If you feel that your home country is charging you too much in taxes, you can consider the opportunity of changing your tax residence. Most countries will make you their tax resident if you spend at least six months within a calendar year on their territories. Similarly, most countries will stop charging you taxes if you become a tax resident in another jurisdiction.
We must note, however, that this opportunity is not available to citizens of some countries. If you are a citizen of the USA, for example, you have to pay taxes to the IRS no matter where you live and where you earn an income. (The same taxation system is applied in two more countries: Myanmar and Eretria.) There is only one opportunity to stop being a tax resident of the USA: you have to renounce your US citizenship. If this proposal sounds too radical for you, you might want to sit back and give this idea some serious consideration. Taxes in the USA are not as high as they are in Canada or a few other countries but they are high anyway.
At the same time, some countries ‘sell’ their citizenship to foreign nationals and most of them do not charge millions of dollars for their passports. (Malta does charge more than a million dollars, we must admit.) Besides, some of these countries are low-tax jurisdictions. So, you can take the following steps if you would like to stop paying taxes in the USA. You don’t want to be a stateless person, which means that you have to ‘buy’ citizenship of a low-tax country such as Antigua and Barbuda, for example, before you renounce your US citizenship. When you do so, you will owe nothing to the IRS any longer. Please rest assured that the US authorities are going to charge you an ‘exit tax’ when you cease to be a US citizen, but you will not have to pay 40+ percent in taxes anymore and in a couple of years, you will save more on taxes than the amount of the exit tax.
Antigua and Barbuda is located in the Caribbean (four more countries in the region administer the so-called ‘citizenship by investment’ programs) but what about some top tax residency choices in Europe? You can find some interesting offers on the old continent too but you have to explore the options with great care. Some European countries charge even more in taxes that the USA does but some others are not overly stingy. Acquiring tax residence in a low-tax European country will mean living there for the best part of the year in most cases. For this reason, we will speak briefly about the advantages and disadvantages of relocating to the low-tax European country that we discuss below and the country is Bulgaria.
Tax residence in Bulgaria
The economy of Bulgaria is not an advanced economy in particular but personal income is taxed at 10% only in the country. In addition to the income tax, there are other taxes to pay in Bulgaria, however. You have to cover the medical insurance and pay the social security tax too, especially if you have a job in Bulgaria. At the same time, there are very few countries in the world where the personal income tax is lower than 10%, which makes Bulgaria attractive from the taxation point of view.
How can you qualify for tax residence in Bulgaria? Spending more than six months in the country per year is not going to be enough, we are afraid. In addition to that, you have to have a ‘center of interests’ there and a permanent address. This means that you will have to buy residential accommodations in Bulgaria and maybe also start a functional business company there to qualify for tax residence. (Or you can marry a local person, why not?)
How comfortable does it feel to live in Bulgaria? We must admit that Bulgaria is nothing out of the ordinary. As far as the climate is concerned, Bulgaria is simply splendid: it is never too cold there. True, it can be quite hot on some summer days in Sofia but if you reside closer to the sea, the heat will become easily bearable.
As far as the country’s economy is concerned, Bulgaria is not doing perfectly well but is it doing ok. There are not many rich Bulgarians but the number of poor Bulgarians is also very low. ‘Average so’: this is how the economic situation in the country could be described.
We must point out, however, that even though Bulgaria is an EU member state, it is not within the Euro Zone thus far. This fact makes prices in Bulgaria considerably lower than they are in the Euro Zone countries. This said, you have to be prepared for price increases in the summertime. A boiled corn cob, for example, may cost 1 lev on May 31 and 2 levs on June 1. Why? Because the tourist season has officially started. The tourist industry is one of the pillars of the Bulgarian economy.
Where could you live in Bulgaria? We do not recommend that you settle down in the capital city of Sofia. The city is not as beautiful as some other Eastern European capitals such as Prague or Budapest, for instance. Many buildings are rather shabby and many things still remind of the socialist past in Sofia.
Instead, you should find a place by the sea. Bulgarians have their own ‘Sunny Coast’. Unlike the Spanish Sunny Coast (Costa del Sol), however, the Bulgarian one sits on the Black Sea. Slanchev Bryag (that’s the Bulgarian name for Sunny Coast) has world-class hotels and resort complexes. The place is popular with the British in particular. Many English people buy suites in luxury hotels and spend their summer holidays there. This is an inexpensive way of spending time at the seaside. The prices of the suites are lower than those in Spain or Portugal, for instance, and the level of comfort that they offer is basically the same.
