The nine micro states Lichtenstein, San Marino, Campione, Monaco, Andorra, Gibraltar, Guernsy, Jersey and the Isle of Man are the only true tax haven.
Before getting deeper into anything regarding tax havens let us understand what tax havens are? A country or independent area where taxes are levied at a low rate is considered as a tax haven.
Micro states proved themselves as the best tax havens because they offer a very high standard of living with a lesser amount of tax to pay.
Let’s discuss the tax systems and the immigration laws of 9 countries that are fiscally autonomous territories in Europe.
Every European country has its own micro state tax haven. Let’s make some of these countries a topic of our discussion today, the 9 micro states are Lichtenstein, San Marino, Campione, Monaco, Andorra, Gibraltar, Guernsey, Jersey and the Isle of Man. The only true haven without any type of income tax is Monaco. Rest of the countries are considered as beneficial as compared to their “mother countries” and somehow they manage to hold a sum of money for themselves.
Some of the countries like Andorra had major political pressure, due to which they had levied a fixed 10% tax rate on individuals. Which of the above countries are suitable for living and have different types of benefits for the citizens? let’s find out:
San Marino is a micro country in central Italy and it is known as the oldest republic in the world. San Marino holds a clean history and it has never been conquered by any other kingdom. Once Napoleon tried to conquer it but never succeed, he got so inspired by this and he made his army march through the republic, he even gifted it with some of his most sophisticated cannons.
San Marino is a tourist destination situated on a high mountain, it is a place where you get all your enjoyment at very low prices. It is not a tax-free country, it charges nearly 50% of tax on your incomes, this palace is only beneficial with the aspect of dividends on which only 5% capital gain tax is applied. In the first five years of your residents, you have to pay local business tax 17% which will lower down after five years. The big and high-tech companies also get some tax advantages, A Limited Liability Company must have a social capital of €25500 and unknown company one of €77,000.
There are many ways to become a resident in San Marino, some are:-
- You can become a resident of San Marino by creating a local company with 5 full-time employees and obtaining a building at the cost of €300,000 or by saving money in the bank, you also have the option of taking out yearly insurance of €30,000
- You also have the option of taking 51% of shares in a local company and making a deposit of €75,000 in a bank, after that deposit of €75,000 in first two years of residence.
- You can become a resident by investing in the infrastructure of more than €500,000 or 10-year government bond for 10 years which costs €600,000 and whole it costs €10,000 and €20,000per family member.
A unique feature of Europe is it does not grant citizenship even if you are residing in San Marino, you have to wait 30 years to become a citizen. If you are having the passport of San Marino then you can easily travel to China without having a visa.
The Isle of Man
The Isle of Man is one of the most unique bits of Europe and the British Isles. It is different from all the other islands surrounding it and there are a lot of interesting facts many don’t know about it. It is situated in the Irish Sea, between Northen Ireland and England and is considered, together with the two-channel Islands. This place is popular for tourists among the world, it is ideally known for the Rally and contains observing giant sharks, which are generally seen in the months of summer to eat the large quantities of plankton.
It was easy for EU citizens to settle on these island before the Brexit came into existence. The non-EU citizens have to follow the British mother country’s rules. It does not include a local permit, and thus, it does not become any problem for online entrepreneurs or individuals.
The Isle of Man does not allow any non-dom regulations so the income from anywhere in the world is considered taxable here. Consequently, you do not have to pay tax on capital gains, or on gifted items. The tax is even applicable to the social security contributions of employees and on the self-employed individuals.
Guernsey is one of the Channel Islands in the English Channel near the French coast and is a self-governing British Crown dependency. It is quite easy for EU citizens to emigrate to this Island, Just after the Brexit came into force it becomes harder to get a work permit there. The current conditions for non-EU citizens are GBP 1 million and acquiring a property.
The tax system of Guernsey and Alderney is similar to the non-dom system.
Residence and only residence are the two terms which differentiate the residency system of Guernsey, the individuals who own the principle/only residency have to pay a 20%income tax, with a limit of GBP 110,000 on foreign income or GBP 220,000 on domestic income. You can only able to make Guernsey your principle residence when you spent at least 183 days there, or you are living there for more than 90 days and at least 730 days in the last 4 years.
