Taxes are a universal burden. Everywhere in the world, everyone is paying a variety of taxes, knowingly or unknowingly. People who are a citizen of more than one country sometimes end up paying double taxes, depending on the countries. The process of paying taxes is also a challenge in a lot of countries. Given the cumbersome process of tax payment, tax-free countries are heaven on earth. For people living in countries with high tax rates, getting a second citizenship in tax-free countries is a smart option.
Second citizenship in tax-free countries
In some cases, it is very useful to get a second citizenship in countries that do not charge taxes on income directly.
- If the first country has very high tax-rates, money can be saved by getting a second citizenship by investment in a country that does not levy any kind of income tax. This way, tax management can be balanced.
- If the first country charges income tax on global income like the U.S., tax is already being paid on the whole of the earnings. Getting citizenship by investment programs will ensure avoiding double taxation.
- If the first country does not have a double taxation treaty with the second country, a second citizenship in a tax-free country can be beneficial. These treaties are agreements that ensure citizens are not charged dual taxes for single income if they are earning in more that one country. If the first country does not have any such treaty, it is only logical that the second country is a tax-free country.
Simply put, tax-free countries are those that do not charge any kind of income tax. It is one of the best tax management strategies for anyone as the tax rate is zero and no planning or strategy is required to save taxes. However, it is not as simple as packing a suitcase and moving to a tax-free country, especially for citizens as that are legally obliged to pay taxes on their worldwide income, wherever they are residing. Also, not every tax-free country offers easy access to their citizenship.
Top 5 tax-free countries
Here is a list of tax-free countries that offer a dual citizenship option:
This country is tax-free because the basis of its economy is the tourism industry. Given its popularity amongst tourists, it can be safely concluded that they made the right decision. Its passport is among the 25 top passports in the world and it also provides limited access to the U.S. Getting a temporary residence here is easy. The government application fee is only $1,000 and can be renewed annually. Investing in real estate can also help with a permanent residence.
The British Virgin Islands
These islands are as attractive as their name for permanent residency. Even though it is a tax-free country, it is not a very big place in terms of area. Therefore, it does not offer a lot of temporary residencies every year. Getting citizenship here is also a difficult task as the procedure is bureaucratic and takes a long time. It might be an expensive option for citizenship as well because of the higher cost of living.
This country, with its oil resources, is one of the wealthiest places that are tax-free. However, getting citizenship here is the most difficult task as the basic requirement to be a citizen here is a residency for 25 consecutive years and fluency in Arabic. Getting permanent residency is also difficult but can be attained if one is retired, and willing to invest $2,70,000 in a Bahraini company or $1,35,000 in property.
Similar to the Bahamas, the Cayman Islands offer enough scenic beaches and breathtaking views to attract enough tourists and go tax-free. In addition to having no direct tax on residents, they do not even have corporate tax. It does not have any kind of property tax, payroll tax, capital gain tax or withholding tax. This is why it is also known as a tax haven for residents. For company owners, it is also considered as an ideal place to set up subsidiaries to save taxes. However, getting citizenship is a very costly and lengthy process.
One of the most elite locations for couples on their honeymoon and for tourists in general, this country has not levied any kind of income tax since 1870. In addition to that, Monaco does not levy any capital gain tax or wealth tax. It is also known for the financial privacy it provides to its residents. The citizenship by investment process is simple and straightforward but requires a huge investment.
Living tax-free in a country is a huge benefit and unless one is lucky enough to be born in one of these countries as a citizen and resident, it will generally cost a lot to attain a second citizenship. We offer expert professional advice on which country fits the tax-saving strategies the best. Those experts will surely help you with your second citizenship planning. Contact us to book an appointment today.