Language:
By Ritika Dixit
Published on 15 May 2024 11 min read
Uncle Sam wants his cut, no matter where you roam. That’s US citizenship-based taxation for you! Even if you ditch the snowy winters for sunny beaches, you’re still on the hook to file a tax return with the IRS every year.
There are ways to lighten that load — low-tax countries.
Living in a country with lower income taxes can be a game-changer for your wallet. That extra money could fuel exciting adventures, fast-track your financial goals, or simply add breathing room to your budget. Low-tax countries also often have other tax benefits, like no capital gains or inheritance taxes.
This isn’t just about saving money, though. Moving to a low-tax country can open doors to new experiences. Imagine yourself soaking up the culture of a new city, exploring breathtaking landscapes, or enjoying a slower pace of life.
Of course, there’s more to consider than just tax rates. That’s why we’ve compiled a list of 11 low-tax havens for US citizens with everything you need to know. So, buckle up and get ready to discover which destinations can transform your finances and your life.
Understanding US Tax Implications for Expats
Living abroad sounds amazing, but taxes? Not so much. The good news is there are some tax breaks specifically for US citizens living abroad, called expats. But before we dive in, here’s the catch: the US taxes its citizens worldwide, regardless of where they live. So, you’ll still need to file a tax return each year.
Here’s where it gets interesting—the Foreign Earned Income Exclusion (FEIE) lets you exclude a significant chunk of your foreign-earned income from US taxes. If you’re working overseas and making less than a certain amount (which changes yearly), you could pay little to no US income tax on that earned income.
In addition, the Foreign Housing Exclusion helps cover some of your housing expenses while living abroad. This exclusion includes rent or mortgage payments and certain utilities. There are limits to this exclusion, too, but it can provide some additional tax relief.
Remember, these are just two of the tax benefits available to digital nomads or expats. The rules can get complicated, so consulting tax professionals like doola is vital. Ensure you follow the IRS guidelines and maximize your tax savings as an expat.
Top 11 Low-Tax Countries for US Citizens
Here’s our list of 11 low-tax countries for US citizens:
1. Bermuda 🇧🇲
Non-Resident Income Tax Rate: 0%
Corporate Tax Rate: 0% for now, up to 15% from 2025 onwards
Bermuda tempts with its pink-sand beaches and turquoise waters, but the tax benefits are also a significant draw for US citizens. Bermuda boasts a no-income-tax policy for non-residents on their earned income. That means you get to keep more of your paycheck.
Plus, there are no corporate, capital gains, or inheritance taxes.
Just remember, Bermuda isn’t exactly budget-friendly. Expect to pay a premium for groceries, housing, and transportation. Obtaining residency can also be challenging, but its slightly easier if you’re a high-net-worth individual and entrepreneur.
On the plus side, Bermuda offers a vibrant island lifestyle with a blend of British and Bermudian influences. English is the official language, and the sunny climate is perfect for beach lovers.
2. United Arab Emirates (UAE) 🇦🇪
Non-Resident Income Tax Rate: 0% | Corporate Tax Rate: 0-15%
The UAE offers a tax-friendly haven for US expats. There’s currently no income tax on individual salaries, resident or non-resident. You’ll only pay a 5% Value Added Tax (VAT) on most goods and services. This can be a significant advantage compared to income taxes in most countries.
The cost of living in the UAE depends on your lifestyle. Dubai can be expensive, but there are more affordable options in other emirates. Then, obtaining residency typically involves securing a job with an UAE company or starting your own business.
Life in the UAE is a blend of modern luxury and traditional Arabic culture. Arabic is the official language, but English is also widely spoken. Compared to the west, there’s plenty of sunshine year-round. If you’re still unsure, know that the UAE already boasts a vibrant expat community, offering you a dynamic and exciting place to call home.
3. The Cayman Islands 🇰🇾
Non-Resident Income Tax Rate: 0% | Corporate Tax Rate: 0%
The Cayman Islands are a popular destination for US citizens seeking tax advantages. This zero tax haven for residents and non-residents on their income, capital gains, and inheritance translates to significant savings.
Having said that, note that the Cayman Islands come with a hefty price tag. Groceries, housing, and transportation tend to be expensive due to the island’s reliance on imports.
Obtaining residency can also be challenging. There are investment-based programs, but they require a significant financial commitment.
On the bright side, the Cayman Islands offer a laid-back Caribbean lifestyle. English is the official language, and the tropical climate is a treat for water enthusiasts.
4. Montenegro 🇲🇪
Non-Resident Income Tax Rate: 0-15% (Montenegro-sourced income); 0% (foreign-sourced income)
Corporate Tax Rate: 9-15%
Beyond the postcard-perfect landscapes, Montenegro attracts US citizens with its attractive tax regime. The country boasts a comparatively low range of corporate and non-resident income tax rate. This applies to your salary, business income, and even rental income. There are also no inheritance or capital gains taxes.
