It is no secret that many of the world’s great fortunes are housed in countries with low taxation or in so-called tax havens: in both cases, the savings on the tax bill are considerable if one chooses to move funds to one of these economies. This practice may be legal or illegal depending on how it is carried out: it is another matter of whether it may be more or less ethical, or more or less ‘patriotic’.
WHICH ARE THE COUNTRIES WHERE THE LEAST TAXES ARE PAID?
It is important to bear in mind that each country is, in principle, free to legislate on its own taxes without infringing the law. Similarly, not all countries with low or zero taxes are considered tax havens: for example, Andorra ceased to be considered a tax haven by Spain in 2011 thanks to an agreement for the exchange of tax information, which makes it possible to obtain data relating to bank accounts in the Principality when there is an open tax investigation.
The opacity and lack of access to the information of those who pay taxes in a given country is what really presents problems for the international community, as this allows these states to house money from criminal activities with total impunity for both parties. A tax haven, therefore, is a country where not only are few taxes paid, but also where there is a significant or absolute shielding in terms of the transfer of information on the people or companies that host money in that economy.
Thus, for the OECD, for a country to be a tax haven, it must be checked (in addition to the low taxes) if these circumstances are present:
LACK OF TRANSPARENCY
That the laws or administrative practices do not allow the exchange of information for tax purposes with other countries in relation to taxpayers who benefit from the low taxes.
Non-residents are allowed to benefit from tax reductions, even if they do not actually carry out an activity in the country.
However, it is true that the list of countries where taxes are paid less often coincides in part with the list of those considered opaque and not very transparent.
If we focus on the countries where the least income taxes are paid, there are many countries where the main source of income is found in other taxes or where the tax burden in this area is simply very low. Some of them, logically, are considered tax-havens.
It is important to highlight the countries included in our list are known for being both collaborative and transparent, which diverts from the traditional concept of “tax haven”. Tax haven countries are often reviewed a year after year as they could change their financial transparency legislations and drift apart from (or start complying with) provisions provided by the OECD.
By now, you could be probably wondering how is it possible for certain countries to live under such tax regimes in which citizens don’t contribute directly to the nation’s budget. Well, the answer is quite simple: many countries rely on other sources of income for their national development.
Monaco, for example, relies on tourism, casino revenues, VAT, and other consumer-related activities. Countries like the Bahamas also set their budgets according to tourism revenue along with offshore financing activities. Gulf nations like Bahrain and Kuwait depend on oil revenues, which are also amazing sources of income that are more than able to modernize and develop said countries.
UNITED ARAB EMIRATES
The United Arab Emirates has one of the highest levels of per capita income, and its capital Dubai is famous for its high buildings and low taxes. As a result, it is a favorite destination for ex-pats from all over the world. Dubai is the definition of a cosmopolitan city, as over 90% of the population comes from abroad.
Dubai, as well as the rest of the UAE, has no income tax at all, neither on individuals nor on companies. This means that, if you work in Dubai, your net salary will be exactly the same as your gross salary, but of course, you will not be eligible for public pension or free health care.
Only for Emirati citizens, companies must pay 12.5% of gross salary for social security. For their part, employees must pay 5% of their salary. However, it should be remembered that almost all the people working in Dubai are foreigners, so there is no social security contribution to be made.
Thus, for non-national workers, it is normal for the company to pay for medical coverage and make contributions to a private pension plan.
Another important point in favor of the UAE is its great living standards, which is particularly true for personal safety and national development performance. This country is known for being a cosmopolitan one, full of tolerance and overall diversity amongst its citizens. This accounts for the UAE being one of the most attractive places with no income tax to invest in as its role as an international center for finance and trade is well-earned.
The Cayman Islands is one of the leading offshore tax jurisdictions in the Caribbean region, offering a number of tax and legislative advantages for both non-resident individuals and international trading companies. The Cayman Islands jurisdiction is part of the British Overseas Territory and occupies a prominent place in the ranking of tax havens thanks to a very attractive tax system, making it one of the 10 largest financial centers in the world by deposits.
In the Cayman Islands, business profits earned outside the jurisdiction and capital gains such as interest or dividends are not taxed, making it a tax haven for various corporations and financial institutions from around the world. Companies operating from this jurisdiction have to pay annual license fees which are calculated based on the authorized share capital.
There are no direct taxes and there is no corporate tax, income tax, capital gains tax, inheritance tax, gift tax or wealth tax. Transfers of shares are subject to stamp tax with some exceptions.
