Different countries have different approaches to taxation. As a U.S. retiree, you can access a more favorable tax environment by relocating to a country with friendly tax policies. Certain countries use a jurisdictional approach to taxation, only taxing residents on income from local sources. Others offer tax abatement programs, whereby pension income is taxed at lower-than-normal rates. In other countries, income is simply not taxed.
Here’s an overview of countries that offer favorable tax environments to U.S. retirees. Remember that U.S. citizens must file U.S. income tax returns regardless of where they live.
— Belize
— Cyprus
— France
— Greece
— Italy
— Malaysia
— Panama
— Turks and Caicos
Belize
Belize is a tiny country in Central America known for its crystal clear Caribbean waters, sugar sand cayes and lush jungles teeming with wildlife. It’s the only English-speaking country in the region, making it a great choice for U.S. expats.
Like Panama, Belize’s approach to taxation is jurisdictional. If you retire to Belize and don’t have any local sources of income, you won’t have any local tax burden.
Belize also offers a benefit-rich program that allows retirees to relocate here. It’s called the qualified retirement program and you can qualify if you’re at least 40 years old and earn at least $2,000 monthly in retirement income. Aside from granting you a resident card, the QRP allows you to import household and personal effects, a car, a boat, and even a light aircraft duty-free into Belize.
[READ: The Most Tax-Friendly States for Retirees]
Cyprus
Cyprus is an island nation in the Mediterranean Sea. Its warm year-round weather and gorgeous beaches make it a haven for sunseekers throughout Europe. Cyprus also has a rich history, excellent cuisine with Greek and Turkish influences and an affordable cost of living.
By retiring to Cyprus, you can pay less tax on your pension income, so long as it comes from a non-Cypriot source. You can choose how your pension is taxed as a resident of Cyprus. It can be included in your worldwide income and taxed according to the standard personal income tax rates, which range from 0% to 35%, or it can be taxed separately at a flat rate of 5%.
It’s generally easy to establish residency in Cyprus using financial solvency to qualify for a temporary residence permit or making an investment to qualify for permanent residency.
Panama
Panama is the isthmus that connects North and South America. It is famous for its canal, beautiful Pacific and Caribbean beaches and high standard of living, which attract expats from around the world. Panama is a haven for business and investment, offering a favorable tax environment for U.S. retirees.
Panama uses a jurisdictional approach to taxation, which means that only locally sourced income is subject to taxation. If you retire in Panama and your income comes from U.S. Social Security, a retirement account or some other source that’s not Panamanian, you will have no local income tax burden.
In addition to friendly tax policies, Panama has welcoming residency policies for U.S. retirees. The pensionado program is easy to qualify for and comes with many benefits, like discounts on medical bills, public transportation, hotel stays and more.
France
For many Americans, France is the epitome of the European retirement dream. It’s home to one of the world’s most romantic cities, Paris, as well as luxe beach towns and quaint villages. It has excellent health care, strong infrastructure and an overall high standard of living.
France has high taxes, with personal income tax rates as high as 45%, so it might surprise you to see it on this list of tax-friendly countries. However, because of the specifics of the U.S.-France tax treaty, U.S. retirees can live in France with almost no local tax burden. If you’re not working, you’re not taxed on anything not earned in France.
The tax treaty gives you a deemed tax credit for the total tax amount in France for any income taxable in the U.S. If all of your income is passive, you’re not taxed in France at all as an American.
[Read: How to Retire in France]
Greece
Greece is known for its many islands, sweeping Mediterranean vistas and whitewashed buildings topped by curved blue roofs. It has shot up in popularity with U.S. expats because of its high standard of living and friendly residency and tax policies.
Greece can be a low-tax environment for U.S. retirees. If you retire here, you can take advantage of the non-dom regime, under which a 7% flat tax is applied to non-domestic income you derive from a pension for up to 15 years. This flat tax rate is significantly lower than the regular personal income tax rates in Greece, which range from 9% to 44%.
It’s relatively easy for U.S. retirees to establish residency in Greece through the financially independent person visa. To qualify, the basic requirements are that you earn at least $3,660 per month (3,500 euros) in passive income, have health insurance that covers you in Greece and have a clean criminal record.
Italy
Italy is another iconic European destination for Americans, beloved for its diverse geography, storied history and world-famous cuisine.
Like Greece, Italy offers a tax abatement program that can create a low-tax environment for U.S. retirees. Under the program, a flat tax rate of 7% is applied to foreign pensioners’ income for up to 10 years. This applies to all income so long as it’s not sourced in Italy. There’s a catch, however: the flat tax rate is only available to residents of Southern Italy, which includes the regions of Abruzzo, Apulia, Basilicata, Calabria, Campania, Molise, Sardinia and Sicily. And you must move to a municipality with less than 20,000 residents in one of those regions to qualify.
Establishing residency in Italy is fairly straightforward, and the U.S. dollar is currently strong against the euro, enhancing your spending power on the continent.
Malaysia
Malaysia is a culture-rich Southeast Asian country where English is an active second language. From cosmopolitan Kuala Lumpur to small colonial outposts like Melaka, its diverse lifestyle options stand out. Malaysia is a multiethnic and multicultural country; nowhere is this diversity better reflected than in its outstanding and vast array of local cuisine options.
U.S. expats who retire to Malaysia may not be subject to local income tax. Malaysia only taxes residents on income that accrues in or is derived from Malaysia.
Malaysia offers several paths to residency. Under the Malaysia my second home program, U.S. retirees can gain a 10-year residence permit that’s renewable so long as they make a fixed deposit of at least $153,000 (675,000 ringgit) and a property purchase of at least $136,000 (600,000 ringgit).
[READ: The 6 Easiest Places to Retire Abroad]
Turks and Caicos
Turks and Caicos is a string of sandy cays that float just southeast of Florida. It offers a lifestyle of total relaxation, with nearly deserted white-sand beaches, cerulean waters and a laid-back culture with English-speaking locals.
Turks and Caicos can be a no-tax environment for U.S. retirees. This Caribbean paradise has no income tax, capital gains tax, property tax, inheritance tax or corporation tax. One tax to be aware of is the 35% tariff applied to most goods. Nearly all consumer goods must be imported, and the 35% tariff drives up the cost of living.
Establishing residency in Turks and Caicos can also be expensive. Most retirees gain residency through investment. Investing at least $300,000 in the construction, purchase or renovation of a distressed property can qualify you for Turks and Caicos residency.
More from U.S. News
The Best Places to Retire in the U.K.
The Most Tax-Friendly Countries for U.S. Retirees originally appeared on usnews.com
