Portugal and Thailand lure digital nomads with low tax

Portugal and Thailand lure digital nomads with low tax

May 25, 2024

Nearly three in four remote UK workers are considering relocating and operating from a different country as a digital nomad, partly to reduce tax liability

In addition to sunnier climbs and a cheaper standard of living, many countries offer beneficial low tax environments said Kasra Dash, founder of TaxBite. Some of the best low tax options are Portugal, Thailand and Malaysia, while tax-free options such as Dubai, Bahrain and Costa Rica are proving increasingly attractive.

One of the most popular choices for British expats is Portugal. Although the country is not tax-free, it offers the non-habitual resident (NHR) regime, which can result in significantly reduced tax rates for qualifying foreign income for 10 years. It has a growing expat community, and it is only two hours flight from the UK. Recent changes to the NHR have reduced the benefits but there is still good reasons to consider the EU country for a relocation.

Another newer option for those looking to reduce their tax bill is Thailand, which has been working on schemes to attract digital nomads, including potential tax incentives and specific visas that allow for long-term stays.

Then there are the nearly tax-free options, ranging from the UAE and Bahrain, to Panama and Malaysia.

Panama has a ‘friendly nations visa’, offering a straightforward pathway to residency for citizens from many countries. While not completely tax-free, Panama does not tax foreign-sourced income, which can benefit digital nomads. The country has one of the cheapest standards of living in the Caribbean, meaning you can live the island life at a fraction of the price.

In the Middle East there are a number of options including Dubai and Abu Dhabi in the United Arab Emirates (UAE), best for financial professionals, and Bahrain.

The UAE offers a 0% income tax rate for individuals, making it a highly attractive option for remote workers. The country also has specific visas for digital nomads, allowing them to live and work there while enjoying the tax benefits.

Applicants have to prove employment with a company outside the UAE and have a minimum monthly salary of $5,000 (£4,000). This can be shown through a contract valid for at least one year, recent salary slips, or bank statements from the last three months.

Another option is Bahrain, which imposes no personal income tax and is considered one of the more liberal countries in the Gulf region, providing a good base for digital nomads.

Bahrain provides a high quality of life with its vibrant cultural scene, historic sites, as well as a wide variety of dining and entertainment options. It also offers excellent healthcare facilities, which is an important consideration for anyone planning to live and work remotely.

Costa Rica provides various residency options that are friendly to digital nomads and like Panama, does not impose levies on foreign-sourced income. The culture emphasises ‘pura vida’ (pure life), promoting a relaxed and positive lifestyle that many remote workers find appealing.

Malaysia offers long-term residency options and does not tax foreign-sourced income through its Malaysia My Second Home (MM2H) programme making it a favourable option for many nomads. Malaysia is also a great base for travelling to other parts of Asia.

Kasra Dash, founder of TaxBite said: ‘Remote working in tax-free countries can offer significant financial benefits, including lower living expenses and tax savings, which together enhance savings and disposable income for workers.

‘The combination of these factors makes tax-free countries highly attractive for UK remote workers looking for both financial benefits and an improved lifestyle.

‘However, it’s important to consider the full implications, including any potential legal or residency requirements, and possibly the long-term impact on one’s tax situation, before making a move.

‘Consulting with a tax advisor or a financial planner who specialises in expatriate finances can provide valuable guidance.’