Changing tax residency can be a strategic decision for entrepreneurs and investors aiming to reduce their tax liabilities and ensure business stability in a more favorable jurisdiction. As of 2024, countries like Portugal and Cyprus, along with other jurisdictions offering advantageous tax regimes, remain attractive options for tax residents. This article will outline the benefits of these countries, compare their features, and provide guidance on choosing the most suitable jurisdiction for your business and income.
A tax resident is basically someone or a business that has to pay taxes in a particular country because they live or do business there. Usually, this means they need to report and pay taxes on everything they earn, no matter where it comes from, in the country they’re officially considered a tax resident.
The distinction between a resident and a non-resident lies in their tax obligations, rights, and status concerning a specific country.
Some differences:
About Resident
Tax residents have to report and pay taxes on everything they earn, whether it’s from within the country or abroad. Whether you’re considered a resident usually depends on things like spending more than 183 days in the country, having a place to call home, or having strong ties, like a job, business, or family connections. In exchange for that, residents usually get access to a bunch of benefits, like healthcare, schooling, and retirement perks.
About Non-resident
Non-residents only get taxed on the money they make in the country where they don’t officially live. Any cash they bring in from outside that country usually stays untaxed. Non-residents are people who don’t meet the residency rules, like staying less than 183 days a year in the country or not having major business or personal ties there. They usually don’t get the same perks as residents, like access to social services, and might have to deal with a tax system that’s tougher, with higher rates or stricter rules. So, while residents pay taxes on everything they earn globally, non-residents only pay taxes on what they make inside the country they aren’t considered a resident of.
Portugal. Non-Habitual Resident Program
Portugal is a go-to spot for expats, mainly because of its awesome tax perks that can last up to ten years. Here’s the deal: most passive income from outside Portugal—like dividends, interest, and rent—isn’t taxed. If you work in high-demand fields like IT, engineering, or medicine, you’ll get a sweet deal too, paying only 20% tax on your income earned within Portugal. Plus, the country doesn’t hit you with a wealth tax, so it’s perfect for people with big assets. On top of that, Portugal has tons of tax treaties with other countries, making it even more attractive. It’s a solid pick for investors with foreign income or those thinking of moving their business to tap into the European market.
Cypr
Cyprus is a hot spot for businesses looking to keep their taxes low and their operations smooth. Why? Well, the corporate tax rate is just 12.5%, which is pretty friendly. On top of that, if you’re a non-resident, you don’t have to pay taxes on dividends from Cypriot companies. Capital gains tax? Doesn’t exist, unless you’re selling property in Cyprus. The process to set up a company here is super easy, and the business environment is flexible, making it an ideal choice for global companies. Whether you’re into international trade, running a service-based business, or diving into the IT world, Cyprus is where it’s at. Plus, it comes with strong legal protection and a stable market to boot.
Other most Popular Tax Residency Jurisdictions
United Arab Emirates
In the UAE, most businesses and individuals don’t have to worry about paying taxes on their income. Plus, there’s no tax on personal assets or inheritances, so you can keep what you earn and pass it on without the government taking a cut. If you set up shop in one of the free zones, you’ll get easy access to offices, warehouses, and all sorts of services, all without dealing with a bunch of red tape. It’s a pretty smooth ride when it comes to doing business here!
Malta
Malta has this cool tax refund system for shareholders of international companies that can really slash the effective tax rate, sometimes down to just 5%. While the official corporate tax rate is 35%, the refund system for shareholders can make it way lower. Plus, if you’re a non-resident, any dividends you get from companies set up in Malta are totally tax-free. Malta’s also a solid option for all kinds of companies, including those set up to protect assets or cut down on taxes. It’s a pretty sweet deal for those looking to keep more of what they earn.
Picking the right country for your business or project can make a huge difference, so here’s what to keep in mind:
If you’re raking in foreign passive income, Portugal’s NHR program might be your sweet spot. But if you’re running a business in international trade or IT, Cyprus could be your go-to.
Now, if avoiding corporate taxes entirely is your top priority, the UAE is hard to beat. But, if you’re aiming to tap into the European market, you’ll want to think about Portugal or Cyprus for sure.
Make sure the country you choose has a solid legal system and stable business conditions. And don’t forget, while low tax rates sound great, some of these jurisdictions might catch the eye of international regulators, so the country’s reputation also matters.
Choosing where to set up your tax residency is a big move that can seriously impact both your business and personal finances. In 2024, Portugal and Cyprus are still top picks, with their sweet tax deals and solid access to the European market. The UAE and Malta also stand out, offering fresh opportunities for those looking to boost profits and keep taxes low.
LFT Advisors is here to help you figure out the best spot for your tax residency, guide you through setting up your business, and provide top-notch advice on all things legal and tax-related. Reach out for a custom consultation and kickstart your journey to a tax-friendly future today!
