Hungary has incomes taxes of just 15%.
Hungary has a standard personal income tax rate of just 15% and a corporate tax rate of 9%, making it one of Europe’s most reasonable and tax-friendly jurisdictions.
Dividends, capital gains and interest are taxed at a fixed rate of 15%, with a maximum annual social contribution of around €2,000.
To qualify as a tax resident, you must either spend 183 or more days in Hungary within a calendar year or have a permanent home there. Alternatively, your centre of interest must be in the territory if you have multiple homes in various countries, including Hungary.
Non-residents only pay corporate income tax for business activities a Hungarian company conducts. And you have the choice to pay Hungarian corporate income tax liabilities in either US dollars or euros.
Although Hungary offers low corporate and reasonable personal income tax, it is less immigration-friendly compared to many of its fellow EU member states.
That said, Hungary relaunched its Golden Visa program in 2024, offering investors the right to live and work in the country for ten years. There are three options to obtain the Guest Investor Residence permit:
Invest €250,000 in a government-approved investment fund for at least five years
Invest €500,000 in Hungarian residential real estate
Donate a non-refundable €1 million to an institution involved in scientific research or artistic activities.
3. Bulgaria
Bulgaria’s corporate tax rate is 10%, meaning it has the second-lowest corporate tax rate in the EU after Hungary. This eastern European nation also maintains tax treaties with many countries, which could allow for special tax treatment for some international entrepreneurs.
To establish temporary or permanent residence in Bulgaria, you have a number of options, including:
Investing a minimum €312,000 in real estate
Starting a company and investing around €256,000
Investing about €3,068,000 in a Bulgarian business (whose shares are not traded on a regulated market).
Bulgaria’s tax system is simple: live there and pay taxes at just 10%. You can become a tax resident in Bulgaria either by living there for at least 183 days a year or by proving that Bulgaria is your ‘centre of life’ to the tax office.
While merely staying in the country is often easier, the ‘centre of life’ test gives you more flexibility. Eastern Europe is one of the world’s most underrated regions for living in, although some prefer living in Serbia or Romania when it comes to the Balkans.
That said, Bulgaria has the advantage of being a relatively straightforward place to operate, with bank accounts being easy to open and a substantial low-tax offshore company industry attracting plenty of entrepreneurs and capital.
4. Czech Republic
The Czech Republic is often ignored as a low-tax jurisdiction despite its streamlined personal income tax rates and corporate tax rates, which are some of the most reasonable in Europe.
The Czech Republic has long been an attractive relocation destination for foreigners. Prague, in particular, regularly appears on lists of the best European cities.
As a low-tax residence option, the Czech Republic is best suited for European Union citizens. That’s because self-employed Europeans can not only avail themselves of a 15% flat tax rate but may also apply a lump sum tax deduction in lieu of actual expenses.
For most business owners, the lump sum can reduce the flat tax by 40% or 60%, leaving an effective tax rate of 6% to 9% on self-employed entrepreneurs.
As with most other European Union countries, accurate tax planning is required if you choose to live in Czechia – for example, you’ll need to rent or own an actual home. On the plus side of things, the cost of living in Prague is surprisingly low, given how popular the city is for tourists and digital nomads.
5. Georgia
While Georgia may not be in the centre of Europe, its position in the Caucasus places it squarely between Eastern Europe and Asia.
All personal income is subject to a flat tax rate of 20% in Georgia. However, under a special tax regime, those with an annual turnover of less than 30,000 Georgian lari (GEL), (around US$11,000) who register as a micro business with no employees are not taxed on their business income.
Not all business sectors qualify for this but, if your’s does then, if you earn up to 500,000 GEL a year (around US$180,000), you can apply for a small business certificate and pay 1% of the income. If you exceed the 500 000 GEL limit, you can still claim small business status if you stay within the income threshold for two consecutive years. In addition, residents here are not taxed on their worldwide income, which includes domestic and international.
So, it’s easy to create an international structure and pay very low corporate tax while being a legal resident of Georgia. It is also possible to maintain a part-time home base in Georgia without incurring tax obligations.
You can even become a tax resident without living in Georgia if you can prove wealth or high income. While Georgia’s capital of Tbilisi is not Paris, Georgia is one of the safest countries in the world and a favourite of ours here at Nomad Capitalist.
6. Gibraltar
Gibraltar has been a popular choice for British citizens seeking a low-tax residency but it’s not just open to Brits – Gibraltar’s tax benefits are available to everyone.
Nestled at the southern tip of the Iberian Peninsula, bordering Spain to the north, Gibraltar is a British Overseas Territory which means that, as a sovereign country, it’s able to set its own tax policies. Gibraltar has an oddly progressive but then regressive income tax system with rates in its Gross Income Based System (GIBS) ranging from 7% to 30%.
There are two ways to become a tax resident in Gibraltar: start a company or demonstrate a high net worth. As is usually the case with these programs, it is easier for entrepreneurs to qualify by forming a company, but proving wealth is easier in the long run.
