The idea of living a life free of income taxes is exhilarating, but the reality of achieving it is easily perceived as difficult and inconvenient to the point of being daunting.
[NOTE: This article is a chapter in our
Comprehensive Guide to Tax Havens.]
For example, the first thing you might think to try is taking advantage of the so-called 183-Day Rule and regularly moving from country to country on a schedule designed to keep you from ever being classified as a resident anywhere. If you’re anything but single, footloose, and fancy-free, however, trying to live that way is extremely inconvenient and very tedious. You need better options.
A better approach is to earn money in one country while living in another country that doesn’t tax foreign income. Depending on your home country, this may have to involve renouncing your citizenship, immigrating to a chosen country where foreign income isn’t taxed, and making sure that your source of income is neither being generated in that new country or in another country that taxes the income that foreigner’s make within their borders.
The last option, of course, is simply to move your citizenship to a country where income is not taxed, and there are many of these. Of course, such countries make the money they need to function in other ways, so it’s important to take this into account in any relocation decision you make. Let’s briefly consider how these countries function, then take a look at a substantial list of countries without income taxes.
Table of Contents
How Countries Without Income Taxes Function
Nations that do not have an income tax have to fund their operations in other ways. There are 23 countries in the world that do not have income taxes. Six of them in Western and Southeast Asia—Bahrain, Brunei, Kuwait, Oman, Qatar, and United Arab Emirates—are rich in crude oil reserves and derive much of the income they need to function from this resource. Others, like the Bahamas, tax the life out of you through different means, such as value-added taxes, real property taxes, licensing fees, import duties, stamp duties, and casino taxes, to name a few. It’s very important to know what you’re getting into if you’re considering moving to a new country to avoid being income-taxed to death, because you might still get taxed to death by other means, or worse, subjected to slave labor. You don’t want to leap from the frying pan into the fire.
The Bahamas are located in the West Indies and, in 2019 U.S. dollars, had a gross domestic product (GDP) of $1,357,880,000. Unsurprisingly, tourism creates half of the Bahama’s GDP and the tourism industry accounts for half of its labor force. Its financial sector is substantial too and accounts for about 15% of the Bahamanian GDP. The Bahamas is the only country in the Western hemisphere that is not part of the World Trade Organization (WTO). If you want to immigrate there as a foreign investor and become a citizen, according to the Immigration Act of The Bahamas, you will need to make a residential property purchase of at half a million dollars (U.S.), demonstrate sufficient financial means to support yourself and any dependents, and then reside in the Bahamas for at least ten years.
Bahrain is located in the Middle East and in 2019 had a GDP in U.S. dollars of $38,574,070,000. Oil and natural gas comprise about 85% of the country’s revenues, but it also has a substantial retail and hospitality sector. The country was formerly a British protectorate, but is independent now and occasionally has to deal with political unrest, as do many countries in the Middle East. To get a residence permit in Bahrain, a lot of paperwork and money is involved. An investment of well over a quarter-million U.S. dollars in Bahrain’s economy or purchase of property worth over $130,000 U.S. is required, as well as evidence of a monthly income of about $1,500 and a fixed deposit of about $40,000. Alternatively, if you receive a work visa from a local employer you are eligible for residency as a foreign worker. The employer will take care of the paperwork. There are also dependent’s residency permits available for the foreign spouses and children of workers obtainable through the agency of the employer.
- Self-Sponsorship Residence Permit Request in Bahrain
- Bahrain Work Visas and Permits
- Family Work Residency Permits in Bahrain
Bermuda is located in the North Atlantic and had a 2019 GDP in U.S. dollars of $7,484,110,000. It is the oldest of several British Overseas Territories lacking an income tax and it has a long history of tourism dating back to the Victorian era. Despite its active tourism industry, 85% of its GDP is generated by its insurance and financial services industries. A Permanent Residency Certificate can be acquired by living in Bermuda for ten years and then paying a $50,000 U.S. fee, or you can marry a local and get your foot in the door for $3,150. You can also gain entrance to the country through any number of classifications of work permits, such as the Global Entrepreneur Work Permit, the Global Work Permit, and the New Business Work Permit, though the Global Work Permit has a limited duration.
British Virgin Islands
In 2017, the estimated GDP of the British Virgin Islands was $1,027,000,000 U.S., so its economy is rather small. Tourism constitutes about 45% of the country’s revenue. The American dollar has been its official currency since 1959 because its economy is tied most closely to the more populous U.S. Virgin Islands. Obtaining permanent residency in BVI is inexpensive, but a long term process. In order officially to become a permanent resident, you must reside there for at least twenty years, then you must submit a residence form in person to the Government of the Virgin Islands Immigration Department.