You have to pay a special tax that is “Standard Charge” if you are supposed to spend at least 91 days there or 35 out of 365 days from the past 4 years. With this aspect, you have to pay GBP 30,000 if your income is around 150,000 GBP or we can simply say that 20% of your income. if you are earning more than 150,000 GBP than you have to pay 20% tax on domestic and foreign income used in Guernsey.
The non-dom regulations are not allowed in Guernsey and this is the reason for the complicated tax system there. It must be noted that capital gains and gifted items are considered tax-free.
If you want to live in Guernsey you must have to spend at least 90 days in another country to avoid taxation on foreign income.
Liechtenstein is a micro state located between Austria and Switzerland. It is a German-speaking state because it is not so far from the German border.
Liechtenstein holds only 20 residence permits to the EU citizens each year through a lottery system. In order to get the permit, you will have to spend at least 183 days per year.
The businessman who wants to set a company in Liechtenstein need a well- connected lawyer, a convincing business plan and a bit of luck. Consultancies and technological companies have more scope in Liechtenstein.
The individual has to pay 12.5% corporation tax and 28% income tax. The equity tax is included in the income tax and the capital gains are tax-free. The 4% total equity includes all the tax charged on dividends, interest income, rental income, and licenses, along with the profits of the capital gains. Here, the tax system gives you a lot of burdens, almost €100,000 of partial taxation, it would be better to settle as a non-dom in Italy, a much bigger country than Liechtenstein.
Andorra is a micro country located between France and Spain, it is known for having two heads of states, a Spanish bishop and the President of France. It is a well-known tourist place, which gets rushed in winter for winter sports.
Andorra offers a light tax burden as compared to Liechtenstein. It has a fixed tax rate which is 10 %, it is so because of the pressure of the EU.
It is a good place to live in terms of earning and saving money, the tax system does not put a high burden on you, the first €24,000 of your income and dividends from local companies are considered tax-free. The only tax which is levied upon individuals is 10% corporation tax which for international businesses can go down to 2% with prior request. Foreign dividends are also tax-free up to the shares of 25%. In any case, you do not have to pay more than 10% tax in Andorra.
The entrepreneurs who want to find a local business anywhere else from the country then also the immigration process is easy and fast as compared to other countries. You only need to spend three months there for registering as a self-employed or set up a local company. The necessary requirements for this are you have to own or rent a house along with paying the social security of €400 a month.
There are very strict rules for investors. It is mandatory for them to have a minimum income of €3,000 and private insurance, along with this, you have to make a bank deposit of €50,000 plus €10000 for members in the family, all this amount will get reimbursed once the residence is granted. You also need to make an investment of €400,000 in property, government bonds, shares in local businesses or financial products from Andorran banks. This condition is not applicable to professional international athletes and renowned scientists.
Gibraltar is an Overseas Territory on Spain’s south coast. Gibraltar is always a subject of conflict between Great Britain and Spain due to its position. The Brexit would seriously endanger Gibraltar, perhaps to the point of losing its independence, which Spain has called for a long time.
For becoming a resident of Gibraltar it is necessary to spend at least 6 months in a year or 300 days in three years. Non-dom system is applicable in Gibraltar and due to which foreign non-controllable income is tax-free. It is also applicable to companies with Gibraltarian capital, these companies just have to 10% tax and after that, they are not liable to pay any tax on foreign income. If you are category 2 resident in Gibraltar then there is a minimum tax bracket which you have to follow as a citizen. The normal income tax of 20% is applicable to your dividends, but the corporation tax paid can be offset against this.
Gibraltar is always a subject of interest for investors and traders because of the lack of capital gain tax. Until the Brexit came into existence the EU citizens will able to enjoy the right to settle in Gibraltar by following some conditions. To settle up your self in Gibraltar you just need to become self-employed or you can also set a company in Gibraltar, you also have an option to prove some of your assets in the Gibraltarian borders. A health insurance policy with at least GBP 100,000 coverage is also necessary for the Gibraltar residence.
