
When going overseas, or indeed getting a second residency, people need to factor in several things.
These could include tax, personal safety, lifestyle and opening up offshore bank accounts to name just a few.
Several people in my network have set up overseas companies, after getting a second residency, without also taking precautions, such as keeping good paperwork and having 2-3 accounts in case 1 is closed down.
That is becoming a bigger threat in the offshore market, for people who are looking for offshore banking + second residencies.
Should people get tax advice?
Getting proper tax advice is often prudent and
To give you just one example, the Australian Government recently ruled that a man was still a resident in Australia, as he wasn’t able to prove his tax residency.
He wrongly believed that staying out of the country for 183 days, automatically made him a tax non-resident.
After the authorities found out that he was regularly sending money home, maintaining a mailing address and indeed residential home, they asked him to prove he is really an expat.
What are your contact details?
[email protected] and I am also available on a range of apps. My main services are financial advice and portfolio management.
I do not provide advice on tax, second residencies and offshore banking, but I have sometimes referred people onto different providers, who have helped.