Brunei is located in Southeast Asia in the vicinity of Indonesia and Malaysia and had a GDP in 2019 in U.S. dollars of about $13,469,420,000. The royal family of Brunei, the House of Bolkiah, has been in power for the last six centuries. Much of Brunei’s economic vitality derives from oil and natural gas, which accounts for about 65% of its GDP. Because of its wealth, the country accords its citizens free medical services and free education through the university level.
Foreigners wanting to live and work in Brunei require an official work authorization. This standardly means acquiring an Employment Pass (EP), acquisition of which is subject to approval by the Ministry of Energy, the Labor Department, and the Immigration Department, and most often is valid for two years. A Special Authorization Work Pass is also available for work assignments or employment up to six months in length.
Acquiring permanent residency in Brunei is an extremely difficult and lengthy process. Anyone married to a Brunei citizen must have been married and reside in Brunei for a minimum of 10 years before he or she becomes eligible to submit an application for permanent residency. Anyone born in the country whose parents do not hold Brunei citizenship must also wait a minimum period of 10 years before being eligible to apply for permanent residency. Without either of these criteria being met, someone seeking permanent residency will need to have worked and resided in Brunei for a minimum period of 15 years to be eligible to apply for permanent residency. Highly skilled professionals, especially those who have invested in Brunei or run a business there, stand a much better chance of obtaining permanent residency status.
Acquiring citizenship in Brunei, however, is only possible through marriage or adoption and is an ordeal that includes the requirement of passing detailed tests on the Malaysian language, customs, and culture after residing in the country for at least ten years. Dual citizenship is not allowed.
The Cayman Islands are located in the Caribbean and, in 2018, had a GDP in U.S. dollars of $5,517,360,000. Another one of the British Overseas Territories, the Caymans derive about 70% of their GDP from tourism, though they are most famous for their status as an offshore financial center. Immigration to the Caymans is not difficult in comparison with many places, requiring only eight years of residency and a roughly $1200 U.S. fee, with a subsequent income-based annual fee that rises to a maximum of about $15,000 if you have an income of $150,000 or more. We will discuss the Caymans in much more detail in section 7.7 and all of section 8.
- Immigration to the Cayman Islands
- Permanent Residency in the Cayman Islands
- Fee Schedules for Visas and Residency Permits in the Cayman Islands
Kuwait, which is located in the Middle East, has an economy that is heavily dependent on oil, which accounts for 92% of its $134,628,540,000 U.S. GDP. Even though its public sector employs 74% of its citizens, it still does not need to levy an income tax. On the whole, Kuwait is not a hospitable place for foreigners to seek work. The CIA reports that foreigners seeking employment often become victims of forced labor because of sponsorship laws that make it difficult to avoid abusive work environments. Furthermore, the Kuwaiti government has, since 2013, been actively trying to reduce the number of foreign nationals to minimize the competition for upper-level management jobs with Kuwaiti citizens. Beyond this, if you are over 50 years of age, you are barred from working in a publicly-funded job. On the whole, Kuwait seems not to be the best choice available to would-be expats.
The Maldives is an island nation dealing with substantial debt despite expanding tourism and fishing industries. It is located on the Arabian Sea side of the Indian Ocean and had a 2019 GDP in U.S. dollars of $5,642,180,000. While residence in the Maldives is possible, a work permit must first be acquired through a local resident or company via a sponsorship program before one can become eligible for a residency permit. Caution is warranted because the CIA reports that both outsiders and local residents can find themselves victims of slave labor.
The country of Monaco is located in Western Europe on the Mediterranean Sea and had a GDP in U.S. dollars in 2019 of $7,188,240,000. If you wish to obtain a residence permit in Monaco it is very costly. Anyone seeking permanent residence must own or rent a residence in Monaco and have an account at a local bank with an initial deposit between $600,000 and $1,200,000. Furthermore, any company functioning in Monaco is subject to a 33% corporate tax unless at least three-quarters of its revenue is generated within Monaco itself.
Nauru is located in the Central Pacific Ocean and had a 2019 GDP in U.S. dollars of $118,220,000. It was once quite wealthy due to its phosphate deposits. These have been depleted and, while efforts are underway to extract secondary phosphates to keep the economy going, these efforts have an uncertain future. The local government extracts money from fishing licenses and by functioning as a dumping ground for the processing of refugees who come to Australia. Since the island nation has very limited space for development, it has no real foreign investment policy and offers no incentives for investors. It does, however, have a financial services center that allows international companies to register in Nauru to gain tax advantages. Further laws and regulations are under development to promote this activity.