The principality of Monaco is the capital of the world’s wealth. The catch behind this tiny but beautiful country lies in its unparalleled taxation regime, one that enables the citizen to keep their wealth.
The tax system of this principality has a lot to do with the parade of celebrities it traditionally hosts. On top of the great tax-exemptions, inheritance taxes have been significantly reduced and you only have to pay Social Security.
If you want to become a permanent resident, you must invest at least 500,000 euros or buy a property for the same amount. In addition, you must spend at least 6 months and one day a year in its territory.
The above explains why Monaco has become the country of excellence for Formula 1 and Moto GP athletes, ATP tennis players, and other kinds of celebrities, as the high quality of life and tremendous climate conditions, account for its attractiveness.
The Bahamian economy is heavily dependent on tourism and the offshore banking sector. Workers residing in the Bahamas do not pay income tax, although they do pay a Social Security fund. In order to obtain a residence permit, it is necessary to invest in the country.
Although citizens of these islands do not have to pay income tax, employees are subject to 3.9% (a maximum of $31,200 per year) in favor of a social security fund called State Insurance.
To get a permanent residence permit in the Bahamas it is necessary to make an investment in a business or buy a property for a minimum amount of 750,000 USD. The general principle is that as more capital you locate within the country, immigration authorities become friendlier, and the faster you will have your permanent residence permit.
The requested permit for a person gives him/her the right to move offshore with his/her whole family. At the same time, the governmental limitations do not impose on investors any enforcement to stay in the Bahamas for a minimum amount of time to keep the legal status.
It is the only Asian country with no income tax: most of its public revenues come from oil and gas. It does pay a percentage of the salary (quite low) to the Social Security and pension fund.
As with most nations in which income tax is not a source of revenue for the state, oil and gas have become the main economic sectors behind the development of the country. Nonetheless, neither of these sectors, including tourism, are able to sustain the enormous maintenance of a country regardless of its size. That’s why Brunei citizens contribute a part of their salary to pensions and social security, as stated before.
One thing still should be considered: this is a Muslim country in which traditions are different from those of Western countries. Moving there means changing many customs, so such a decision should be taken carefully. On top of it, it is known that foreigners are not as well-seen, and the national government is a dictatorship, which accounts for Brunei being a difficult country to move to.
Kuwait is one of the richest countries in the world with the highest per capita income thanks to the fact that it is the sixth-largest oil exporter in the world. Ninety-five percent of the state budget is financed by revenues from oil sales.
Although the economic stability in the financial sector is more than evident, the political situation in Kuwait is not very stable. In the last five years, the country’s Parliament has been replaced several times due to corruption and distrust among its citizens.
Despite the absence of income tax, the country’s citizens must pay 7.5% of their salaries in the form of social security contributions and employers pay up to 11%. This country is also known for being cosmopolitan, as more than 50% of its population comes from other countries. It’s, without a doubt, amongst the greatest countries for expatriates.
The Maldives’ economy thrives on tourism and most of the taxes go to the budget through import duties and service-related businesses.
It was only since 2019 that a new law passed by the local parliament enforced citizens to new taxes. Before, everything from income to inheritance taxes was exempted from the legislation.
This new set of tax guidelines settled the rate in 3% for income tax on citizens, although it’s only enforceable when making business transactions or transferring funds abroad. And even as this new law might appear unappealing, it remains as some of the most favorable ones on that side of the world.
Even if the 3% seems like an upgradeable rate, only a handful of citizens in the world are paying that kind of tax, a handful that shortens even more amongst foreigners.
It should be noted that even when living on a quiet island with an amazing tourism offer, being relaxed 24/7, it tends to become sort of boring especially for businesspeople used to carry fast-paced lives.
The Kingdom of Bahrain is the smallest country in the Persian Gulf and is a financial center that began by channeling the financial surpluses from the sale of oil in the region. Although Bahrain’s economy is based primarily on oil, the country has a policy to encourage the development of the offshore banking sector through various tax advantages, so that financial activities are becoming increasingly important in its economy.
The economy is a free market, with no restrictions on the movement of capital, foreign exchange, foreign investment or foreign trade. Companies registered in Bahrain are tax-exempt if they do not operate in the oil and gas sector, but there is a social security tax to be paid. Import taxes and customs duties vary depending on different categories of goods and services but can be reduced or avoided through the use of the Free Trade Zone.
