Where to relocate to not pay capital gains tax and live cheap

[Revoltec]

There was someone else on this forum who got a legal opinion on this from the Estonian tax authorities. Maybe you can find it through the search function.

You can find more information on the website of the Estonian tax authorities:

Determining residency | Estonian Tax and Customs Board

The instructions for determining the residency of a natural person for tax purposes explains when is a natural person considered a resident for tax purposes, gives an overview of the circumstances of change of residency and the obligation to declare

www.emta.ee

"On determining the place of residence, we proceed from the definition of a place of residence in § 14 of the General Part of the Civil Code Act, according to which the place of residence of a person is the place where he or she permanently or primarily lives."
You can rent an apartment in Estonia for the whole year, but if you never spend time there, then you don't "permanently or primarily" live there -> no tax.
You should be able to get this confirmed by the Estonian tax authorities if you send an official inquiry.

Lithuania has similar rules:

Lithuania - Individual - Residence

Detailed description of individual residence rules in Lithuania

taxsummaries.pwc.com

Again, "permanent" is not the same thing as "renting an apartment for the whole year". You can rent an apartment for the whole year (and registering your residency there) with the intention of using it for sporadic weekend trips to the country only.
You cannot do the same thing in Sweden, as registering your address there would immediately trigger tax residency.

But please don't just trust me, get this confirmed by a lawyer or ideally directly by the tax authorities in the respective country.

The only problem with this is that if I get questioned by the Estonian tax agency, the only way out would be to prove to them that I have my residency in another country, simply saying 'I dont live here' will not work, because I know how the questioning goes. And I cannot point to Sweden, so that would mean I would just need to find another country where I have my residence.

 

[JustAnotherNomad]

That's not correct. They're not Sweden. They don't care about your relaionship to some other country. They only care about your relation to their country.
But please get it checked and don't just trust me. You can send an official inquiy to the tax authorities.
Or maybe get some asistance from a lawyer.

Or just move to the Balkans...

Here is the thread I had in mind:

Currently living in Malaysia and Dubai, wanting to have another base in Europe - specifically Estonia. Thoughts?

Hello guys, how are you?. this is my first time registering an email and posting a thread here. So, please be kind hap¤#" Anyways i'm happy to be a part of this community, and If u don't mind, here is a bit of background about me! I consider my self a global citizen. i have multiple passports...

www.offshorecorptalk.com

 

[Revoltec]

my info might not be precise or up-to-date (do your own research) but you're supposed pay health insurance (hidden tax) of 14% (if I remember correctly) even when you sell share in a company or real estate.
I believe this also applied to securities...

hey, have you moved on this slovakia thing? I'm interested

I have now finally gotten the answer from the "Ministry of health" in Slovakia. Turns out as this is not considered a tax but called "social health contribution" or something like that so therefore it is not a question to be answered by the Slovakian Tax agency. Here comes the answer:

"Whether said income will also be subject to contributions to the health insurance depends on how the income will be taxed. If the said income is not subject to tax, the said income will not be subject to health insurance levies either.

During the annual settlement of the health insurance (RZ), the health insurance company is based on the submitted tax returns (DP) of the insured. The data from the filed tax return is reported to the health insurance company in accordance with § 29b par. 11 of Act no. 580/2004 Coll. Financial Administration of the Slovak Republic."

I find this quite remarkable. Therefore, no capital gains tax on stock you hold for more than 1 year in Slovakia.

That's not correct. They're not Sweden. They don't care about your relaionship to some other country. They only care about your relation to their country.
But please get it checked and don't just trust me. You can send an official inquiy to the tax authorities.
Or maybe get some asistance from a lawyer.

Or just move to the Balkans...

Here is the thread I had in mind:

Currently living in Malaysia and Dubai, wanting to have another base in Europe - specifically Estonia. Thoughts?

