Any businessman is looking for the best conditions for the development of business. The country’s tax policy is a key factor in starting a business. Foreign investors and businessmen view the move to Europe as a tool to reduce the fiscal burden.
There are a number of countries in Europe with low tax rates. So where can you pay the lowest taxes in Europe?
Best tax residency and lowest taxes in Europe
Many successful entrepreneurs and investors have long turned their attention to different European countries.
The good news is that you don’t need to move to the Bahamas or Dubai to take advantage of the low taxes if you can invest some of your capital in the European economy.
A number of countries in the Old World will always be inaccessible to those looking for great tax planning tools.
Andorra has great geolocation, It is conveniently located between Spain and France. Andorra is considered a “tax haven” and a haven for businesses seeking to reduce their fiscal burden.
Andorra grants residence permits to investors in real estate and other assets, as well as to business owners.
Andorra is positioned as a more affordable alternative to Monaco, being a country not only with low taxes but also with a relatively affordable residency by investment program. This helps the country to effectively attract large investors with significant financial resources.
Andorra is ideal for those who earn income from capital gains or their own wealth that is passed down from generation to generation. The country has no wealth tax, no gift tax, and no inheritance tax. At the same time, there is an income tax in the country, which starts to be calculated on the amount of income over 24,000 euros per year. Its maximum rate of 10% comes into effect on an annual income of 40,000 euros and above.
There are two ways to obtain the right to residency in this country: invest or start a business. In any case, you will need to commit to spending 90 days a year in Andorra, renting or owning property, and paying for health insurance.
To create a company and become an active resident, you need to submit your resume and business plan to the local authorities, and then actually do business in the country. This means that living in Andorra should be part of your overall corporate and tax planning. By deciding to become a passive resident, you can invest 400,000 euros in real estate in Andorra.
Bulgaria offers cities with Eastern European charm, many beach resorts on the Black Sea, and low tax rates. The country has a flat 10 percent personal income tax rate. This makes the country one of the jurisdictions with the lowest rate of this fiscal fee in the European Union. The corporate income tax rate is similar to the personal income tax rate and is a fixed 10%. In addition, Bulgaria has entered into tax treaties with many countries. This opens up broad opportunities for tax planning for international entrepreneurs.
The tax system in Bulgaria is simple: live in a stratum and pay personal income tax at a rate of 10%. Having lived in Bulgaria for at least 183 days a year or by convincing the tax office that Bulgaria is your “center of vital interests”, you can become a fiscal resident of this country. The second option provides more flexibility, although it is much easier to simply live in the country, fulfilling the above-mentioned residency requirement. Moreover, it is very simple to issue a residence permit in this country, having a decent own capital.
Eastern Europe is one of the most underrated destinations in the world. And a number of Balkan countries offer interesting living conditions. The advantage of Bulgaria is that this state is quite open to business, bank accounts are easy to open, and a well-developed industry of offshore companies with low taxes attracts many entrepreneurs and serious capital.
The most popular tourist attraction in Central Europe is Prague. The Czech Republic also boasts a low tax rate. And residence there can be obtained through the local investor visa program.
Considering that Prague is one of the most demanded cities in Europe, it is worth considering the possibility of living in the Czech Republic and obtaining tax residency there. The Czech Republic, as a country of residence with low taxation, is best suited for citizens of the European Union. This is due to the fact that European entrepreneurs can not only use a fixed tax rate of 15% in the Czech Republic but also skillfully apply lump-sum deductions. For most business owners, using the lump-sum deduction can reduce the flat tax by 40% or 60%, resulting in an effective tax rate of 6% or 9% for sole proprietors.
If you decide to live in the Czech Republic, then real tax planning is required, as in Portugal or other European Union countries. You need to rent or own real property. The good news is that the cost of living in Prague is surprisingly low – especially when you consider how popular the city is with tourists, expats, and travelers.
Georgia is not located in the center of Europe. It is located in the Caucasus – right on the border between Eastern Europe and Asia. Positive fact: Georgia is the only European country with a predominantly territorial tax system. This means that, with proper structuring, income generation from foreign sources is not subject to fiscal fees in most cases.
A person residing in this country (that is, a legal resident of Georgia) can easily create international companies and pay zero income tax. It is also possible to become a tax resident without living in Georgia. Provided that you can prove that you have the capital or a high level of income, as well as the legitimacy of the sources of origin of your wealth.
The cost of living in Georgia is extremely low, the country also offers very affordable housing – including in the capital Tbilisi, which has a lot of tourist attractions and offers breathtaking scenery. For example, the historical part of Tbilisi is a UNESCO World Heritage Site.
Malta is one of four countries on this list that are part of the Schengen area and one of three that are part of the European Union. The Maltese authorities have developed a number of very attractive tax incentives for an EU member state. These benefits are available to both individuals and corporate residents. At the same time, non-resident companies can also take advantage of the democratic corporate tax rate at the level of only 5%. Maltese law allows foreign nationals to pay an annual flat fee and is exempt from taxation in Malta on the foreign income they receive.
Malta has had several residency programs for a long time. But the new Malta Global Resident Program boasts very attractive conditions for high net worth individuals looking to reduce their fiscal burden.
Unlike Andorra, in Malta, you don’t need a physical presence in the country. A foreigner can apply for residency in this country under the Global Residence Program, and then not live there at all. In addition, foreigners can count on a minimum of bureaucracy when applying for Maltese residency under this scheme. At the same time, residents are even allowed to bring home staff with them (similar to the MM2H program in Malaysia).
Residents of Malta are not taxed on income from foreign sources that are held outside the country and do not move to jurisdiction. Moreover, they are not taxed on capital gains generated by foreign investment – even if such income is sent to a bank account in Malta. Other income, including pensions, can be taxed once at a flat rate of 15% thanks to Malta’s extensive network of tax treaties.
The cost of maintaining Malta residency is fixed at € 15,000. With proper fiscal planning, tax payments can be limited to this. It is also possible to obtain a certificate of tax resident status. In addition, citizenship by investment is available in the country. With an investment of about 1 million euros, you can get a Maltese passport in just 12 months.