Tax Residency: How to Choose the Right Country to Minimise Taxes

Tax residency: what is it and how do you choose the right country?

For digital nomads, choosing a country to establish tax residency is a strategic decision that goes beyond a simple geographical change. It involves balancing minimising the tax burden, ensuring legal compliance and aligning lifestyle with the new environment. Each country offers specific regimes that can be more or less advantageous depending on income, sources of income and length of stay.

1. The Concept of Tax Residence

Tax residence is the legal link between a person and a country for tax purposes. In most jurisdictions, an individual is considered a tax resident when they spend more than 183 days in the country, or when they have relevant economic and family ties there. However, some nations offer specific rules and differentiated tax regimes to attract international professionals and investors.

International treaties to avoid double taxation, based on the OECD Model Convention, play a crucial role in this context by preventing the same income from being taxed in two different countries.

2. Countries with Attractive Regimes for Tax Residence

The following is an analysis of countries that offer interesting tax advantages for digital nomads and remote professionals:

a) Spain: Beckham Law

The Beckham Law, aimed at newly arrived workers, allows a reduced tax rate of 24 per cent for income in Spain and exemption from taxation on income earned abroad during the first six years of residence. This option is attractive for those looking to live in a country with a high quality of life and tax incentives.

To find out more about Beckham's Law, I recommend reading this article.

b) Malta: Non-Domiciled Resident

Malta offers a remittance-based tax regime, which means that only income brought into the country is subject to taxation. For digital nomads, this can represent an opportunity to significantly reduce the tax burden, as long as most of the income remains outside Malta.

To better understand the Non-Domiciled Resident regime, I recommend reading this article.

c) Estonia: Deferred Tax

Estonia offers a unique model in which corporate taxes are only paid when profits are distributed. This allows professionals and entrepreneurs to maximise reinvestment before incurring tax obligations. Although this doesn't directly affect personal income, it makes the country attractive to digital entrepreneurs.

To find out more about taxation in Estonia, I recommend reading this article.

3. Criteria for Choosing the Ideal Tax Residence

When choosing the ideal country, it is essential to consider the following aspects:

• Source of income: Income from self-employment, investments or employment may be treated differently depending on the country.

• Double taxation treaties: Check whether the chosen country has conventions to avoid double taxation with the country of origin.

• Living costs: Countries with low taxes may have higher living costs, which can have an impact on your budget.

• Lifestyle: Tax legislation must be aligned with the possibility of maintaining a comfortable and productive lifestyle.

 

4. Mobility and Adaptation: A Lifestyle in Constant Transformation

The mobility offered by remote working gives digital nomads the opportunity to explore new countries and cultures while optimising their tax burden. This freedom, however, requires frequent planning and adaptation to local regulations and the practical challenges of living in different jurisdictions.

For many, the search for a tax-friendly environment is also a way of finding balance between their professional and personal priorities. Choosing the right country involves more than tax issues; it's about identifying a location that allows for a sustainable and enriching lifestyle, aligned with individual expectations of growth and stability.

Conclusion

Choosing the right country for tax residency is a process that requires careful analysis of legislation, tax benefits and lifestyle. Countries such as Portugal, Spain, Malta and Estonia offer advantageous regimes that can be exploited by global professionals. For digital nomads, strategic tax planning is the key to making the most of the opportunities offered by remote working while remaining compliant with international regulations.

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