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High Quality of Life and Low Taxes: European Countries with the Best Tax Conditions

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Although taxes are an integral part of the functioning of modern society, no one wants to give away too much of their income. Change of tax residency can become one of the effective tools to reduce the tax burden. Many people mistakenly believe that low taxes can only be found in remote island jurisdictions without developed infrastructure, high-quality services, and other conditions for a comfortable life.

Actually, it is true. InternationalWealth experts prepared an overview of the lowest tax European countries. By becoming a tax resident of one of these countries, you will be able to take advantage of favorable tax rates while enjoying all the benefits of modern civilization.

Which countries in Europe offer the best tax conditions

In 2023, these European countries offer favorable tax rates combined with all amenities and a high standard of living:

  • Monaco – this is a small principality in southern Europe associated with France. In this jurisdiction, there is no personal income tax, capital gains tax, wealth tax, or property tax (it does not apply to French citizens). One of the few taxes that exist in Monaco is a 1% property rental income tax. Monaco has a reputation as a country for the rich. And to a large extent, this corresponds to the real state of affairs – you can get tax residency in this jurisdiction only if you have a significant income and an impressive fortune.
  • Bulgaria – this is a European Union country located on the Black Sea coast. The fixed personal income tax rate in the country is one of the lowest in Europe – only 10%. In addition to income tax, contributions to state social and health insurance are applied in Bulgaria. There is no capital gains tax in this southern country, but there is a property tax. Tax residents in Bulgaria are subject to fiscal obligations on their worldwide income.
  •  Cyprus – an island nation with one of the lowest corporate tax rates in Europe (12.5%). In this country, tax residents pay personal income tax on their annual income on a progressive scale. The rate of this tax can range from 0 to 35%. Cyprus also offers to obtain a special status of a non-domiciliated tax resident, which exempts from paying taxes on dividends, interest, rental income, and military tax. In addition, there is no inheritance tax, no immovable property tax, and no capital gains tax in Cyprus (except for real estate transactions).
  • Liechtenstein – a dwarf principality with a developed financial sector and a very high standard of living. This jurisdiction has a very loyal, progressive income tax system. Liechtenstein exempts from personal income tax the annual income of an individual in the amount of CFH 15,000. The maximum income tax rate is 8%, which applies to annual income above CHF 200,000. However, in this small jurisdiction, there is a communal tax, which takes the form of a surcharge on the national income tax. The decision to increase the fiscal burden is made annually by local governments.

This is not a complete list of low-tax European jurisdictions. More countries can be found at the link above.

Additional Resource: The Challenges of Finding a Tax Attorney

How to get residency in a European country with low taxes

To pay taxes in a European country with favorable rates, you need to obtain the status of a tax resident of this jurisdiction. Each country has its own conditions for obtaining such a status. Usually, the primary condition is living in the chosen country for at least half of the calendar year. However, some jurisdictions offer other, more loyal terms.

We will tell you about the conditions for obtaining residence in the countries described above:

  • Monaco – to become a tax resident of Monaco, you need to continuously reside in the territory of this principality for 183 days, as well as confirm that you have sufficient income or business in Monaco.
  • Bulgaria – you can secure the status of a tax resident in Bulgaria by living in this country for 183 days out of any 12-month period and having a permanent address or center of vital interests in this country.
  • Cyprus – to obtain a tax residence in Cyprus, it is also enough to stay in this country for 183 days. However, this jurisdiction also has a 60-day rule for those wishing to obtain residency. It applies if the person was not staying in any other country for 183 days, is not a tax resident of another country, resides in Cyprus for more than 60 days, and has economic interests in that island country.
  • Liechtenstein – to obtain tax resident status, you need a residence permit in Liechtenstein and also stay in the country for six months, excluding short-term trips.

How to choose a suitable country for obtaining tax residency

It is rather challenging to choose a suitable country for obtaining tax residence on your own, as well as subsequently apply for this status. You need to carefully study the tax legislation of the chosen country, as well as international legislation. You also need to analyze several options, compare them, and choose the best one. In addition, conditions in different countries may change, and you may find outdated information.

Therefore, the best choice is to turn to experienced professionals in their field, such as International Wealth experts. Specialists will help you not only in choosing the optimal jurisdiction and subsequent registration of a tax residence but also in opening a European bank account, buying real estate, and other important issues.

Using the services of professional intermediaries will allow you to avoid unnecessary expenses and waste of time and make the process of choosing a jurisdiction and obtaining tax residence as fast and convenient as possible. In addition, you can choose a list of additional services that will significantly simplify your move to a new country. Experts will help you with opening accounts, starting a business, obtaining the necessary licenses and permits, and much more.