Discover more from Second Income Strategies
Approved Countries to Live in as an Online Business Owner (ft. BowTiedGlobe)
Best locations based on quality of life, taxes, and cost
Tetra here. We have another guest post today, this time from the Jungle’s own second citizenship expert BowTiedGlobe. He was kind enough to write up a guide on the best locations to live in as an online business owner. I learned a lot from this guide and I’m sure I’ll be using it in the near future.
(I’ll be back with a regular paid post on Monday)
As a business owner, chances are you are not being treated well in your home country. Taxes always going up, increasing regulation, you know the deal.
If you were a brick-and-mortar entrepreneur, with local factories and stores and employees and all that, you would be in a tough spot. Moving you and that business abroad would be hard, complicated, and generally would cost a lot.
Luckily for you, you have listened to Bull, followed the advice of our friend Tetra, put in the work, and started making WIFI-money. This not only gave you financial independence, but also put you in an incredibly privileged position for internationalization.
Your business is entirely online and is easy to redomiciliate
As an entrepreneur with foreign income, countries WANT you
Today, we'll be going over some of the best locations for you as an online business owner to move to for a high quality of life and low taxes.
Each country will be outlined as follows:
Pros and Cons
Of course, there is no one-size fits all solution, so the best option for you may not be the best option for somebody else. Moving is also about personal preferences, after all, and that is highly subjective. Things like weather, culture, religion, all of that matters.
What all these countries do have in common is:
A decent level of development and security (I would not send you to Zimbabwe even if it were tax-free)
Either good taxes for local companies OR no complicated restrictions on managing offshore companies (Portugal being the only exception)
Viable immigration routes if you have a business or remote income
I’ve included at least one example from every major region in the world. They are listed in no particular order. Let’s go.
1 - United Arab Emirates
Superb travel hub
World-class cities for networking and events in Dubai and Abu Dhabi
High-class services and options for a high-quality and maybe extravagant life
Most tolerant country in the Middle East
Ridiculously hot weather in the summer, AC stays on all the time
0 food self-sufficiency, should there be a breakdown of global trade
Car-centric cities, not very walkable
Probably going to be the shortest section of all countries. There is no Personal Income Tax in the UAE. While a corporate tax of 9% is to be introduced in 2023, this will NOT apply to Free Zone Companies with foreign income, which is what you would likely be using anyway.
So if you are not selling inside the UAE, you can still stay 100% tax-free using Free Zone companies even after next year. If you do make income from the local market, 9% is still a good tax rate.
This part is also surprisingly simple. I wrote a whole thread on the step-by-step process and cost breakdown:
Summing up, as an online business owner you can:
Open a Free Zone company (yearly license cost of 3.800 USD)
Sponsor a visa for you as the director, which also includes your family
The total cost for a fully functional tax-free company, with access to payment processors like Stripe, plus a tax-free residency will be around 6700 USD. The whole process is surprisingly simple and efficient and won’t take more than a couple weeks.
If for some reason you do not like the Emirates but would still like to live tax-free in the Middle East, there are a couple of other options in the Persian gulf. Oman, Qatar, Bahrain and Kuwait are all tax-free options, but the immigration is harder when compared to the UAE and these places are less cosmopolitan.
2 - Portugal
Great climate and sun, lots of sun
English widely spoken
Full of expats and crypto people
Prices have been rising a lot, specially in Lisbon
Tax benefits are limited in time (10 years), after that you will be in a tax hell if you decide to stay
Socialist gov in place that is thinking of removing crypto capital gains exemption next year
If you were a regular Portuguese citizen living in Portugal, the country looks nothing like a tax haven. The usual top income tax rate + surcharges goes over 50%.
Of course, you, as a foreign business owner, won’t be paying that. In fact, you can pay as low as 0%. That option can be achieved through the NHR regime.
Were not a resident of Portugal for the last 5 years
Have a legal residence permit
Do the application on time (don’t miss the deadlines!)