The High Executive Possessing Specialist Skills method, or HEPSS, allows executives in Gibraltar companies to pay a maximum tax on their salary. With the HEPSS, you must earn more than GB£120,000 per year to be eligible and the tax liability is limited to the first GB£160,000 of your salary – which currently equates to a total tax charge of GB£39,940.
The Category 2 visa program is also appealing but requires a net worth of £2 million (US$2.5 million) to qualify. There are few requirements besides proving this level of wealth; the main requirement is to purchase or lease a ‘qualifying’ home. Other than these requirements you may carry out almost any business within Gibraltar’s territory.
Under the Category 2 visa, individuals are only liable to pay income tax on the first GB£118,000 of their annual worldwide income under the Allowances Based System, with the annual tax payable here ranging from between GB£37,000 to GB£44,740. If the assessable part of your income is lower than GB£118,000 you will pay GB£37,000 and, if it’s higher, you’ll pay GB£44,740.
7. Malta
The tiny island nation of Malta is a member of both the Schengen Area and the European Union and has developed some of the EU’s most tax-friendly programs for both individual tax residents and corporations, with corporate tax rates as low as 5% possible for non-resident companies.
Malta offers three different tax residence options:
The Global Residence Program (GRP)
The Malta Permanent Residence Programme (MPRP)
Non-domiciled tax residence.
As a non-domiciled Malta tax resident, you only pay tax on income earned or remitted there.
Malta has long had a flat-fee residence program available, which is discussed here (How to Get Malta Residency), while its Global Residence Program has become the second permanent residency of choice.
Unlike Andorra and Monaco, Malta does not require any physical presence, meaning you can establish residence but not live there at all. Furthermore, the country prides itself on reducing bureaucracy: for example it even allows residents to include domestic staff on their applications (similar to Malaysia’s MM2H program).
Maltese tax residents aren’t subject to tax in Malta on foreign-sourced income that is kept outside of the country. What’s more, they’re not subject to tax on foreign capital gains even if those gains are sent to a Maltese bank account.
Other income, including pensions, can be taxed once at a flat 15% thanks to Malta’s tax treaty network. The cost of maintaining tax residence in Malta is a flat €15,000 ‘minimum tax’ payable each year. With proper planning, this should also be the maximum tax.
8. Monaco
While Monaco is not a full member of the European Union, it is a de facto participant in the borderless Schengen Area, offering excellent travel opportunities. The country’s exclusivity and its proximity to France and the rest of Europe make it a more desirable tax residency than other isolated zero-tax countries.
Monaco’s personal income tax still stands at 0%, while its corporate income tax is now set at 25%. But tax residence in Monaco is reserved for only the wealthiest entrepreneurs and investors, requiring a €500,000 bank deposit and purchase (or, in some cases, rental) of a property there.
It’s also reserved for those actually willing to live there: a tax resident is required to spend 183 days per year for the first nine years, at which point they can obtain what is effectively permanent residence.
If you’re interested, read more in our guide to Monaco residency and citizenship.
9. Montenegro
Montenegro boasts one of the lowest personal income tax and corporate income tax rates in Europe, at progressive rates from 9–15%.
Like many of its western Balkan neighbours, Montenegro has sought to attract business to its small country by lowering tax rates. While almost all of Eastern Europe offers rather reasonable tax rates, Montenegro has the added distinction of being a country you might actually want to live in. Known by locals as Crna Gora, Montenegro is a stunning place to visit during the summer season.
Montenegro’s government seems to have played to that notion, inviting foreign investors to develop luxury resorts on its pristine coastline in a bid to be the jewel of the Adriatic Sea.
The country allows foreigners who buy residential property to obtain temporary residence, which is renewable yearly. If you live in Montenegro the majority of the time, you will become a tax resident and be liable to pay the flat 15% rate on your income.
Though Montenegro isn’t a zero-tax country for full-time residents, it is a very attractive home base, primarily for Europeans seeking a legitimate low-tax residence.
10. Portugal
Most people don’t associate Portugal with low-tax countries. In most cases, they’re right; Portugal is hardly tax favourable for the average resident with taxes varying from 13.25% to 48% on personal income.
Expats had been able to take advantage of a ten-year Non-Habitual Resident (NHR) program that exempted up to 100% of their income from Portuguese tax. However, for political reasons, namely a housing crisis and rising inflation, Portugal changed the NHR tax regime and removed incentives for investors to buy real estate through Portugal’s Golden Visa Program.
The changes mean that Portugal is no longer accepting NHR applications and those who become tax residents in Portugal in 2024 will no longer be eligible to register.
However, a new tax incentive for research and innovation has been created for 2024: the Tax Incentive Scheme for Scientific Research and Innovation (IFICI). This new regime, sometimes referred to as NHR 2.0, aims to attract individuals involved in specific professions such as teaching, scientific research and other high-tech or innovation-led fields.
