Low Tax Countries in Europe

For many people living abroad is a life dream to experience a new culture, explore different places and take advantage of any extra benefits of living in a different country. Moving to one of the low tax countries in Europe, with tax exemptions and other tax benefits.

In this guide, we will explore the tax-friendly countries in Europe for digital nomads based on annual income, including other financial incentives and details regarding who qualifies for tax exemptions.

Europe is home to several countries that offer favorable tax environments for digital nomads. These low-tax countries provide attractive opportunities for those seeking to minimize their tax burdens. Let’s discover the best tax-friendly destinations destination and explore their potential advantages.

Andorra is a tax haven which attracts lots of people to move to the country. Salary up to €24,000 is tax exempt and the highest rate of tax is 10%, which applies to people earning €40,000 and over.

A resident permit is available for investors and entrepreneurs starting up a business in Andorra.

A bond of €50,000 is required for a deposit when setting up a business.

There are two types of resident permits, a passive one (investment program) or an active one (work permit).

It is possible to invest in an Andorran company or to invest at least €350,000 in property. Passive residents are required to reside in Andorra for a minimum of 90 days per year. If you reside in the country for over 183 days, you will be liable to pay taxes.

Andorra is a beautiful, mountainous country with much lower rent and cost of living is cheaper than places such as London or Madrid, making it a top destination for digital nomads, investors and entrepreneurs.

Bulgaria has a flat tax rate of 10%, which is the lowest tax rate for an EU member. Bulgarian tax residents must reside in the country for at least 183 days per year.

The 10% income tax rate applies for all levels of annual income and self-employed residents pay tax at 10%

Corporate tax in Bulgaria is currently set at 10%, with Bulgarian based companies taxed on global income, while non-resident companies will only be taxed in the income generated in Bulgaria.

Investors and entrepreneurs can obtain permanent residence through business investment (minimum €250,000) or real estate investment (minimum €300,000).

If you are considering moving to Bulgaria, the cheap property prices and low personal and corporate income tax are major benefits.

The Czech Republic is another European country with low taxes. From 2021, the Czech Republic returned to a progressive taxation system, with a marginal rate of 23% for gross income of over CZK 1,867,728 (around €76,000).

The tax rate for salaries of lower than the threshold is 15%. The general personal tax credit in 2022 is CZK 30,840.

Self-employed workers are able to reduce the flat tax rate by 40% or 60%, which results in a tax rate of 6% to 9% for self-employed entrepreneurs.

EU citizens who wish to stay in the Czech Republic for more than 90 days must a pply for a temporary residence card. A long-term visa enables you to stay in the Czech Republic for up to 1 year, provided you have evidence of your purpose of stay.

Prague is one of the most popular cities to live but rent will cost more than in other areas of the Czech Republic.

It is around 26% cheaper to live in the Czech Republic compared to living in Germany.

The personal income tax rate in Georgia is 20%, while corporate income tax is 15%. However, corporate income tax is only payable when dividends are distributed by a company to the shareholders.

This means that if the company decides to reinvest the profits rather than paying dividends, there is no corporate income tax to pay in that tax year.

The low cost of living in Georgia is highly appealing to entrepreneurs looking to live cheaply while establishing their business.

The national tax rate in Liechenstein is combined with communal tax, resulting in tax rates between 2.5% and 22.4%.

The corporate tax rate in Liechtenstein is 12.5% and the VAT rate is 7.7%. There is a reduced VAT rate of 2.5% for deliveries of food, drugs, newspapers, magazines and books.

Living in Liechtenstein costs more than the world average, so it is worth researching the cost of living in the area you want to live to check that the tax benefits make living in Liechtenstein worthwhile.

Luxembourg operates a progressive income tax scale ranging from 0% to 42%. It is one of the more complicated tax systems in Europe, involving three tax classes and 23 different brackets.

The top rate of tax (42%) applies to earnings of over €200,000.

To be classed as a resident taxpayer, you must have lived in Luxembourg for a minimum of 6 consecutive months.

Highly skilled workers recruited from abroad and earning over €100,000 can benefit from the impatriate tax regime, with an impatriation premium of up to 50% of an amount not exceeding 30% of the annual basic salary.