You can be granted the special status of Non-Habitual Resident (NHR). This status is valid for 10 years, and grants you:
20% fixed tax on income from employment or self-employment
Potential 0% tax on income from foreign-earned dividends, interest, and rental income from real estate, as well as a couple other tax breaks.
I say “potential” because it is not a simple 0% like in the UAE. Dividends, for example, will only be tax free if:
There has to be the possibility that these dividends could have been taxed at the source (as is the case in the OECD model double-taxation treaty)
That income cannot be coming from a company in a country blacklisted by Portugal, unless that country has a tax-treaty with Portugal (like the UAE or Uruguay)
Portugal also has effective management and CFC rules, which makes it impossible to legally run a post-box company.
The reality is that, if you want to benefit from that juicy 0% dividend exemption, your company will have to have a REAL local director and office in the country of incorporation. No, not a fiduciary that gets a couple hundred bucks a year, and no, your accountant’s address won’t work either. You will need to build real substance for the business.
Because of the costs for building substance for your foreign company, consider that the setup of receiving tax-free dividends in Portugal will only make sense after about 100k in yearly profits before tax. Before that, it’s simplest to just stay as self-employed or open a local company, even if the taxes will be higher.
For the purpose of this setup, companies in the EU like Romania, Cyprus, Malta or Bulgaria are well-suited, as well as the UAE and Uruguay.
As a last note, at the moment crypto capital gains are still tax-free in Portugal, as long as crypto trading is not considered your profession.
Portugal is quite flexible when it comes to immigration and offers a variety of options.
If you are an EU/EEA citizen, you can just move there, with little bureaucracy or requirements.
If you are not an EU/EEA citizen, the most popular visa options include:
D2 - Entrepreneur or independent worker visa. This is if you want to open a local company or become self-employed.
D7 - Passive income holders and retirees visa. If you have a recognized source of passive income (including dividends) over the minimum wage of 705€ per month, you can qualify for this one.
Golden Visa - Classic investment visa. Make an investment in Portugal and keep it for a minimum of five years, or make a donation to culture/science. There are many options here from 250,000 to 1.500,000€, the most popular being a real estate purchase for 500,000€. The real estate option has some restrictions, you can’t just buy in Lisbon or Porto anymore.
There are other general requirements, like having a clean criminal record, proof of full health insurance, and proof of accommodation.
If you are into that med lifestyle, there are a couple options where you can live with good taxes - although some, like Portugal, are limited in time. Spain has a program similar to the NHR which is valid for 6 years. Italy has a program valid for 5-10 years.
Malta and Cyprus also have great tax options and are not hard to move to if you have a EU passport or have a biz going already.
Greece, as crazy as it may sound, is also quite tax-friendly if your income comes from foreign dividends - these are only taxed at 5%. Of course, you will need substance for your biz living here too.
3 - Hungary
Fantastic capital with lots to do and see, good nightlife and also quiet cafés
Good infrastructure and central location in Europe for travel
Low cost of living
Way less gender craze and identity politics than the west
Long naturalization time (8 years to become a citizen)
Native language is super hard and not really useful
Hungary has many special tax regimes for companies. I recently did a thread on them:
Quick sum-up of the options for online entrepreneurs:
Regular companies pay 9% corporate tax and 15% withholding tax when distributing dividends to individuals. As an individual, the income tax rate is of 15% on most sources of income.
For small taxpayers (KATA) with a turnover up to about $30,000, there is a fixed income tax. The tax is at a sum of 50,000 or 75,000 HUF / month, applicable to self-employed, individual entrepreneurs, and small taxpayers in B2C.
This amount cancels corporate tax, income tax, social security, all health care contributions, dividend tax, and professional training contributions This means that on an annual income of $30,000, only about $125 per month has to be paid in taxes.
If you are not a complete beginner and earn more than $30,000, KIVA should be a better regime for you.