- Nauru: The CIA World Factbook
- Visa Applications for Nauru
- Corporate Tax Incentives But No Personal Residency Permits in Nauru
Norfolk Island is an external territory of Australia in the Pacific Ocean that was resettled by descendants of the mutineers from the HMS Bounty. It is difficult to estimate the GDP of the island because the government does not collect the kinds of financial reports that would enable an accurate calculation. It is clear that the economy is currently in a major downturn because tourism is the main driver of its economic growth and the pandemic has shut down travel. Beyond this, and more positively, its agricultural industry is self-sustaining.
Immigrating to Norfolk Island is simplest for Australians or New Zealanders, who have access to an exclusive streamlined process for doing so. Other foreigners looking for entrance into the country or to establish a business presence there are required to submit a seemingly endless stream of forms and documents, some of which need to be renewed on a regular basis, and many of which have processing fees.
Oman is another oil-rich country in the Middle East. Its GDP in 2019 in U.S. dollars was $76,331,520,000. Oil and gas generates about 75% of the country’s revenue, though leadership is trying to diversify the economy by bolstering the mining, manufacturing, fishery, shipping, and tourism industries. More foreign nationals are entering the country, but to do so you must be between the ages of 21 and 60 and have a confirmed job offer from a company based in Oman that will sponsor your visa and request labor clearance from the Ministry of Manpower.
You are not a citizen of Oman unless your father is a citizen of the country. Naturalization requires twenty years unless there is marriage to an Omani citizen. A woman who marries an Omani can naturalize if she was married with government permission, bore her husband a child, has lived in Oman for at least 10 years, is fluent in Arabic, and has a good reputation. A man married to an Omani woman may naturalize after 15 years if the marriage was recognized by the government and his Omani wife bore him a child. Dual citizenship is not allowed, so any foreign citizenship must be renounced.
Like Norfolk Island, Pitcairn Island was also settled by mutineers from the HMS Bounty. As a British Overseas Territory, it is the last vestige of the British Empire in the South Pacific. It is about 18 square miles in size and it’s economy revolves around fishing, farming, handicrafts, and postage stamps. The population of the island is currently about 50 people and, if you want to live there, it’s relatively simple to do so: fill out a settlement application form, pay a small fee, and interview with the Deputy Governor of the Island. If you get the thumbs up, you’re in. The 2020 GDP of the island in U.S. dollars was about $151,750.
- Pitcairn Island: The CIA World Factbook
- Mutiny on the Bounty
- How to Apply to Settle on Pitcairn Island
Qatar is located on the Arabian Peninsula and about as attractive and hospitable for foreigners to settle in as Kuwait, which is to say, it’s probably not a wise choice. Foreigners can easily end up in forced labor.
The economy of Qatar is based on oil and natural gas and in 2019 it had a GDP in U.S. dollars of $175,837,550,000. Anyone wanting to risk moving to the country will have to provide documentation of police clearance in their home country and have secured a position at a Qatari company that will arrange for work and residence permits to be processed. Before final approval is given, the visa must be reviewed by the Ministry of Interior. Once in, anyone wishing to leave the country needs the permission of their sponsor and sometimes even an additional guarantor who will agree to repay any outstanding debts. If you wish to become a citizen of Qatar, among other things, you must have lived there for at least 25 years and never have left the country for a period longer than two consecutive months in duration.
- Qatar: The CIA World Factbook
- What to Know Before Relocating to Qatar
- A Comprehensive Guide to Moving to Qatar
- Eight Countries Where It’s Hardest to Become a Citizen
Saint Barthélemy, which is located in the West Indies, became a French overseas collectivity in 2007 after switching hands between France and Sweden a few times between 1648 and 1877. It was under the jurisdiction of the French overseas region of Guadeloupe for many years, but voted to secede from Guadeloupe in 2003 to become a separate overseas collective. The French parliament recognized this status in 2007. It further became an EU (European Union) overseas territory in 2012, which has expedited the local government’s ability to deal with the immigration processes for foreign workers, especially non-French European citizens.
The exact GDP of Saint Barthélemy is an unknown quantity, but the economy of the island revolves around tourism and luxury businesses, with tourism accounting for most of the local employment. The cost of living on the island is quite high and more than compensates for its lack of income tax.
