International Tax Laws

Systems for individual taxation

Broadly speaking, five different systems for the taxation of the income of individuals can be found in the world. Mauritius has a remittance-based taxation system which is very beneficial for expats who are tax-resident there.
Citizen-based taxation
The citizen’s worldwide income will be taxed, regardless of country of residence. Countries:
  • The United States and Eritrea only
Residence-based taxation
The resident’s worldwide income will be taxed. Countries:
  • Most continental European and OECD countries
  • Many other countries that are not expressively mentioned below
Territorial taxation
The resident’s income in the country of residence will be taxed, while foreign income will not be taxed. Countries (most popular destinations only):
  • Europe: San Marino, Gibraltar
  • Africa: Botswana, Namibia, Zambia, Seychelles
  • Asia: Singapore, Hong Kong, Macau, Malaysia, Georgia
  • Latin America: Costa Rica, Panama, Paraguay, Bolivia
  • Caribbean: British Virgin Islands, Anguilla, Bermuda
Remittance-based taxation
The resident will be taxed only on earnings generated in or money brought into the country of residence. Countries:
  • Mauritius; Cyprus (restrictions apply)
Non-domiciled tax system
The taxation is remittance-based as long as the foreign resident does not become domiciled. Countries:
  • United Kingdom, Ireland, Malta
No direct taxation
Residents do not have to pay any direct taxes. Countries (most popular destinations only):
  • Europe: Monaco
  • Middle East: United Arab Emirates, Qatar, Oman, Kuwait, Bahrain
  • Asia: Maldives, Brunei
  • Caribbean: Bahamas, Cayman Islands, St. Kitts and Nevis, Antigua and Barbuda, Turks and Caicos Islands
  • Pacific: Vanuatu, Nauru

Of course, it is not as simple as that. There are hybrid schemes in place in some countries, and many exemptions in others. Some countries treat capital gains different from other sources of income. Some examples:

  • In Mauritius, there is no capital gains tax (CGT). Other countries without CGT on securities include Singapore, Hong Kong, the Cayman Islands, Belgium, the Netherlands.
  • In the UK, a Remittance Basis Charge has to be paid by non-domiciled persons who have been resident in the UK for at least seven out of the previous nine tax years.
  • In Italy, you can vote for paying a lump-sum tax of 100,000 EUR per annum instead of paying taxes on your foreign-sourced income; capital gains, however, will be only tax-exempt after five years.
  • Malta is currently changing its non-dom system in a way that non-domiciled persons will be subject to a minimum tax of €5,000 annually in Malta, but no tax would be payable on capital gains arising outside Malta irrespective of whether these are brought into Malta or not.
  • The Philippines have a residence-based taxation of citizens, and a territorial taxation of foreigners.
  • Monaco is tax-free except for French citizens.

Choosing a no-tax jurisdiction as country of residence with the goal of escaping high taxation of the home country can be a trap. Many countries, i.e. Germany, have subject-to-tax clauses in place which would give them the right to tax expats on their total income. Such clauses may even supersede the provisions of existing Double Taxation Avoidance Agreements.