List of Territorial Tax Countries with formal and de-facto treatment of foreign income

[Cloudbanck]

In the thread "Where to relocate to not pay capital gains tax and live cheap" it was mentioned that some countries "don't tax foreign income" in the context of owning a business registered elsewhere while living in the country that "doesn't tax foreign income", i.e. a territorial tax country.

I'm thinking there are significant differences between territorial tax systems, both in what the law says and how the law is (or isn't) enforced, and that it would be useful to compile a list of these details for territorial countries (and we can also include zero tax countries as these are also not always straightforward). This thread is to compile such a list with the experiences/knowledge of the people in this forum.

The details that would be interesting to know:
If you have a foreign business, and run it via your laptop from country X that supposedly doesnt tax foreign income. Does it a) legally count as local income since you effectively manage the company from country X, even if you have no office or employees in country X. And b) even if it legally/technically counts as local income, is it enforced? Also, c) can you make it count as foreign income by having employees/offices in some other country, or even just by having a residence permit or tax certificate somewhere else.

A list of territorial and zero tax countries can be found on wikipedia here, International taxation - Wikipedia. Feel free to add further details on any of the countries listed by wikipedia in this thread!

 

[Marzio]

I'v gone ahead and created a Google sheet where anyone can contribute.

I added a list of territorial taxation countries taken from wikipedia and a couple of columns.

The first column is the territorial taxation country

The second column is if managing an offshore company from that country will be considered local source income

The third column is if local source income law is enforced if the previous question was yes.

I also added a color scheme:

Yes is red
No is green

In that way you will immediately see which are the "smart territorial taxation countries"

https://docs.google.com/spreadsheets/d/1k8tu5H0k_OcOsQtrn6RuBQc-m3XT91LFRqDOs6ngYto/edit?usp=sharing

 

[Cloudbanck]

I can start with the UAE which was straightforward zero tax before the introduction of the 9% corporate tax.

Now they have copied the OECD rules for Permanent Establishment, so it does seem like someone living in the UAE with a company elsewhere even if run from a laptop at home, would be formally subject to the new corporate tax. However, profits up to 375k AED are exempted, and possibly - but Im less certain here - also turnover below 1M AED.
As to enforcement, too early to tell, but would be surprised if it is enforced at least in the first few years of the corp tax. On the other hand the UAE can have strict enforcement with high fines/penalties when they get down to it.

The above is too long to fit in the excel spreadsheet I believe.

 

[Marzio]

I can start with the UAE

I summed up everything you said in one line

If you really think about it we are really looking fo accurate informations for 5-6 countries:
1. Panama
2. Paraguay
3. Philippines
4. Hong Kong
5. Malaysia

 

[Cloudbanck]

I'd say there are islands in the Caribbean that Id like to know have more details about like St Barthelemy (do you pay tax to France for 5 years or not), and all the other central american countries beside Panama. And Thailand, Malta (how do their quasi territorial remittance regime really work). And what about the african countries, Namibia, Angola, Botswana.

 

[Marzio]

As i said you can freely modify the sheet.

It's something that will become more and more useful the more people will participate

 

[JustAnotherNomad]

No idea if true, but I've heard that Cyprus has very weak requirements for foreign-sourced income. A simple nominee might be sufficient for the CY tax authorities....

And not really relevant, but you have countries with very weak enforcement, such as the Balkans or South Africa, where you can pretty much declare whatever you like and live out of your company account...

 

[BlinkHood]

About Panama I know many foreigners who've lived there for years without paying taxes on foreign sourced income despite doing the work from Panama and so far they haven't had issues. Apart from that I believe capital gains from foreign companies are not taxed (it is specified like this in the tax code so it's quite certain).

Anyone has information on Thailand/Philippines/other Asian countries?

I'd be interested mainly in the taxation of capital gains aswell.

 

[Marzio]

Anyone has information on Thailand/Philippines/other Asian countries?

@backpacker is the guy who seems to be in the know about Philippines

 

[zomundaprince]

how about malta non dom

 

[JackAlabama]

About Panama I know many foreigners who've lived there for years without paying taxes on foreign sourced income despite doing the work from Panama and so far they haven't had issues. Apart from that I believe capital gains from foreign companies are not taxed (it is specified like this in the tax code so it's quite certain).

Anyone has information on Thailand/Philippines/other Asian countries?

I'd be interested mainly in the taxation of capital gains aswell.

That is correct for Panama. There was also no requirement to file. So youre good to just not do anything. My info on this is a bit dated tho, might have changed but idk..
It only matters anyway for stays longer than 180 days.

 

[zomundaprince]

feedback on malta non dom or gibraltar guys

 

[Marzio]

That is correct for Panama.

So it's considered local source income but is it not enforced? Is that right?

I updated the sheet with the Panama informations

feedback on malta non dom or gibraltar guys

I've added Malta to the list.

Any income accrued from work performed in Gibraltar will be considered local sourced income.

 

[zomundaprince]

sory to bring this subject once again in a different thread but is it providing information to betting partners for a fee and equity that bet abroad and worldwide ,foreign sourced income or locally sourced
they pay the due taxes over in the countries that the bets are being placed

i mean im providiing them info and discussing with them so im not sure what category fits into

CR wont care about foreigners at all

 

[JackAlabama]

So it's considered local source income but is it not enforced? Is that right?

I updated the sheet with the Panama informations

Yeah like that.

 

[BlinkHood]

That is correct for Panama. There was also no requirement to file. So youre good to just not do anything. My info on this is a bit dated tho, might have changed but idk..
It only matters anyway for stays longer than 180 days.

Yeah that's the 'bad' part about Panama. I think it'd be a really cool place to stay if the requirement was only 90 days.

Plus getting the residency right now is not as easy as a few years ago.

 

[Marzio]

I've added a new colum: CRS

Added another columun: Days to tax residency

 

[JackAlabama]

Yeah that's the 'bad' part about Panama. I think it'd be a really cool place to stay if the requirement was only 90 days.

Plus getting the residency right now is not as easy as a few years ago.

More expensive right now indeed, but if one wanna be there, it can be achieved. There is an option for working a job.

 

[backpacker]

About Panama I know many foreigners who've lived there for years without paying taxes on foreign sourced income despite doing the work from Panama and so far they haven't had issues. Apart from that I believe capital gains from foreign companies are not taxed (it is specified like this in the tax code so it's quite certain).

Anyone has information on Thailand/Philippines/other Asian countries?

I'd be interested mainly in the taxation of capital gains aswell.

Philippines: You will get into significant trouble not paying your due taxes if you generate anything else than passive foreign sourced income.
The Philippines is perfect when you're retired, still like some fun, and have only passive foreign sourced income.
Otherwise, better look elsewhere.
The country might look a bit chaotic but there is always the day"when it happens". And "it happens" more often than not. As a foreigner you are also always at the receiving end.
Generally speaking, you become a tax resident once you intend to permanently reside in the Philippines. This intention starts once you have been granted the relevant status.
I wrote about it several times in this forum. Just use the search function.

Some people here claim that the Philippines doesn't care. This is outdated. Don't fall for it.

 

[Marzio]

Philippines: You will get into significant trouble not paying your due taxes if you generate anything else than passive foreign sourced income.

Based on this answer i updated the Philippines section of the chart.