The small business tax (KIVA) is a special tax for companies with fewer than 50 employees and an annual turnover not exceeding 3 billion HUF (about $7,500,000).
This tax regime replaces the corporate tax, social security, and professional training contributions.
Under KIVA, you pay 11% tax, but only on distributed dividends and salaries paid. If you plan on hiring cheap and qualified local employees, this is still clearly a better option than the standard corporate tax of 9% plus 27% social security.
Like Portugal, if you are an EU/EEA citizen, you can basically just move.
If you are not an EU/EEA citizen, you can apply for a Residence Permit for the Pursuit of Gainful Activity. This option applies both if you want to open a business or register as self-employed.
After opening a company, you can confirm the purpose of your stay by:
Employing at least 3 full-time Hungarian citizens or residents for 6 months without interruptions
Presenting a business plan with credible sources that shows the likelihood that the company will earn an income which will be enough for your livelihood
You will also need proof of accomodation, proof of health insurance, you know, the usual.
Eastern Europe in general is more tax-friendly than Western Europe, so here there are many options that can be quite interesting.
If you are still small, the Czech Republic is a popular option. Romania is the best location tax-wise up to 1.5m euros in revenue. Croatia is interesting up to 1m too.
Other options include Poland, Estonia and Lithuania, if you prefer colder weather, or Montenegro, Serbia and Bulgaria, if you want to live in the Balkans.
One of the best travel hubs in Latam
Strong expat network
Solid financial system
Central America’s most armed country (easy to get a gun)
Quite pricey for Latam
Ongoing protests and riots
We finally come into the territorial-tax country section!
Countries that follow the territorial concept of taxation tax income that is considered locally sourced (like from employment, local dividends, rents), while not taxing income that is considered foreign sourced (most importantly for you, foreign dividends).
Panama is one of such countries. If you have a foreign tax-free company and distribute profits to you in Panama, you will not be taxed on them. Congratulations, you are tax free.
The most popular immigration option is the Friendly Nations Visa. You will have 3 options to apply for residency this way:
Investment in Real estate for $200k
Investment in a Bank account for Fixed-term account for 3 years of $200k
Work in a Panamanian Company
These residencies are granted for 2 years and then later you can apply for the permanent residency.
Option number 3, while it may sound unattractive, is actually the easiest. This is because you can employ yourself through a local Panamanian company. This has some costs, as the company will have to get an operational license and pay a bit of taxes.
The total cost for this option is around 6.600 USD, plus annual costs of 660 USD for keeping the company during the 2 years of temporary residency.
The whole process can be done in 2-3 weeks if you take care of the documentation before going to Panama.
Basically all of Central America and the Dominican Republc also have territorial tax systems, which means you can live tax-free there with a foreign company. Out of these options, Costa Rica has been quite popular, and the island of Roatán in Honduras is also quite safe and is English-speaking.
One of the safest, freer, most stable, developed, least corrupt countries in Latin America
More social stability due to a large middle class and lowest income disparity in South America
Latin America's most armed country (8th most in the world)
Recreational marijuana legalized
High cost of living for the region, similar to Spain
Relatively poor flight connections, but direct and fast flights to São Paulo and Buenos Aires means you can reach the world from there
No really big metropolis - Kinda boring in low season
Another territorial tax country! Here, however, the situation is a bit more complicated than in Panama.
Income from mobile assets (dividends and interest) is included in the local base, meaning they are taxed - usually at a rate of 12%.
However, you, as an expat, can choose between two privileged treatments when you move in:
No taxes on foreign dividends and interest for 11 years, then the 12% rate
Permanently reduced tax rate of 7% on this same type of income
The option that makes more sense depends on how long you see yourself staying there.
As you can see, having a foreign company distributing you dividends works here as well. However, Uruguay also has interesting tax options for local small companies (SAS) or larger companies (Free Zone companies).