Hello guys, how are you?. this is my first time registering an email and posting a thread here. So, please be kind hap¤#" Anyways i'm happy to be a part of this community, and If u don't mind, here is a bit of background about me! I consider my self a global citizen. i have multiple passports...

www.offshorecorptalk.com

In the end, Estonia still tax worldwide income and the only way to prove to the tax agency that you didn't live in Estonia would be to show another address in another country. It is always your duty to prove things, so I find this option risky. Your thread also seem to be about companies and not individuals?

 

[JustAnotherNomad]

No, I meant individuals. You should be able to have an apartment in Estonia, but if you don't live there full time (nomadic lifestyle for example), you may be able to not be considered tax resident even under domestic law. But please check this with a tax lawyer, or ideally try to get an advance ruling from the tax authorities.

 

[JonnyStekkino]

Bahrain

 

[Cloudbanck]

Other idea, how how about register that you live in a country that is so chaotic, that the government there doesn't really keep track of residents, and doesn't answer if authorities from other countries try to contact them. And streets have no names and numbers. Also is not considered a tax haven, but still there is no such thing as a personal tax return and no capital gains tax. Most people from Sweden that live in such countries are NGO-workers, and embassy/international institution staff.

And then you can travel wherever you want, (just dont become a tax resident in a high tax country).

I have lived in such countries for a long time, I like it a lot, but it is not for everyone.

 

[JohnnyDoe]

Other idea, how how about register that you live in a country that is so chaotic, that the government there doesn't really keep track of residents, and doesn't answer if authorities from other countries try to contact them. And streets have no names and numbers. Also is not considered a tax haven, but still there is no such thing as a personal tax return and no capital gains tax. Most people from Sweden that live in such countries are NGO-workers, and embassy/international institution staff.

And then you can travel wherever you want, (just dont become a tax resident in a high tax country).

I have lived in such countries for a long time, I like it a lot, but it is not for everyone.

Can you list some of these countries?

 

[JustAnotherNomad]

Enforcement of the tax code is generally low in a lot of less developed countries. There are many countries that even have an OK tax treaty network where the corporate tax rate is quite high, but they don't really check what you're doing. Heck, probably even the Balkans would fit that description.
But at a couple million in annual profit, why choose a setup where you have to rely on weak enforcement? What if they come after you one day after all? It's not like 100k where you can just claim all your private expenses as business expenses to lower your tax rate.
If he's fine with living in Dubai and cutting ties with Sweden, it's probably a very clean solution.

 

[Cloudbanck]

Can you list some of these countries?

Large parts of Sub-saharan Africa is like this. And yeah balkans have some of these aspects. Asia used to be , but less now.

Enforcement of the tax code is generally low in a lot of less developed countries. There are many countries that even have an OK tax treaty network where the corporate tax rate is quite high, but they don't really check what you're doing. Heck, probably even the Balkans would fit that description.
But at a couple million in annual profit, why choose a setup where you have to rely on weak enforcement? What if they come after you one day after all? It's not like 100k where you can just claim all your private expenses as business expenses to lower your tax rate.
If he's fine with living in Dubai and cutting ties with Sweden, it's probably a very clean solution.

Agreed that a Gulf country is a cleaner solution. But you dont entirely rely on weak enforcement, the capital gains tax for individuals typically legally is zero, and some of these countries have territorial tax in law, and all have it de facto. Another thing is that these countries can only go after you when you are physically there, and if you have money things can typically be arranged.

 

[scooterguy]

Large parts of Sub-saharan Africa is like this. And yeah balkans have some of these aspects. Asia used to be , but less now.


Agreed that a Gulf country is a cleaner solution. But you dont entirely rely on weak enforcement, the capital gains tax for individuals typically legally is zero, and some of these countries have territorial tax in law, and all have it de facto. Another thing is that these countries can only go after you when you are physically there, and if you have money things can typically be arranged.

SEA is still like this.

* Thailand doesn't tax foreign capital gains, and getting a medium-term visa there is cheap and easy.
* Cambodia is a mess and has no CRS.
* Myanmar (non-CRS) is an even bigger mess, with an ongoing civil war.
* Laos (also non-CRS) barely has a tax agency, and taxes are extremely low anyway, such as a 2% capital gains tax. They also have a very short 3-year statute of limitations, and very lax fines (30% of the tax due as a fine on the first offence, 60% on the second offence).

