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. In this region, Hong Kong, Singapore, Macau, and some of the micro-islands in the Pacific are excluded even though they are open to foreigners and have appealing tax programs.
My Picks in The East
Top of the list for me in this region is the country of Malaysia. Malaysia is a unique country where east meets west, Islam meets Buddhism, and towering jungle mountains meet white sand beaches. It is a progressive Muslim-majority country with a vibrant economy, great tax breaks, fantastic infrastructure, and easy access for expats. It offers the most stability and business freedom in the developing east.
Income Tax: Low - No tax on any overseas income. Moderate tax on local income. No tax or prohibitive restrictions on imported personal belongings under the MM2H visa.
Obtaining Residency: Easy - Malaysia offers the leading Malaysia My Second Home visa to economically self-sufficient individuals for 10 year periods. Renewal is also easy. You must have total assets of approximately $150,000 USD and a monthly offshore income of $2,500 USD. Also, the program requires a deposit of approximately $50,000 USD into a Malaysian bank. Up to half of this deposit can be taken out after one year for certain purposes. These requirements are lower for individuals over fifty years old.
Climate: Moderately Low - Malaysia is a thoroughly tropical country so it is hot and humid everywhere all the time. It rains year round, but there's also plenty of sunshine. Common expat islands, Penang and Langkawi, have amazing beaches.
Cost of Living: Moderately Low - The cost of living in Penang and Langkawi is 50 - 70% cheaper than a large city in Canada. Kuala Lampur is more expensive. Malaysia's cities are amazingly cheap considering they have highly developed first-world infrastructure.
English Speakers: High - The majority of Malaysians speak English. The local language is actually Malay and Chinese, but it's not necessary to learn these languages to get by in Malaysia.
Freedom: Moderate - Malaysia performs well in governance and economic freedom. Personal freedom is lower; this is not surprising in a Muslim-majority country. Generally speaking the government has a lot of control, but is efficient and quite progressive. Property rights are well structured and it's easy to do business in Malaysia. In many ways Malaysia may be the next Singapore or South Korea. While Penang and Langkawi are safe, there are crime issues in many areas of Kuala Lampur.
2. New Zealand
New Zealand is a fully developed, free, and very competitive country that earns a spot on this list. While it's certainly more comfortable and familiar to live in than the other countries in this mini series, it's also not a developing country and is much more expensive than the others. However, New Zealand has a unique tax allowance which makes it very appealing over most other developed countries.
Income Tax: Moderate - Competitive tax on worldwide and local income less than 17.5% on incomes under $48,000 NZD ($43,000 CAD). New Zealand does not levy a capital gains tax on most investments, whether local or offshore! It's possible for someone with a large investment account to pay very, very low tax rates.
Obtaining Residency: Moderately High - New Zealand has a relatively robust immigration program which offers many routes to permanent residence. Canadians under thirty-five can stay on a working holiday visa for up to twenty-three months. Under the age of fifty-five, it's relatively simple for an English speaking individual with a university degree or skilled trade, who is easily employable or willing to start a business to obtain permanent residence. There are also wealth visa schemes, but these require millions in assets.
Climate: Appealing - New Zealand has a wide variety of climates ranging from subtropical in the north to cool oceanic in the south. Generally speaking there are no major cities with temperatures that sink well below freezing. Rainfall is moderate for the most part and sunshine is plentiful in many areas.
Cost of Living: High - The cost of living in New Zealand is comparable to Canada. The cost of living mostly varies by location due to real estate cost differences. The largest cities, Auckland and Wellington, are very pricey.
English Speakers: High - New Zealand is an English speaking majority country.
Freedom: Very High - New Zealand boasts top scores globally in freedom. Elections are free, governance is transparent, and personal freedom is sky-high. Economically and for business, New Zealand consistently takes top scores ranking well above Canada and the United States. Crime rates are very low.
Thailand would probably be at the top of my list in Asia if not for two factors: difficulty obtaining stable visas and a more stable, progressive government. Thailand has a variety of climates and destinations for expats. It's also cheap and expat friendly.
Income Tax: Moderately Low - No tax on any overseas income that is not remitted in the year it was earned. Taxes apply on imported personal belongings.
Obtaining Residency: Somewhat Difficult - It's difficult for younger foreigners to obtain stable residency in Thailand. The best route is probably by applying for education visas and taking courses in scuba diving, Thai kickboxing, massage, or by teaching English. These visas only are good for a year and renewal seems to be hit and miss. Some people try visa run strategies to stay on temporary visas, but this is also unreliable. For individuals over fifty years old there's a renewable one-year retirement visa that is easy to obtain with a bank deposit of $20,000 USD.
Climate: Moderate - Thailand offers great tropical beach climates in Phuket and Hua Hin. Phuket has more rainfall of the two, but both are humid. Located in the northern interior highlands, Chiang Mai is known to have the most moderate climate in Thailand. On the coast, Bangkok is a hot and humid city, especially in the rainy season.
Cost of Living: Moderate - The cost of living is 30 - 60% cheaper than a large city in Canada. This varies widely with Bangkok and Phuket being on the more expensive side while Chiang Mai and Hua Hin are quite reasonable.
English Speakers: High - The Thai are known to have good English skills, especially in the popular expat areas of Bangkok, Phuket, Hua Hin, and Chiang Mai. Basic knowledge of Thai goes a long way with locals.
Freedom: Moderately Low - Thailand is generally safe for expats, but there are many other freedom issues here. The government is known to be corrupt, the courts are unreliable, property rights are not secure, and the country is generally a quagmire of red tape. Within tourist/expat areas especially, property crime is pretty bad. Thankfully violent crime is not and the Thai are generally friendly and relaxed.
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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