How would you like to stop paying any income tax for the rest of your life? In this short series, I'm going to explain how this is done 100% legally by moving to Central America, South America, Europe & Africa, and Asia.
Unlike our American friends who must file and pay applicable income taxes based on citizenship regardless of where they live, there is an easy way for Canadian citizens to legally avoid paying income tax forever.
Read my first post of this mini series for more information on the proper way to become a non-resident of Canada for tax purposes, manage your accounts, and invest through an overseas brokerage for expats.
Countries with No Tax on Investment Income
There are a significant number of countries around the world which do not tax investment income on money located outside of the country you reside in. Other countries do not charge capital gains taxes on worldwide income. Both of these are countries I will focus on where you can legally not pay a dime in income tax for the rest of your life!
My picks include countries which have stable governments, are known to be friendly to expats, and are quite safe for foreigners. I'm also only considering options which have a moderate cost of living. Some of the better known micro-states or islands with huge tax advantages are prohibitively expensive and only an option for the super-rich.
My Picks in South America
Top of the list for me in this region is Ecuador. Ecuador is a safe, expat friendly country with beautiful cities and towns in a nice variety of climates. It is also extremely affordable! Like Costa Rica, Ecuador is a known biodiversity hot spot. Ecuador uses the U.S. dollar as their currency, so it's easy to transact from your brokerage account.
Income Tax: Low - No tax on any overseas income. Low tax on local income. Personal belongings are exempt from import taxes under the 9-I visa.
Obtaining Residency: Easy - The 9-I visa for Pensioners is the best way to get continuous residence in Ecuador. You must show proof of having an income greater than $800 USD per month. You may also deposit a fixed amount in an Ecuadorean bank to satisfy this requirement. The amount varies based on personal circumstance.
Climate: Appealing - The coast offers a tropical, humid climate in some areas and a coastal desert climate in other areas. Due to the cool Humboldt current, temperatures rarely go into the high-30's. The green, central Andean valleys surrounded by soaring peaks offer a very stable year-round climate with daily highs in the low-20C range year round, moderate rainfall, and over 2,000 hours of sunshine each year in most places. Air conditioning and home heating are not needed here!
Cost of Living: Low - The cost of living is 40 - 60% cheaper than a large city in Canada. This varies by area with real estate rental costs as popular expat areas are a bit more expensive.
English Speakers: Low - Very few locals can speak a passable amount of English. This means it is important to learn the local language – Spanish – to have a good experience. There are numerous language schools and Spanish is a relatively easy language to learn quickly.
Freedom: Low - Ecuador ranks quite low in personal and economic freedom. The court system and government are known to have corruption issues. Property rights are shaky so Ecuador would not be a great place to purchase real estate. Despite this, Ecuador is one of the safest countries in South America.
Bolivia is another very interesting pick in South America, but it's definitely for the more adventurous. Bolivia has several beautiful cities with a wide variety of climates. It is also extremely affordable! There are few expats in Bolivia, so it's an up and coming destination where Spanish speaking ability is a must.
Income Tax: Low - No tax on any overseas income. Low tax on local income. Import taxes on personal belongings applies.
Obtaining Residency: Moderate - Bolivia does not have a specific retirement / self-sustaining individual visa. However, it is possible to obtain a visa permitting lengthy stays in Bolivia through the Special Purpose Visa. You will need to demonstrate you can sustain yourself financially and you will probably need to use an agent. After the initial expiry of 30 days, you can apply for annual extensions.
Climate: Appealing - The Andean highlands boast a very temperate desert climate with temperatures varying based on altitude. Daily highs average in the mid-20C range year round and there's plenty of sun. Near the Argentine border, wine grapes are grown in the dry valleys around Tarija. East of the Andes ranges, the climate becomes more humid and hot as altitude drops.
Cost of Living: Low - The cost of living is 50 - 70% cheaper than a large city in Canada. There are few expats, so deals are plentiful but Western amenities can be lower as well.
English Speakers: Low - Very few locals can speak a passable amount of English. This means it is important to learn the local language – Spanish – to have a good experience. Spanish is a relatively easy language to learn quickly, but most foreigners come to Bolivia already speaking Spanish.
Freedom: Low - Bolivia has a lot of problems with corruption in its institutions. The current political dynasty tightly controls the country. Property rights and land registration is very weak. There is a violent crime issue in the coca trade areas east of the Andes, but it is quite safe in other regions.
Paraguay is an extremely affordable country that welcomes expats. This landlocked country is dominated by tropical plains, big rivers, and woodlands. Paraguay is the most "Free" country in this region.
Income Tax: Low - No tax on any overseas income. Low tax on local income.
Obtaining Residency: Easy - A permanent residence visa (good for five years) can be obtained by making a $5,000 USD deposit in a Paraguayan bank. University degrees or a Paraguayan property deed are also accepted instead of or in addition to your deposit. You may be required to demonstrate economic self-sufficiency.
Climate: Moderate - Due to its flatter terrain, the climate doesn't vary significantly across Paraguay. The capital, Asuncion, is the only real expat destination in Paraguay; the city is hot and moderately humid with a warmer summer and somewhat cooler winter. Thankfully there's plenty of sunshine year-round to give my rating a boost.
Cost of Living: Low - The cost of living in Asuncion is approximately 60% cheaper than a large city in Canada.
English Speakers: Low - Very few locals can speak a passable amount of English. This means it is important to learn the local language – Spanish – to have a good experience. Most expats would come to Paraguay with Spanish speaking ability.
Freedom: Moderately Low - Paraguayans have a reasonably free electoral system with somewhat high personal freedom. The court system and government show evidence of corruption, especially outside of Asuncion. Violent crime levels are relatively low.
Have you considered moving overseas on a more permanent basis? What would be your priorities in choosing a place to live?
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