 

[backpacker]

* Cambodia is a mess and has no CRS.
* Myanmar (non-CRS) is an even bigger mess, with an ongoing civil war.
* Laos (also non-CRS) barely has a tax agency, and taxes are extremely low anyway, such as a 2% capital gains tax. They also have a very short 3-year statute of limitations, and very lax fines (30% of the tax due as a fine on the first offence, 60% on the second offence).

With these countries you rely on weak enforcement. Plus, they have an almost non-existent network of DTT. Not exactly a forward looking strategy.

 

[Revoltec]

With these countries you rely on weak enforcement. Plus, they have an almost non-existent network of DTT. Not exactly a forward looking strategy.

But DTT is not needed as long as that country is your center of life for more than 6 months? (Depending on your origin country's tax laws of course)

 

[Cloudbanck]

But DTT is not needed as long as that country is your center of life for more than 6 months?

Yeah DTT is mostly irrelevant.
And as to lax enforcement, you are relying on the country remaining messed up. And if it gets less messed up you will usually get ample warnings ahead, like property rights and rule of law improving, and real estate values shooting up.

To take a concrete example of how things work in practice, got a friend living long term in an African country and working remotely for a European company. Naively he went to the local tax office to declare his foreign income and the guys at the tax office looked at him like he was crazy. After long discussions (no clear law or rules) it was agreed he would pay 10%, which obviously went straight to the personal pockets of the guys at the local tax office.
Then after 5 years of paying 10% the local tax office contacted him with some bulls**t excuse saying he hadn't paid enough and owed them about 15,000 EUR. He managed to negotiate it down to 150 EUR, and after that he stopped saying he had a foreign income and hasn't had any issues.

 

[scooterguy]

With these countries you rely on weak enforcement. Plus, they have an almost non-existent network of DTT. Not exactly a forward looking strategy.

Weak enforcement will remain, these countries operate in a completely different way than Western ones.

But even if you follow all rules, you only pay 2% capital gains tax in Laos, for example, so tax rules are still favorable.

 

[backpacker]

But DTT is not needed as long as that country is your center of life for more than 6 months? (Depending on your origin country's tax laws of course)

It largely depends on your activities. For most people in this forum, a DTT is seemingly (and understandably) very important.

Weak enforcement will remain, these countries operate in a completely different way than Western ones.

These "wise" words I heard all too often Just to see the same "wise" people crying when their house of cards collapsed.

Why not look for the correct setup right from the start?

 

[Cloudbanck]

It largely depends on your activities. For most people in this forum, a DTT is seemingly (and understandably) very important.

These "wise" words I heard all too often Just to see the same "wise" people crying when their house of cards collapsed.

Why not look for the correct setup right from the start?

There is often no correct set up in these countries. Or well, the "correct" set up is to be part of the ruling family or clan, then you are above the law, and dont pay any tax, and can forbid competitors to compete with you, even have the police arrest competitors and give their assets to you.

As an example look at Tunisia under Ben Ali before the revolution. They had on paper super high taxes, restrictions and import duties, making business practically impossible to do by the book, but then you could with a little facility payment get rid of all that. But the government kept a file on all businesses - and whenever some business owner did something the government - or more specifically the Trabelsi family - didnt like, then suddenly the full formal rules were used against that business owner.

 

[scooterguy]

It largely depends on your activities. For most people in this forum, a DTT is seemingly (and understandably) very important.

These "wise" words I heard all too often Just to see the same "wise" people crying when their house of cards collapsed.

Why not look for the correct setup right from the start?

I agree with doing the correct setup from the start, that's why those countries have lots of the advantages of a correct setup:
* Low to non-existent taxes
* Low to non-existent fines
* Weak enforcement of those low to non-existent taxes and fines

You can do a correct setup in Germany and not only pay more tax but still get screwed with hefty fines for an error in your tax declaration many years ago. That can never happen in Laos, and if it happens it will be much cheaper: taxes are lower, fines are lower, and enforcement is weaker.