Even the cost of living in Montenegro is low compared to Western Europe. You’ll find affordable housing, delicious food, and budget-friendly entertainment options.
Obtaining residency is also easier than in some other low-tax havens. There are programs for those who invest in property or establish a business in Montenegro.
Life in Montenegro is steeped in rich history and tradition. The official language is Montenegrin, but English is becoming increasingly common too. The climate is typically Mediterranean — warm summers and mild winters.
If you’re looking for a beautiful, affordable European escape with a low-tax advantage, Montenegro is the answer.
5. Singapore 🇲🇪
Non-Resident Income Tax Rate: 24% (Singaporean-sourced income); 0% (foreign income)
Corporate Tax Rate: 17%
Singapore is a Southeast Asian powerhouse known for its efficient business environment. But for US citizens, the real draw might be its tax benefits.
Singapore boasts a progressive income tax system, with rates ranging from 0% to 24%. This means you’ll only pay tax on income exceeding specific thresholds.
Additionally, there are no capital gains or inheritance taxes. For high earners, this tax system can be very attractive.
However, Singapore is known for its high cost of living, especially when it comes to housing and transportation. Groceries and entertainment can be relatively affordable, but overall, expect a premium lifestyle.
Obtaining residency in Singapore can also be challenging, with programs targeting skilled professionals, entrepreneurs, and investors.
Despite the cost considerations, Singapore offers a vibrant cosmopolitan lifestyle with Chinese, Malay, Indian, and Western influences. English is one of the official languages, making it easy for expats to adapt.
The tropical climate is hot and humid year-round, a treat if you’re tired of winter spells.
6. Czech Republic 🇨🇿
Non-Resident Income Tax Rate: 15% (only on Czech-sourced income); 0% (foreign income)
Corporate Tax Rate: 21%
The Czech Republic also offers tax advantages for US citizens. The country operates a two-tiered income tax system.
Up to a certain income threshold (linked to the average monthly wage), you’ll pay a flat 15% tax rate. If your income exceeds this threshold, a slightly higher rate of 23% applies to the exceeding amount.
This progressive system can be beneficial for those with moderate incomes. Additionally, there are no capital gains taxes on most assets held for more than six months.
The Czech Republic also boasts a low cost of living. Housing, food, and transportation are generally affordable, making it a budget-friendly option.
You can obtain residency through various pathways — employment, marriage to a Czech citizen, or investing in property.
Life in the Czech Republic is a unique blend of Central European charm and modern amenities. Czech is the official language, but English is being increasingly spoken.
The climate is continental, with warm summers and cold winters. If you’re looking for a culturally rich and affordable European escape with a moderate tax system, the Czech Republic could be a great fit.
7. Panama 🇵🇦
Non-Resident Income Tax Rate: 15% (only on Panama-sourced income) + 2.75% educational tax rate; 0% (foreign income)
Corporate Tax Rate: 25%
Panama is another popular destination for US citizens seeking tax benefits. For starters, Panama offers a territorial tax system, meaning even the non-residents only pay income tax on income sourced from Panama. This translates to zero taxes on your foreign income (like US wages or pensions) if you don’t deposit it in a Panamanian bank.
The cost of living in Panama varies depending on location. Panama City can be pricier, but smaller towns offer a more affordable lifestyle.
Obtaining residency is generally considered easier than in some other low-tax havens. The Panama Pensionado program, for instance, offers residency to retirees with a minimum monthly pension.
Panama boasts a vibrant culture with Spanish as the official language. But English is becoming increasingly common, especially in tourist areas.
Panama’s climate is tropical, with warm temperatures and a rainy season. If you’re looking for a laid-back lifestyle in a beautiful country with a low tax system, Panama might be your perfect match.
8. Portugal 🇵🇹
Non-Resident Income Tax Rate: 25% | Corporate Tax Rate: 21%
Portugal also offers attractive tax benefits for US citizens with a progressive income tax system, but the rates are generally lower than those in the US. There’s also a program called the Non-Habitual Resident (NHR) scheme that offers a flat 20% income tax rate on qualifying income (like pensions and certain professions) for 10 years.
Portugal also offers tax breaks for retirees and remote workers. Retirees may benefit from exemptions on foreign pensions under the NHR program. Remote workers can enjoy a special tax regime with reduced tax rates.
The cost of living in Portugal varies by region. Major cities are pricier, but smaller towns and rural areas offer a more budget-friendly lifestyle.
If you wish to obtain Portuguese residency, there are various pathways — the NHR program, investing in property, or starting a business.
For other considerations, Portuguese is the official language, but English is increasingly spoken in tourist areas. The climate is temperate, with warm, sunny summers and mild winters.
If you’re seeking a beautiful European country with favorable tax rates, and a variety of residency options, Portugal is worth considering.
9. Georgia 🇬🇪
Non-Resident Income Tax Rate: 1-5.75% (only on Georgia-sourced income)
Corporate Tax Rate: 5.75%
Georgia offers a unique blend of tax benefits and cultural charm for US citizens. The flat income tax rate is just 1.0% on most income sources, translating to significant tax savings compared to the US progressive system.