All the above will only comply if you have a second home, and it is applicable to non-EU citizens.
All the above is possible in a situation when you have a second home, along with the above conditions it is also necessary that you have net assets of GBP 2 million. And if you have a category 2 status, then you are liable to pay a tax of GBP 29,000.
You can get a residence in Gibraltar without having a category 2 status if you are an EU citizen but it is all possible with the permission of the local government.
Jersey is the largest channel island, it is a self-governing state of United Kingdom, it comprises of mix cultures of British and French. Before the existence of Brexit, the EU citizens could settle easily in Jersey. The non-EU citizens can also settle there by purchasing or renting a property which cost around GBP 1,750,000.
The tax system in Jersey is quite similar to Guernsey but in addition of some other tax laws. It gives many benefits to the non-dom residence, in which the income from other countries is non-taxable and the income from Jersey is taxable. You just need to make Jersey your main home living at least six months in a year or three months in four years, with all these if you own a property in Jersey than you must avoid living here for more than three months, or you just need not to make Jersey your Permanent home instead you have an option to use it in your holidays and business trips.
If you want to become a non-dom in Jersey than you should have to purchase a property and live for every three months. If you are doing this than the income from a foreign country is tax-free. Capital gains and personal gifts are also tax-free.
The permanent residence holders have to pay a fixed tax rate of 20%. The non-EU citizens who are emigrants of Jersey have the facility to limit their tax up to 20% on the first GBP 625,000 to GBP 125,000 by proving themselves as a “High-Value Resident”. The remaining income is taxable at the rate of 1%, which does not involve income from local rent.
The best thing of channel islands is that you just have to pay tax on the salaries and dividends at a fixed rate and you are not liable to pay the corporation tax excluding the insurance and the banking sector. The freelancers and employees have to contribute to the social security contributions but may take advantage of certain deductions.
Campione d’Italia is an Italian enclave surrounded by Switzerland with only 2,000 inhabitants. It is situated at the foot lake Luna go, this island is mainly known for the casinos and its beautiful location between the lake and the Alps. There is no bank in Campione d’Italia, you have to travel to Switzerland for depositing or saving your money.
There are various laws regarding the tax system in Campione d’Italia, but in general, a very rare amount of tax is applied there to pay. The income from another country is tax-free.
Campione D’Italia is a part of the Swiss territory, therefore, the inhabitants can get 20% discount on the exchange rate at the time of calculating the Italian tax, which will help them in reducing their tax burden.
The non-Swiss and non-Italian residents are often not eligible to pay tax in Campione d’Italia if their income is less than CHF 200,000.
So living in Campione d’Italia is one of the best options. You just have to buy or rent a house for getting a residence, besides this, there is no other requirement to fulfil indeed private insurance is mandatory.
Monaco is the most famous tax-haven in Europe. It is a micro state in the French Riviera, between Nice and Italy. It is situated on a steep slope at the foot of a mountain. The capital of Monaco is Monte Carlo, it is one of the densely populated countries in the world, and thus living there costs high in terms of buying or renting a house. For residing in Monaco one has to spend at least €4,000a month in a property.
The banks in Monaco checks your Equity which needed to be high enough from there perspective and after checking your Equity the banks decide your resident in Monaco. Lots of people are dependents on banks to take a long term residency, different banks take an interest in your life and your previous criminal or clean records, they also check whether you are bankrupt or have sufficient money to survive, all these processes take time of around six weeks and after investigating all this they decide about your residency in Monaco.
It is important to spend at least 3 months in a year for becoming a permanent residence of Monaco. Monaco is famous in the world for following strict rules and regulations and for its ideal wealthy inhabitants who are always secured with this regulation.
Monaco is an independent country and maintains its own status of a tax haven. The companies in Monaco are obliged to pay 10% of corporate tax. The gift and inheritance are also taxable in Monaco, there is up to 16% tax rate for the gifts and donations, only the gifts and donations were given by your child or spouse are tax-free.