Acquiring permanence through residency programs is not impossible, but it can be a tough process. That’s not to mention the procedure to get citizenship, as you’ll need to live in Bahrain for more than 2 decades and speak the Arabic language fluently.
As happens with many countries from that part of the world, Oman gets a special permit to develop itself only through oil revenue. Exceeding exports of up to $9 billion, the government does not have the need to impose taxation hells on its citizens, forgetting about that burden called income tax.
A curious fact about this country is that there are heavy taxes on very specific products: 100 percent on energy drinks, 50 percent on soft drinks and 100 percent on tobacco. Thanks to these measures the government of Oman intends to receive additional revenues of 100 million rials ($260 million) and reduce the economy’s dependence on oil revenues.
In addition, the level of inflation in Oman is very low, only 1.1% and the sales tax (VAT) is equal to 0%.
In general, Oman can be a sort of equivalent if UAE didn’t convince you, as its no taxes policies are more than attractive. However, it must be said that is not the most popular choice amongst Centurion Capitalist members.
SAINT KITTS AND NEVIS
This country’s tax regime is amongst the most favorable in the whole world. Income tax is just non-existent, while taxes on capital gains and foreign financial operations are also exemptions.
As you would imagine, this is a more than attractive element for investors from all over the world, as is just the ideal place to look for when allocating one’s capital in terms of legal, tax-related, and living conditions.
The reason behind this attractive citizenship by investment program can be found in the terrible hurricane that damaged the Caribbean Islands in unseen measures. That’s why you can get your passport if donating $150,000 to the relief fund created by the government after the disaster. Afterward, you won’t need much more in terms of requirements, at least in comparison with other countries, to acquire permanent residency and a second passport.
However, it does grant the owners one of the greatest passports out there, as it allows entrance to over 135 countries, no obligation of minimum days of residence in the country, and totally free tax. In summary, acquiring a Saint Kitts passport is probably the easiest path towards second citizenship.
Now we are talking about the world’s richest country in terms of GDP per capita. Of course, the reason behind it is having one of the largest gas reserves on the planet, which accounts for a sometimes-overwhelming ability to develop the country.
These enormous gas companies that also extract oil for refinement account for a big chunk of the country’s wealth, as corporate taxes go as up as to 35%. But this is the exception to the rule, as neither taxes on income, royalties and profits are enforced on the population.
Qatar has become one of the most popular places for expatriates due to its amazing tax regime along with the high chances of making a profit in several business sectors. Also, the crime rate is amongst the lowest in the region. Therefore, especially for westerners, it is a special place to live and do business in.
This country is known for being quite safe and pleasant, and if that wasn’t all, is the only country located in the Gulf with permanent residency programs for expatriates. However, not everything is perfect, as to obtain these benefits one has to undergo a thorough due diligence process.
You should take into account that there is no perfect country for everything and that, on top, there are no taxes. Consider that if you have a residence in a country without taxes you still have to live there at least 183 days a year since in compliance with international tax regulations (to be considered a tax resident in that country you must spend at least 6 months and a day there).
Therefore, it must be a pleasant country with high quality of life. For some, it may be boring to stay 183 days on a small island like the Maldives, or very complicated like Brunei. We would recommend countries with a high quality of life such as Monaco or Dubai.
If you want to be advised on the best country out there that adjusts to both your financial objectives and life expectations, and if your desire is to acquire as much information as possible about residency permits, second citizenship, setting up offshore companies, or opening up offshore bank accounts, don’t hesitate to contact our team at Centurion Capital.
Our team will aid you in decreasing as much as possible all the tax burden you are currently carrying. And don’t take such a task for granted, as tax law is not precisely an easy ocean to surf. Remember, your path towards financial independence is right around the corner!
Warning: The content of this article does not constitute legal or tax advice. It is provided for general informational purposes only and not for the purpose of offering any warranty or guarantee. As laws change frequently, personalized professional advice is absolutely necessary.
Article written by: Fabrice Barra is a cosmopolitan entrepreneur, lawyer, fiduciary and author, one of the world’s leading experts on offshore strategies, corporate haven, international investments and global mindset lifestyles. He is the personal trusted advisor of well-known entrepreneurs, UHNWI, Forbes Global 2000 companies, professional sportsmen, aristocrats, celebrities, investors, people with a net wealth of 7- to 8- or more figures, and he has access to a network of influential people around the world.