- Saint Barthélemy: The CIA World Factbook
- History of St. Barth
- UN Conference on Trade and Development Profile: Saint Barthélemy
- How to Move to St. Barth
Saint Kitts and Nevis
Saint Kitts and Nevis are also located in the West Indies. It is the smallest sovereign state in the Western hemisphere, both in area and population, though it remains part of the British Commonwealth of nations. Its GDP in U.S. dollars in 2019 was $1,053,000,000. Up until 1970, the economic mainstay of the country was its sugar industry, but this was shut down after operating at a loss for several decades. Despite the best efforts of the local government to revive the agricultural economy, these islands still have one of the highest debt to GDP ratios in the world.
The economy of the islands now mostly relies on tourism. In order to stimulate economic activity and as a partial solution to its debt pr0blems, Saint Kitts and Nevis offer economic citizenship to foreigners, who, through a process of financial investment in the islands, can secure residence in Saint Kitts and Nevis along with citizenship and a local passport.
In regard to its tax haven status, the government of Saint Kitts and Nevis succumbed to political pressure and signed an intergovernmental agreement with the United States in 2014, which went into effect in 2016, that complies with the conditions in the FATCA legislation passed by Congress (see section IV.B above). Under this agreement, Saint Kitts and Nevis must report to the IRS on assets over $50,000 held locally by U.S. taxpayers as well as on the workings of certain other legal entities for the purpose of identifying U.S. taxpayers having ownership interest. Shell companies are included in this category. If Saint Kitts and Nevis do not comply, they are subject to a 30% withholding tax on payments that originate in the USA from associated financial institutions, as well as the potential loss of any corresponding banking relationships. We will say more about the potential of Saint Kitts and Nevis as a tax haven in section 7.11.
- Saint Kitts and Nevis: The CIA World Factbook
- Doing Business in Saint Kitts and Nevis
- Saint Kitts and Nevis Sign Tax Reporting Agreement with the U.S.
- Saint Kitts Citizenship by Investment Program
- Saint Kitts and Nevis Possibly a Foreign Investor’s Best 2nd Passport
Somalia may not have income tax, but it’s also politically unstable. Since Siad Barre’s oppressive authoritarian regime collapsed in 1991, the country has been characterized by factional fighting and the lack of any semblance of effective governance at the national level. Because of its instability, economic data is difficult to ascertain, but it is estimated that Somalia’s GDP in 2020 in U.S. dollars was around $5,218,000,000. Its economy most revolves around livestock, money transfer companies, and telecommunications.
The functi0ning federal government of the country, in an effort to curtail reliance on other nations, passed legislation in 2015 that restricts the employment of foreign workers. Visas and residence permits are now required for all foreign nationals. Somali citizenship is obtainable for any person who has established residency in the Somali Republic for at least seven years, has demonstrated good civil and moral conduct, and is willing to renounce any status as citizen or subject of a foreign country.
- Somalia: The CIA World Factbook
- Somalia Restricts Employment of Foreign Workers
- Obtaining Somali Citizenship
Turks and Caicos Islands
The Turks and Caicos Islands are another British Overseas Territory in the West Indies. Its 2019 GDP in U.S. dollars was $1,197,410,000. The island economy mostly revolves around its service sector, which accounts for 90% of the country’s revenue. The primary industries are tourism, financial services, and fishing. To become eligible for residency in the Turks and Caicos, you have to be a person of independent means who is self-supportive, locally rent or own a house, and be capable of investing $500,000 in the local economy. Alternatively, you are eligible for residency if you marry a local resident. If you are eligible on any of these grounds, immigration is relatively simple: all you need to do is submit an application form to the Director of Immigration and then pay a modest fee.
- Turks and Caicos Islands: The CIA World Factbook
- Living and Working in the Turks and Caicos Islands
- Immigration to the Turks and Caicos Islands
United Arab Emirates
The United Arab Emirates is located on the Arabian Peninsula and had a 2019 GDP in U.S. dollars of $42,114,227,000,000. While its economy used to derive almost exclusively from its oil and natural gas wealth, it has now diversified so that these only account for about 30% of the GDP, with other industries making up 20%, and the service sector making up the other 50% of the economy. The UAE enjoys a high standard of living and the government has recently focused on expanding the country’s infrastructure and creating new jobs. The UAE actively seeks foreign nationals and is strategic about creating jobs for them. Anyone who wishes to live and work in the UAE must be sponsored by a local resident or business through the Kafala sponsorship program. However, the visas granted under this program are temporary and have to be renewed and loss of a sponsored job requires a foreign national to leave the country.
