Europe is often perceived as a high-tax region, where residents have to pay hefty taxes on their income, wealth, and inheritance. However, this is not necessarily true for all European countries. In fact, you can find several places in Europe that offer low taxes and favorable tax residency for individuals and businesses, especially if they are willing to invest or relocate there.
At the very start of our journey, let’s see what the requirements and benefits of becoming a tax resident in these countries are in 2024.
Bulgaria
Surprisingly, Bulgaria is one of the European Union (EU) member states with the lowest taxes in the region. Here, both individuals and companies pay income tax at a flat rate of 10%, regardless of their income source or amount. You will find no dividend, capital gains, or wealth tax in Bulgaria. The only exception is a 5% withholding tax on dividends paid to non-residents unless a double tax treaty (DTT) applies.
The jurisdiction also offers a beneficial tax residency regime for those individual taxpayers who are not domiciled in the country. Note that you are considered domiciled if you have a permanent address, a center of vital interests, or habitual residence in Bulgaria. A non-domiciled person may become a Bulgarian tax resident if they spend more than 183 days in a calendar year in the jurisdiction, or if they obtain a residence permit.
Non-domiciled tax residents in Bulgaria are only taxed on their income derived from Bulgarian sources, and not on the worldwide income. This basically means that a non-domiciled tax resident will enjoy the low flat tax rate of 10% on their Bulgarian income, and avoid their foreign income being taxed, as long as they do not remit it to Bulgaria.
Malta
In Malta, low taxes and convenient tax residency terms are also nothing new, which is true for both companies and natural persons. Please be aware though that Malta comes with a progressive tax rate for personal income, ranging from 0% to 35%. The exact amount to pay depends on the taxpayer’s income bracket and their marital status. On the brighter side, Malta also offers a special tax status for high-net-worth individuals (HNWIs) and highly qualified professionals, who benefit from a flat tax rate of 15% on their income, provided they meet certain conditions and minimum thresholds.
With its unique tax system for corporate income, Malta allows companies to claim a full or partial refund of the corporate tax paid in the country, depending on the source and type of income. This efficiently reduces the effective tax rate for companies to as low as 5% or even zero, in some cases. Malta also does not impose any withholding tax on dividends, interest, or royalties paid to non-residents, and has no capital gains, wealth, or inheritance tax.
Non-domiciled natural persons enjoy beneficial tax residency terms in Malta. Please note that you are considered domiciled here provided you have a permanent home, a center of vital interests, or an intention to reside permanently in the country. For non-domiciled persons, an opportunity does exist to become a tax resident if you spend more than 183 days in a calendar year in Malta, or if you declare your intention to establish residence there.Â
Like in many other offshore jurisdictions, any non-domiciled tax resident is only taxed on their income arising in Malta, and on their foreign income remitted thereto. This means that a non-domiciled tax resident enjoys low tax rates on their Maltese income, and avoids taxation on a foreign one, as long as they do not bring it to Malta.
Portugal
Portugal, another member state of the European Union, boasts a tax system advantageous to both individuals and businesses. Like in the above cases, it is characterized by low rates and favorable residency regulations. The country implements a progressive tax scale for personal income, with rates spanning from 14.5% to 48%, and varying according to income levels. Notably, Portugal also offers a unique tax arrangement for non-habitual residents (NHRs). The latter enjoy a fixed tax rate of 20% on specific professional incomes or activities, or potentially qualify for a complete exemption on foreign income, provided they meet the established criteria.
In Portugal, you will find a competitive corporate tax structure, featuring a flat rate of 21% for corporate income, accompanied by a municipal surcharge reaching up to 1.5%, and a state surcharge of up to 9%, with the exact interest rate determined by one’s taxable income. The country provides numerous tax incentives and advantages for companies engaged in research and development, innovation, or investments in specific regions or sectors. Portugal imposes no withholding tax on dividends, interest, or royalties disbursed to non-residents, and lacks both wealth and inheritance taxes.
The nation extends its advantageous tax residencу program even to those individuals who do not maintain habitual residence in the country. Habitual residence in Portugal is established if a natural person has a permanent home, a habitual abode, or a center of vital interests within its borders. As for non-habitual residents, they have a chance to obtain tax residency status if they spend over 183 days in Portugal during a calendar year or if they have a dwelling accessible for their use at any time throughout the year.
Non-habitual tax residents in Portugal are solely subject to taxation on the income generated from Portuguese sources and on the foreign income not exempt under the NHR regime. Consequently, they can benefit from the favorable flat tax rate of 20% on their Portuguese income stemming from specific professions or activities, while being exempt from taxes on their foreign income from employment, self-employment, pensions, dividends, interest, royalties, or capital gains, provided they fulfill the existing requirements and criteria of the NHR regime.
Few will ever argue that changing your tax residence is not exactly a bowl of cherries. To succeed, you need to know the tax laws and requirements of your target tax residency state in full detail. Considering that the laws keep changing, it is a smart idea to apply for professional help with this.
To find the best country for your tax residence, whether in Europe or elsewhere, get in touch with International Wealth! Our top experts will make sure that you achieve your goal without much effort.