Of course, those countries have other issues: bad hospitals, serious enforcement for other 'crimes' such as criticizing those in power, etc., but for certain types of businesses and for investment income they work pretty well.

 

[backpacker]

I agree with doing the correct setup from the start, that's why those countries have lots of the advantages of a correct setup:
* Low to non-existent taxes
* Low to non-existent fines
* Weak enforcement of those low to non-existent taxes and fines

You can do a correct setup in Germany and not only pay more tax but still get screwed with hefty fines for an error in your tax declaration many years ago. That can never happen in Laos, and if it happens it will be much cheaper: taxes are lower, fines are lower, and enforcement is weaker.

Of course, those countries have other issues: bad hospitals, serious enforcement for other 'crimes' such as criticizing those in power, etc., but for certain types of businesses and for investment income they work pretty well.

Initially, you mentioned Thailand, Cambodia, Myanmar, and Laos.
Not only do Cambodia and Laos tax foreign-sourced income, but these countries are also more expensive than Thailand (from a value perspective).
Myanmar: Somebody must have serious issues if he or she devoutly wants to live there.
So we are left with Thailand.

If you are longing for zero taxes (on foreign-sourced passive income), an affordable cost of living, a fun lifestyle, and an at least semi-functional immigration system, there are currently only two places in SE-Asia that can offer that: the Philippines and Thailand.

 

[scooterguy]

Initially, you mentioned Thailand, Cambodia, Myanmar, and Laos.
Not only do Cambodia and Laos tax foreign-sourced income, but these countries are also more expensive than Thailand (from a value perspective).
Myanmar: Somebody must have serious issues if he or she devoutly wants to live there.
So we are left with Thailand.

If you are longing for zero taxes (on foreign-sourced passive income), an affordable cost of living, a fun lifestyle, and an at least semi-functional immigration system, there are currently only two places in SE-Asia that can offer that: the Philippines and Thailand.

I agree that Thailand and the Philippines overall provide the best value, both in terms of proper structures and quality of life.

However, again, Laos has only a 2% capital gains tax, so it can be a solid option for OP (assuming you want to abide by these laws no one in the whole country cares about, and where fines are laughable). Furthermore, you don't need to live there full time, just arrange your affairs so that you have your center of interests there, pay your 2% tax, and then don't become a tax resident anywhere else (e.g., you can spend most of your time between Thailand and Laos, with summer trips to your home country).

Cambodia only taxes employment income, so, no, foreign income is not taxed, unless it's a salary.

Myanmar: I agree that it's the weakest option in SEA but can work for those who want a more chaotic country with extremely weak enforcement of tax rules (I understand that after a few posts we changed the discussion to "proper structuring that doesn't rely on weak enforcement", but it's a great option for the original intent. Yangon is also a vibrant city, and barring current political instability and some weak infrastructure, is very livable and feels way less 'westernized' than the other SEA capitals.

 

[cryptofriendly]

Initially, you mentioned Thailand, Cambodia, Myanmar, and Laos.
Not only do Cambodia and Laos tax foreign-sourced income, but these countries are also more expensive than Thailand (from a value perspective).
Myanmar: Somebody must have serious issues if he or she devoutly wants to live there.
So we are left with Thailand.

If you are longing for zero taxes (on foreign-sourced passive income), an affordable cost of living, a fun lifestyle, and an at least semi-functional immigration system, there are currently only two places in SE-Asia that can offer that: the Philippines and Thailand.

Taiwan and Malaysia also don't tax foreign income. But yeah, a bit less fun. Though Langkawi isn't a bad option, if one wants to enjoy tax-free products in Malaysia, and being on a beautiful island just a few km from Thailand. Malaysian 90 days free visa is a good thing, though I am still trying to find a way for longer stay without MMSH or Labuan options. Coz without that, one can't even open a bank account anymore. And Taiwan.....having lived and worked there for a year - not really my thing. I'd take Lao over that, with the $500 business visa option, might retire in that sweet little Phongsali with that.