Malta is another European country that has a progressive tax rate, which ranges from 0% up to 35%. The highest tax level of 35% is applicable to those earning over €60,000. The 0% rate is for single people earning up to €9,100 or married individuals earning up to €12,700.

The next tax bracket is 15% and then 25% for up to €60,000.

Malta has a system where any taxes that are paid abroad are used as credit against their income liabilities.

A Malta residence permit is available for investors, provided they meet certain criteria such as paying a minimum rent of €8,750 and an administration fee of €5,500. They must also obtain health insurance to qualify under the Residence Programme.

The warm weather is one of the reasons so many people want to relocate to Malta, in addition to the potential tax benefits.

Monaco is renowned for being a tax haven, with no personal income tax rates or capital gains tax. There are no taxes on dividends paid by local companies and there is no general corporate income tax. It is quite common for people to work somewhere such as the UK and reside in Monaco to qualify for Monaco tax laws, with income earned in the UK avoiding tax.

Becoming a Monaco permanent resident is restricted to the wealthy, with a minimum €1 million investment - half of which must be deposited in a Monaco bank and the other half used towards purchasing a property.

The cost of living in Monaco is very high, so the lifestyle is only affordable to high earners or those with a large amount of savings/wealth.

There is a progressive tax rate scale in Montenegro that is relatively low, ranging from 9% to 15%. This is one of the reasons why more remote workers are looking to obtain Montenegro digital nomad visa. In 2022, a tax reform was introduced that included a non-taxable salary part of €700, which is one of the highest in Europe, meaning tax residents pay low taxes in general.

The compulsory health insurance was also cancelled as part of the reform.

Tax residency is granted to applicants who have a domicile or a centre of personal and economic activities in Montenegro. There is no wealth tax paid in Montenegro.

The tax rates in Portugal are on a progressive scale ranging from 14.5% to 48%. In Portugal there is a local tax IMI (Imposto Municipal sobre Imoveis) which is the equivalent of council tax.

The IMI is charged based on the value of your home and only applies to homeowners, this tax is regarded as Portugal's wealth tax. Homes that are valued at over €600,000 pay an additional level of IMI.

Portugal offers a golden visa to foreign citizens who invest at least €500,000 in property. The lowest tax rate of 14.5% is payable for income of up to €7,116, while the highest tax rate of 48% applies to earnings of €75,010 and over. Portugal also has a gift tax of 10%.

Sole traders and freelancers have their income assessed on their personal earnings, paying income taxes rather than corporate tax. This makes Portugal appealing for digital nomads to live and work in.

Swiss income taxes are levied at three different levels, with all individual tax residents in Switzerland taxed on their worldwide income and wealth. However, no tax is paid on income from foreign businesses or foreign residential property, just any other foreign income.

Switzerland has a lump sum tax deduction that can lower your tax rate.

Inheritance and gifts are not subject to tax on federal and cantonal level but may be subject to gift or inheritance tax. Private capital gains are generally tax exempt and does not qualify as a business activity.

Personal income tax rates range from 0.77% for income of €17,800 to €31,600. The highest tax rate of 13.20% applies to the tax bracket €176,000 to €755,200 while those earning over €755,200 pay 11.5%.

The cost of living in Switzerland is relatively high, especially in Geneva and surrounding areas.

From November 2023, the ETIAS, or European Travel Information and Authorisation System, will be introduced. Citizens from ETIAS visa waiver countries will be able to continue to visit Schengen Area countries without a visa but will be required to apply for an ETIAS.

The system is being introduced to improve security and border management across Europe. The application is through an online form, so it is much easier to obtain compared to a visa where you are required to attend a consulate interview.

The ETIAS visa waiver is available for short stays of up to 90 days and it will be a quick process to have the ETIAS approved. You can find out more about the ETIAS system, ETIAS requirements and who it applies to on the etias.org website.

If you want to move to a country where you can benefit from the lowest tax rates in Europe and other tax benefits, you may be eligible to apply for a digital nomad visa in certain countries.

Numerous EU countries have introduced digital nomad visas to attract freelancers and self-employed workers to move to the country. Check out which European countries have a digital nomad visa and decide which one suits you best.