There’s also a flat tax rate of 5.75% on corporate income.
Georgia offers remarkably affordable housing, food, and transportation compared to Western Europe. Thus making it an attractive option for those seeking to stretch their dollar further.
Residency in Georgia is available through investing in property, starting a business, or marrying a Georgian citizen. The process is generally less complex than in some other low-tax havens.
As for other factors, Georgian is the official language, but English is increasingly spoken too. The climate varies depending on the region, with warm summers, cold winters in the mountains, and more moderate temperatures along the Black Sea coast.
10. Malaysia 🇲🇾
Non-Resident Income Tax Rate: 0-30%
Corporate Tax Rate: 24%
Malaysia, known for its vibrant cities, stunning rainforests, and delicious food, also offers attractive tax benefits for US citizens.
Malaysia operates a tiered income tax system. Rates start at 0% for low earners and climb progressively, with a maximum rate of 30% for high earners. This means you’ll only pay higher taxes on income exceeding specific thresholds.
This country also offers specific tax incentives for expats with specialized skills or who work in particular industries. Under certain conditions, foreign income is also exempt.
The cost of living in Malaysia varies depending on location. Kuala Lumpur, the capital city, can be pricier. Smaller towns and suburbs offer a very affordable lifestyle.
Obtaining residency in Malaysia is more challenging than in some other countries on this list. However, there are programs for investors, highly skilled professionals, and retirees with a minimum monthly income.
Life in Malaysia is a fascinating blend of Malay, Chinese, and Indian cultures. Bahasa Malaysia is the official language, but English is widely spoken. As for climate, it is tropical, with hot and humid weather year-round.
If you’re looking for a diverse, affordable country with a progressive tax system, Malaysia could be your ideal destination.
11. Slovakia 🇸🇰
Non-Resident Income Tax Rate: 19% on income up to €41,445.49 (as of 2023) and 25% on any income exceeding that amount
Corporate Tax Rate: 21%
Slovakia beckons with its dramatic castles and charming towns. But for US citizens, the appeal extends beyond beauty.
Slovakia has a relatively low flat tax rate of 19% on income up to €41,445.49 (as of 2023). If you earn more, the rate increases to 25% on the exceeding amount.
Compared to most of Western Europe, Slovakia boasts a comfortable cost of living. Housing, food, and transportation are generally affordable. Residency in Slovakia can be achieved through work, investment, or marriage to a Slovak citizen.
Slovakia’s rich history and cultural traditions offer a unique experience. Slovak is the official language, but English is also increasingly spoken.
Slovakia’s climate is temperate, with warm summers and cold winters. It’s a great place to consider if you’re looking for an affordable European adventure, a low-tier tax system, and a welcoming atmosphere.
Essential Factors to Consider Before Moving
Reducing your tax burden is a compelling reason to consider moving abroad, but it’s not the only factor. Before you pack your bags and head to a low-tax haven, consider these crucial factors:
🔵 Tax Treaties
Not all sunshine and beaches are equal. The US has tax treaties with many countries to avoid double taxation on your income. This means you will only get taxed once on the same income.
Double-check if your chosen country has a tax treaty with the US. A tax advisor like our doola tax experts can help you navigate the specifics of these agreements.
🔵 Financial Considerations
Moving abroad involves financial adjustments. Look into currency exchange rates. A strong dollar today might mean little if the currency weakens in your new home country.
Budget for the cost of living. Research housing costs, groceries, transportation, and healthcare expenses.
Remember, a low-tax country might have higher living costs, which could negate the tax benefits.
🔵 Lifestyle Factors
Moving abroad is a lifestyle change. Consider the language barrier. Will you be comfortable in a country where English isn’t widely spoken?
Research the culture and customs. Are you prepared to adapt to a different way of life?
Healthcare is another big one. Will you have access to quality healthcare in your new country? Factor in the cost of healthcare and if you’ll need private health insurance.
🔵 Speaking of Professionals
Consider consulting a tax advisor to understand the tax implications of moving abroad. They can ensure you follow US tax laws and maximize your tax benefits. An immigration lawyer can advise on residency requirements and obtaining visas.
Moving abroad can be an exciting adventure, but it’s important to be well-prepared. By carefully considering these factors, you can make an informed decision about which low-tax country is the right fit for you.
Get Started With doola
Living in a low-tax country can be a strategic way to boost your savings and reach your financial goals faster. But remember, it’s a big decision.
Carefully consider the factors we discussed, from tax treaties to lifestyle adjustments. Don’t hesitate to seek professional guidance. To that end, doola is your one-stop shop for navigating the complexities of international taxation and ensuring a smooth transition.
Get started and learn more about us and how we can help you achieve financial freedom abroad. To discuss your specific situation and goals, schedule a free tax consultation with a doola tax expert. We’ll help you understand the tax implications of moving abroad and identify the best low-tax country for you.