Two recent developments offer additional paths to UAE residency. In 2019, the UAE introduced a new investor visa for entrepreneurs and professionals that grants 10-year residency for investment in a business. This innovation encourages foreign investment by allowing full foreign ownership of UAE-based companies, even outside of the UAE’s Free Trade Zone areas. The second development is very new, having been introduced in January 2021. A citizenship by investment program is being launched for a special classes of investors and professionals that will permit foreign residents to establish dual citizenship if specific criteria are met. The details have not yet been finalized by the UAE government, but any person of means interested in acquiring a UAE passport should keep watch for the government’s roll out of the program.
- United Arab Emirates: The CIA World Factbook
- Immigration Concerns in the United Arab Emirates
- Living and Working in the United Arab Emirates
- How to Immigrate to Dubai
- UAE Citizenship by Investment
Vanuatu is an island in the South Pacific with a 2019 GDP in U.S. dollars of $934,240,000. Unlike many other island nations who have struggled to make agricultural industries work, over a quarter of Vanuatu’s economy derives from their agricultural sector, which employs about two-thirds of the population. The rest of its GDP comes from tourism, fishing, and offshore financial services. The island government has also been working to bolster livestock farming as another local industry.
Obtaining citizenship in Vanuatu is fairly straightforward if you have the means, though its a bit unusual. By this means, you can obtain a passport in about two months. After an initial clearance process requirint a $10,000 fee is completed, you have to make a $135,000 donation through the Vanuatu Development Support Program to a single person, or $185,00o to a family of four.
- Vanuatu: The CIA World Factbook
- Living Conditions in Vanuatu
- Expat Guide to Vanuatu
- Vanuatu Development Support Program (DSP)
- Vanuatu Citizenship and Passport
Vatican City State
Vatican City State is located in Rome, Italy, but is its own jurisdiction consisting of a 121-acre walled area. It is ruled by the Bishop of Rome (the Pope), doesn’t export tangible goods, and is primarily supported by its investments, real estate income, and donations. Vatican City (the Holy See) proper gets income from museum admission fees and the sale of tourist mementos like stamps, publications, medals, coins, and other trinkets. It doesn’t engage in international trade and it imports almost all its agricultural products and foods, as well as all its manufactured goods, from Italy, which also supplies all its water, gas, and electricity. The CIA World Factbook reports that in 2013 it took in revenues in U.S. dollars of about $315,000,000 and had expenditures of around $348,000,000. In light of growing deficits, the Secretariat of the Economy was created in 2014 to oversee the financial and administrative operations of the Holy See.
Moving in with the Pope and becoming a citizen of Vatican City is not really an option unless you’re a Cardinal appointed to the Holy See or to Rome, a Vatican diplomat, an authorized resident, a person with specific papal authorization, or the spouse and/or children of a resident. Once your appointment is over, however, you are no longer entitled to residency. Even the Pope, if he resigns his office, has to move out.
- Vatican City: The CIA World Factbook
- An Overview of the Vatican City State
- U.S. Relations with the Holy See
- Living in the Vatican
Wallis and Futuna
Wallis and Futuna, like Vanuatu, is located in the South Pacific and is one of a handful of island nations that has a viable agricultural industry in addition to livestock and fishing. The last available estimate of its GDP dates back to 2004, when in U.S. dollars it was about $60,000,000.
Wallis and Futuna is a French Overseas Collective. The public sector is its largest employer, providing work (though not necessarily normal pay!) for about 70% of the population. The financing of the public sector comes from France, as does the money for its healthcare and education services. Since the island is a French collective, the conditions governing residency and citizenship there are the same as those for France itself.
- Wallis and Futuna: The CIA World Factbook
- The Economy of Wallis and Futuna
- Visas for Wallis and Futuna
- Settling in Wallis and Futuna
Western Sahara is a non-self-governing territory in North Africa. Since Spain’s withdrawal from the territory in 1976, Morocco has been trying to lay claim to it. In the effort to integrate it into the Moroccan Kingdom, Morocco is offering incentives to its citizens to move there. The main industries in the area are phosphate mining, fishing, nomadic livestock raising, and tourism. Because of its unresolved regional status, its natural resources are often at risk of exploitation. Financial data is sketchy and dated, but in 2007 its GDP was estimated in U.S. dollars to be around $906,500,000.
Given its ambiguous status, there obviously is no citizenship to be offered by the territory and, apart from the absence of income tax, there are international concerns about human rights violations, so there is scant reason to consider Western Sahara as a viable candidate for permanent relocation. There are better ways to minimize your payment of income tax.
- Western Sahara: The World Factbook
- A Travel Guide to Dahkla, Western Sahara
- U.S. State Department Reports on Human Rights: Western Sahara
[NOTE: This article is a chapter in our
Comprehensive Guide to Tax Havens.]