Key features include a flat rate tax of 20% on professional income generated in Portugal and a wide-ranging exemption on most foreign-sourced income provided it may be taxed in the source country under a Double Taxation Agreement (DTA).
Like the original NHR scheme, it’s designed for a 10-year duration and, to qualify, applicants must not have been tax residents in Portugal for the preceding five years, can’t have benefited from the former NHR scheme and must be involved in one of the specified eligible activities.
This strategic pivot reflects Portugal’s focus on developing a more innovation-led economy and leveraging its capacity in science and technology to attract foreign talent and investment.
11. Switzerland
There is no doubt that Switzerland has become less friendly in terms of both immigration and banking in recent years. That said, it is still one of the safest and most respected countries in the world, located at the heart of Europe. While Switzerland is hardly a cheap place to live, it has one of the highest standards of living in the world and its maximum personal income tax rate is only 11.5%.
Swiss residency offers an air of legitimacy that many other low-tax residencies can’t match, with two options to choose from.
The first is to form a new company in Switzerland and hire local employees. This company will pay corporate income tax based on which canton (region) it is incorporated in, and the manager of which will pay Swiss income tax.
The other, more common and lower, tax method for living in Switzerland is the Lump Sum Taxation method, also known as ‘taxation according to expenditure’. Under this method, a family may move to Switzerland and pay a flat annual tax based on their cost of living rather than their actual income.
Generally speaking, expect to pay at least US$150,000 and up to US$1 million in flat tax each year, depending on which canton you want to live in.
Lump Sum Taxation will mean you can’t live in Zurich (this canton abolished the option in 2010). If your worldwide income exceeds US$1 million each year, maintaining your home and tax residency in Switzerland would give you a moderate tax rate. If your income is in the millions, Switzerland could reduce your tax rate below 10%, depending on negotiation with the cantonal tax authorities.
12. The United Kingdom
Like Portugal, the United Kingdom (UK) isn’t exactly a low-tax haven for everyone, but – up until this point at least – it has been for a select group of wealthy individuals. By acting on the difference between domicile and residence, specific foreign citizens are able to live in London and pay an annual flat tax.
This non-dom system has been high-profile thanks to Middle Eastern and Russian billionaires taking up residence in the UK, while denying they’re running their businesses from there. Because their income is from a foreign source, they are eligible to be taxed on a remittance basis; in other words, keeping income out of the UK which means it’s not subject to tax. Obtaining non-dom status in the UK does require a substantial investment, but the tax benefits have usually outweighed the initial costs.
However, the jig seems to be for non-doms in Britain. It appears the UK is about to end more than two centuries of the non-dom option. British Chancellor Jeremy Hunt announced in his 2023 Budget speech that the non-dom status will be phased out effective April 2025. The change has sent shock waves through the British non-dom community with many rumoured to have quit the country already.
With the likes of Portugal and the United Kingdom removing beneficial tax regimes, understanding the implications and adjusting your plans is more important than ever.
This is where our team at Nomad Capitalist step in. We analyse these changes daily to understand how they affect individuals like you.
Countries with The Lowest Taxes in Europe: FAQs
Which EU country has the highest tax?
Denmark now has the highest top statutory income tax rate in Europe, at 55.9%. Austria and Sweden also have personal tax rates of more than 50%.
Are there any tax-free countries in Europe?
Monaco has no direct taxation, which means there is no personal income tax for residents and no corporate income tax for companies operating within the country. Andorra also has a 0% tax rate on personal income up to €24,000 and a top rate of 10% that takes effect at €40,000.
Has Portugal’s tax regime for foreigners changed?
As of 2024, Portugal is no longer accepting new applications for its Non-Habitual Resident (HBR) tax program but there is a new science and technology-based regime in place.
How many European countries have a non-dom tax regime?
European countries where you can claim non-dom status include Malta, Ireland and Cyprus. The United Kingdom, while not an EU-member state, also offers non-dom status but that’s set to end in 2025.
Optimise Your Tax Rate
So, to leave where we came in – is it your dream to live in a European country and at the same time benefit from favourable rates to lessen your tax burden and keep more of your wealth?
Many countries offer generous tax exemptions, minimal property taxes, tax holidays, flat taxes and other incentives. If you want to live in different parts of the world, you can take advantage of tax residency rules in emerging countries that aren’t well-known but are nonetheless great places to live and invest in.
That’s where Nomad Capitalist comes in. We can help you determine which countries would treat you best and create your bespoke tax and lifestyle strategy.
We help seven- and eight-figure entrepreneurs and investors create bespoke strategies using our uniquely successful methods. We will help you keep more of your own money, create new wealth faster, and protect you from whatever happens in just three steps. Discover how we do things here.
Source link : https://nomadcapitalist.com/finance/low-tax-countries-living-europe/
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Publish date : 2021-08-07 05:26:17
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