In the case of the Free Zones, they can also be completely tax free - good if you are looking to have local employees.
I talked more about these options here:
If you are a citizen of Mercosur (all of South America, basically), this is a piece of cake. You can just go and request permanent residency.
If you are not, don’t worry, Uruguay is still an easy country to move to. Besides usual documents like birth certificate, a police record and a medical check-up, the only other relevant requirement for obtaining temporary residency is providing proof of income.
Unlike many other countries, Uruguay does not have a fixed Proof of Income requirement. You just have to prove that you have a steady stream of income to support yourself and your family, if you have one.There is no minimum, but the amount has to be consistent with your lifestyle.
The income can come from many sources, including dividends. One must also prove that the income is actually received in Uruguay, so it’s good to open a local bank account in the country, which is easy, and can be done in a day.
Permanent Resident status is usually granted within six to eight months. In the meantime, you will be a “Temporary Resident”, with a Uruguayan National Identification Card (“cédula de identidad”) from the beginning, and as such, you may stay in the country indefinitely (or come and go).
Development-wise, you could consider Chile, but that country is going in the wrong trajectory and their tax benefits don’t live up to Uruguay’s. Paraguay is also tax-free on foreign income, but poorer and more isolated.
For some geoarbitrage, similar weather and a drinking Mate, you can also consider Southern Brazil and Argentina. Although these are less stable and have a less favorable tax situation, they can still be good options (maybe not Argentina at the moment, I would wait a bit before deciding to move there).
One of the safest, stablest, most developed and freest countries in Africa
English- and French speaking population
Pretty isolated, you will likely need a stopover in Dubai for everything
No big cities (may be a pro though, depends on you)
As a British colony, Mauritius has a non-dom tax system that taxes money that is brought into the country (remittance basis). The system in Mauritius is similar to that in Malta.
Non-dom, or Non-domiciled, describes a status in English common law. Briefly:
One's domicile is usually the country where one's father comes from, and where the person has lived most of his life.
Usually, but not always, domicile is the country of nationality.
In general, you do not lose your original domicile until you renounce your nationality, or after many years without going to the country where you were domiciled.
According to this system, if you are a non-dom, foreign income is tax exempt as long as it is not used in or remitted to the country.
The personal income tax and the corporate tax rates are the same: a flat 15%.
There is no tax on capital gains, be it at the personal or corporate level. There is no tax on internal dividends either.
There are also two special offshore company types, the GBC and the AC. The AC is a pure offshore company and is not suitable for Mauritius residents. The GBC, however, works if you are living in Mauritius.
The GBC has some additional requirements that raise its operational costs. These include being managed and controlled from Mauritius, having its core activities done from Mauritius and having a minimum level of expenditure and employment.
However, it comes with a big advantage: The corporate tax for most foreign passive income types is only 3%. Only domestic income is taxed at 15%.
Summing up, generally you will be paying 15% tax on your Mauritius-sourced income, and foreign-sourced income not brought into or used in the country will not be taxed. Capital gains won’t be taxed either.
If a GBC makes sense for your case, you will potentially only pay 3% on many kinds of foreign-earned income, even if it is distributed to you.
There are many options for online entrepreneurs to move to Mauritius. For example:
You can immigrate as a solo entrepreneur or self-employed with an initial investment of $35.000 and minimum annual income of $14.500 from your business.
You can make a $100,000 investment in an investment project with a value of at least $470,000.
You can buy a property for a minimum of $500,000.
If you are over 50, through a retiree visa. You will have to make an initial transfer of $30,000 to your local bank when first settling in, an then transfer at least $2.500 every month or $30,000 annually to your local bank account.
The other island countries in Africa are not nearly as attractive, with the possible exception of Cape Verde, although in almost every metric it is a direct downgrade to Mauritius.
Mainland Africa, while interesting for risk-taking entrepreneurs, is a better option if you are starting a business on the ground, with local gov connections. Otherwise, you will get a better bang for your buck in most other places.
