Legal methods of tax optimization if you have a second citizenship

When moving to another country for permanent residence, the question of reducing the tax burden often arises in order to avoid paying taxes in two countries at once. For these purposes, many countries sign treaties on the avoidance of double taxation, providing residents with various tax optimization opportunities.

Russia has such an agreement with more than 80 countries, including Spain, Portugal, Greece, Montenegro, Turkey, Latvia, Malta and Cyprus. In them you can obtain a residence permit, permanent residence or citizenship in exchange for investments in real estate – both residential and commercial, as well as in other assets. In most cases, in order to become a tax resident of a country, you must legally reside in it for at least 183 days a year, although in Cyprus this period is only 60 days, and in Malta there is no such period.

At the same time, temporary restrictions are imposed on the ownership of the object without the right to resell or the preservation of investments, which are also repayable. In EU countries, these restrictions usually last for five years, and in Caribbean tax havens – from three to seven years.

Many states offer new resident foreigners to choose the most profitable and suitable tax regime for them. For example, in Portugal there is a Residente Não Habitual regime, thanks to which for the first ten years the rate on income received in this country is 20%, regardless of the amount. Similar conditions are provided in Cyprus and Greece, and in Malta, when renting out real estate, you are allowed to adhere to a special tax scheme with a rate of 15%.

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Another legal method of tax optimization is to open a new company abroad or transfer an existing one there. In almost every EU country there are various tax breaks and deductions that can be used to reduce the tax base. One of these benefits applies when transferring certain amounts to charitable purposes, and this rule also applies to individuals.

The Caribbean countries do not have double taxation agreements with Russia, so in order to avoid paying taxes in both countries, the investor will need to transfer his business to their jurisdiction, which means opening an office. Countries such as Dominica, St. Kitts and Nevis, St. Lucia and Grenada impose a net profit tax on worldwide income of 23-30%, and VAT can reach 20%. There is no income tax only in Antigua and Barbuda, where, in addition, international companies are not taxed on global income for the first 50 years. Tax rates on dividend payments to non-residents vary between 15-25% with the exception of Saint Lucia, which exempts its payment.

As for individuals, no income tax needs to be paid in St. Kitts and Nevis and Antigua and Barbuda. In other countries, tax rates on wages and business income received on their territory range from 10% to 30%, depending on the amount of income, and are almost the same for residents and non-residents.

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