Residency and Taxation in Andorra, Bulgaria, and the UAE - Tax Haven Options

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  • Author Articles Factory
  • Published September 8, 2023
  • Word count 1,240

Discover low-tax and tax haven options for becoming a fiscal resident in countries like Andorra, Bulgaria, and the United Arab Emirates. Learn about investment requirements, residence permits, and tax advantages in these jurisdictions. Explore opportunities to reduce your tax burden and find the right fiscal strategy for your needs.

It is impossible to become a tax resident of the Cayman Islands. Why? Because the jurisdiction charges no taxes! It is a tax haven in the full sense of the word.

At the same time, there are other countries whose fiscal resident you can become thus saving on taxes. The countries that we discuss below are not zero-tax countries. Rather, they are low-tax countries. You have to realize from the very start that you have to acquire legal residence in a foreign country if you are to qualify for tax residence there. This means that you will have to spend the best part of the year in the foreign country of your choice and move your family there as well.

Many developed countries that are attractive for relocating there have progressive tax scales: the more you earn the more you pay in taxes. In such countries as Germany, France, or Spain, for example, the wealthy have to pay 35% to 50% of their income in taxes. At the same time, there are jurisdictions that will not want to rip you off and they levy lower taxes. This is the most obvious of all the advantages of using tax havens: you can lay less in taxes.

When you become a fiscal resident of a foreign country, you automatically cease to be a tax resident of your home country. This rule does not apply universally, however. If you are an American citizen, you are taxed globally no matter where your income comes from and no matter where you live – at home or abroad. The only way of losing fiscal residence of the USA is to renounce American citizenship. This should not sound too radical because you can actually ‘buy’ citizenship of a Caribbean country, for instance, and thus avoid becoming a stateless person when you renounce your citizenship.

Now let’s see what countries offer beneficial tax regimes.

Andorra

You have to meet the following main requirements in order to qualify for a legal residence permit in Andorra: you have to be solvent; you have to have no serious diseases; and you have to have no criminal record for serious offenses. Your legal residence permit in Andorra will not serve as a work permit.

The minimum required investment amount is EUR 400,000 and you can invest in real property in Andorra, make a bank deposit or use other financial instruments. The applicant for Andorran residence has to have EUR 50,000 in his/ her bank account in the country plus another EUR 10,000 per family member (the money counts towards the total required investment amount of EUR 400,000). The bank deposit is returnable but it will be returned to you only if you decide to renounce the residence permit. You don’t have to buy real property in Andorra: renting some residential accommodations is fine.

A significant disadvantage of the Andorran residence card is the fact that it does not allow freely traveling around Europe as Andorra is outside the Schengen zone. With the card, you will have visa free access only to Spain, France, and Portugal.

You have to spend at least 90 days in Andorra every year if you want to keep your residence card. We have to note that many foreigners de facto live in Spain on the documents issued in Andorra. The main reason for that is that the income tax is flat in Andorra and it is only 10%. Besides, you can use certain legal instruments to reduce the tax rate to zero. As you probably know, the income tax for the rich in Spain exceeds 40%.

Bulgaria

You can acquire legal residence in Bulgaria in exchange for investing EUR 512,000 in government bonds for five years. The legal residence permit does not give you tax residence, however. As is the case with most other countries, you have to spend 183 + 1 days per year in Bulgaria to qualify for tax residence. The tax rate is flat at 10%. This is the lowest income tax in the European Union (Bulgaria is a member of this international organization).

We also have to note that making an investment in government bonds is not the only way of legalizing your stay in Bulgaria. If you invest into business in the country and create jobs, you will also qualify for a residence card. You don’t have to start a new company in the country as you can register a subsidiary of your existing company there. Besides, there is a special program for retirees in Bulgaria who can also qualify for residence there. Please bear in mind that you have to spend more than six months in Bulgaria if you want to extend your residence permit and become eligible for tax residence there.

United Arab Emirates

You can apply for a 1, 2, or 3-year visa to the United Arab Emirates. When obtaining the visa, you are also obtaining a local ID card, which means that your visa essentially serves as a residence permit. If you open a company in one of the Free Trade Zones in the UAE, you will qualify for a three-year residence permit. No income tax is charged in the Emirates. Besides, companies registered in FEZs do not pay any corporate income tax either. There is an abundant choice of Free Trade Zones in the Emirates.

In addition, the UAE charges no property tax nor capital gains tax. The country seems to have two parallel economies: one is an onshore economy and the other one is an offshore economy. With your residence card, you can live in the UAE all the year round even though you don’t have to. The requirements for keeping your residence permit are rather liberal in the Emirates. All you have to do is visit the country every sixth month and spend at least 1 day there. If you fail to pay a visit within six months, however, your residence permit will be annulled and you will have to start the application process all over again.

Does the residence permit serve as a work permit? Partially. If you open a company in the UAE and use it as legal grounds for applying for a residence card, you will be allowed to work only for your own company. You cannot work for anyone else in the Emirates.

You have to file an official request for a tax certificate if you want to become a fiscal resident of this low-tax jurisdiction. You can file the request when your offshore company has been paying you a salary for 6 months. The same period has to pass in case you have applied for legal residence in the UAE on some other grounds such as a job contract with a local company or purchase of real estate. Please note that the date of issue on your residence card matters while the actual time that you have spent in the country over the last six months does not. The tax certificate can be issued to a citizen of a country that has signed a double taxation avoidance treaty with the UAE.

To conclude, acquiring citizenship of the UAE is close to impossible. No matter how long you live in the country, you will remain a foreigner forever.

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