If you like island nations, there are plenty in the Caribbean where you can pay no tax and where they speak English. Also, the islands of Madeira (Portugal) and the Canaries (Spain) also have some good tax incentives for businesses.
7 - Thailand
Strong expat communities and networks
World-class health facilities (like in Bumrungrad)
Tropical and beach lifestyle
Muay Thai and Thai massage classes from the source
You will not get citizenship
Restrictions on foreigners owning property
The Thai tax system is mainly comparable to those of Non-Dom Countries, like the UK or Mauritius. Briefly:
Income earned in the country is taxed at the usual income tax rates
Foreign income is only taxed if it is transferred to or used within the country
However, Thailand has a peculiar distinction:
Foreign income is only taxed if it was transferred into the country in the same calendar year it was earned.
If the foreign income was earned in previous years and was invested abroad, these assets can be transferred to Thailand tax-free in the following years.
Therefore, if you want to take advantage of this very attractive tax system, you must have sufficient funds to be able to live in Thailand for one year, as the foreign income must not be transferred to the country in the same year it was earned.
If you transfer the money in the same year, income tax rates of up to 35% will apply. Otherwise, tax-free.
One of the best options for online entrepreneurs is the Thai Elite Visa. This program is basically purchasing a residence permit.
In exchange for a certain amount and according to the program chosen, you receive a (very) long-stay visa, additional support from the immigration authorities, and special advantages at various Thai establishments, such as discounts at hotels and spas.
In particular, the airport limousine transfer service and the possibility to pass through airport controls and customs quickly is a very attractive perk for many busy frequent-flyers.
The cheapest variant costs 500,000 baht, about $13,700, and entitles you to a five-year stay. In the other categories of the program you pay up to $50,000, but your right of residence is extended for up to 20 years and other family members can be included.
Broken down monthly, in the cheapest plan, you would pay about $200 in exchange for legal residency in Thailand, plus some additional benefits. In the "most expensive" plan, if calculated on a monthly basis, legal residency status in Thailand would cost less than $100 per month.
Shouldn’t be hard for serious entrepreneurs, considering you can spend your whole life in an extremely attractive country with total tax exemption on foreign income.
If you like Southeast Asia, you’ll be pleased to know that both Malaysia and the Philippines also have a territorial tax regime (which again, means you are tax-free on foreign income). From these two, Philippines is easier to move to, as the Malaysian MM2H program has gotten considerably harder since the recent changes.
If there is one thing you will take away from this article, let it be this: You don’t have to resign to paying high taxes and living an increasingly regulated life in a decadent country. As an online entrepreneur, you have a world of options abroad. Make use of them!
Remember that if you are an American citizen, you won’t be free of the IRS and paying taxes to Uncle Sam unless you renounce your citizenship. If you don’t want to do that (or don’t have a 2nd citizenship yet), you should at least look into Foreign Earned Income Exclusion (FEIE) or Puerto Rico.
My thank you to Tetra for providing his platform for this article. If you want more tips and content on internationalization and destinations for moving abroad, follow me on Twitter @BowTiedGlobe. Of course, if you need my help in evaluating your options, developing a plan for yourself and moving, feel free to book an intro call.
Free articles on Second Income Strategies are supported by:
►Namecheap - Set up your first website with a few clicks. Follow an easy and intuitive process to set up a domain name and hosting. This is step one to earning WiFi money.
►Jasper - Use an AI assistant to write your content faster and easier. Jasper creates original content for meta descriptions, emails, subheadings, post headlines, website copy, and more. Automate your content creation and free up hours of your valuable time.
►Surfer SEO - Generate an entire content strategy with a few clicks. This tool features a content editor that is equipped with Natural Language Processing technology that gives you the exact phrases you should use to help your article climb to page one in the SERPs and outrank your competition. If you’re not using this tool, you’re falling behind.