By Moustafa Daly
When pursuing a golden visa or a citizenship-by-investment (CBI) in different countries, foreign investors must contemplate many aspects to decide on the worthiness of their investments. Top of the list is often the mobility advantages that the new residency or citizenship grants, which frequently ends up being a deciding factor for many investors.
Other factors also influence an investor’s decision to pursue a foreign residency or citizenship by investment (RCBI), including access to public services, route to citizenship, political rights, and notably, the local tax regimen of their desired destinations.
Consequently, to remain attractive to foreign investors, many RCBI destinations offer tax incentives that sometimes amount to establishing “tax havens” of sorts.
For many RCBI investors, protecting their wealth and income is a priority, and a crucial factor to consider in their decision to pursue foreign residencies.
Here, we delve into the tax regimens for investors across five popular RCBI destinations.
Until 2023, Portugal’s golden visa program had been widely regarded as the world’s most popular. For a real estate investment of €250,000, among other routes, foreign investors could easily obtain a Portuguese residency, allowing them to pursue citizenship within seven years – with all the benefits being a European Union (EU) citizen brings.
Now fully revamped, the Portuguese golden visa program no longer accepts applications based on property purchase – but a few other attractive options routes open to investors for thresholds ranging between €250,000 and €500,000.
Taxes for golden visa holders in Portugal
Regarding taxes, as of October 2023, golden visa holders do not pay income taxes in Portugal if they live there less than half the year. However, if investors take up permanent residence in the country, they must register as residents and declare themselves tax residents in Portugal. Still, Portugal offers such investors tax incentives, namely the Non-Habitual Residents (NHR) regime, which exempts foreign residents with many tax exemptions for the first ten years of their residence in the country, and institutes a flat rate tax of 20% on income generated within the country.
Meanwhile, the flat rate could be set for pensioners at 10%, depending on their income.
In late 2023, Portuguese Prime Minister António Costa announced his government’s intention to pursue an end to the NHR tax regime in 2024, citing unfairness to Portuguese people who have to pay progressive taxes on their incomes. Costa also said that any changes to the tax regimen won’t be retroactive, meaning foreign golden visa investors already registered on the favorable tax regimen won’t have to worry about losing their favorable tax rates in the country.
UNITED ARAB EMIRATES (UAE)
The UAE recently took big strides towards making the country attractive as a permanent residency location for skilled labor and investors from other countries. Up until 2019, there had been an option for foreigners living in the country to maintain their residence without a local sponsor – which, up until then, made the country unattractive as a forever home due to lack of future certainty. This all changed with the launch of the golden visa in 2019, which quickly became one of the world’s most popular, issuing over 150,000 residence permits to investors, skilled talents, and even top students between 2019 and 2022.
The UAE, particularly the emirate of Dubai, has been topping the lists of destinations sought by high-net-worth individuals (HNWIs) since the pandemic. In 2023, the UAE is expected to attract more than 4,000 HNWIs, as per a report by Henley & Partner. This is set to make the UAE the country with the highest inflow of foreign millionaires this year – most of whom establish their bases in the country using the golden visa program.
In addition to its hyper-connectivity, efficient security and stability, and position as one of the Middle East’s main economic hubs, foreigners favor UAE golden visas for the country’s famously favorable tax regimen for foreigners. If a foreigner lives in the UAE for under 183 days, no taxes will be levied upon their income or property – however, if they reside in the country for more than 183 days a year, they must declare themselves as tax residents of the country. This development only happened in March 2023; foreigners had no tax obligations before then.
Taxes for golden visa holders in the UAE
Still, the UAE tax regimen remains very attractive to foreigners. As it stands, there are no income, interest, dividend, inheritance, or capital gains taxes in the UAE. Also, there are no annual property taxes in the country, but for buying or selling residential property, investors must pay a small tax percentage to the local emirate, ranging from 2% in Abu Dhabi to 4% in Dubai. This tax is usually divided between the buyer and seller.
Meanwhile, for commercial properties, buyers and sellers must pay 5% VAT on the transaction.
Another Middle Eastern country with a popular citizenship-by-investment program, Turkey is considered a regional pioneer in the industry. Launched in 2016, the program allows foreign nationals to obtain Turkish residency by investing $400,000 in local property, among other routes. One of the factors that makes this program particularly attractive is Turkey’s inclusion in the E-2 treaty with the United States (U.S.), which allows foreigners who have lived in Turkey for more than three years to apply for the E-2 investor visa to the U.S. at a much lower investment threshold than the EB-5 visa.
Taxes for citizenship by investment applicants in Turkey
Submitting a citizenship application in Turkey by way of investment entails obtaining a tax ID number, but that doesn’t automatically make the applicant a tax resident of Turkey unless they take up permanent residency in the country for more than half the year. Once residents, foreigners must pay taxes on income earned in Turkey and abroad; non-residents only pay taxes on income generated inside Turkey.
For the former, the tax rates are imposed progressively, starting from 15% and reaching 40% depending on the total income. The highest bracket is for income exceeding an equivalent of 880,000 Turkish Lira ($31,518) per year.
Bank deposits in Turkey are taxed at a rate of 10% to 18%, while foreigners can get tax deductions of up to 15% on dividend and 20% on royalty.
Property is taxed at a rate of 4% upon purchase, while a VAT up to 18% is levied on such purchases –foreigners who purchase their property from licensed local developers don’t have to pay VAT.
Offering one of Europe’s most popular golden visa schemes, the Greek program only gained more popularity in 2023 with Portugal scrapping its real estate golden visa, becoming one of the most affordable and hassle-free routes to a quick EU residency.
Despite Greece doubling the investment threshold for real estate golden visa investors to €500,000 in August 2023, the decision only applies to tourist hotspots, while most of the country remains open to golden visa property purchases valued at €250,000, making it one of the cheapest routes to EU residency currently on offer.
Taxes for golden visa holders in Greece
Complementing its affordability and mobility benefits, Greece also offers notable tax breaks for non-domiciled foreigners – foreigners who are based in, and pay taxes, in other countries. Such foreigners can expect to pay no taxes in Greece except if they bring their income or revenues in the country.
Selling property in Greece, however, entails a 15% tax on gains made from the sale – which is the difference between the purchase and selling price. If no gains were made, meaning the property was sold at the same price it was bought or less, no taxes are levied.
Several small island nations in the Caribbean region, including St. Kitts and Nevis, Antigua and Barbuda, Dominica, Grenada, and St. Lucia, offer competitive citizenship by investment programs that capitalize on these countries’ visa-free access to different world destinations including the United Kingdom (UK), EU, Singapore, Hong Kong, among others.
These programs have proven lucrative for the islands, with most of them drawing significant amounts of their annual revenues from these programs. Though such programs are currently under scrutiny from the EU, U.S. and the UK, it’s unlikely they would come to an abrupt end as most of these countries are engaged in high-level discussions to address concerns over their investor citizenship programs.
Across the Caribbean, applicants can simply get citizenship by paying non-refundable contributions to local development funds. They don’t have to visit or live in the countries. Unless they become residents in the country or invest in businesses or property, there are no taxes levied upon non-resident passport holders in the Caribbean.
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