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British Taxpayers’ Guide to Passporting to Lower Taxes

If you thought the rioting and rampaging, the mindless hooliganism, theft, violence and arson that has swept across parts of the UK over the last few days was bad enough, did you know that British taxpayers may actually have to foot the bill for all the damage?  It’s true!  Thanks to the Riots (Damages) Act of 1886 the police authorities may be forced to foot the bill…and the police authorities are of course funded by the public purse.

This won’t have any bearing on the lawless, feral mobs who tore up Britain – they don’t work or pay tax anyway.  But for the rest of Great Britain its reason enough to think about leaving!  And if you are thinking about moving abroad, you might like to look and see where you will pay less tax and be less likely to encounter the underclass that the UK has bred over recent generations.

After all, taxes have increased in Britain and yet they are seemingly paying for less, (I’m talking about all the public spending cuts), so if you could live abroad and pay less tax but have a better life, it’s got to be better than sitting in bankrupt and burning Britain and waiting for things to change.  This is the British taxpayers’ guide to passporting to lower taxes and a higher standard of living in Europe…

Flat Tax – Where to Live in Europe to Pay a Fixed Rate of Less Tax…

From Albania to Estonia and from Latvia to Lithuania you can move to parts of (mainly Eastern or Northern) Europe and know exactly how much of your salary will be taken in tax.  Flat taxes exist in such nations to encourage investment and growth – and the local citizens generally welcome them!

In Albania the flat tax rate on personal income is just 10%, and it’s 10% for corporate tax too, (note VAT is as high as the UK though, standing at 20%).  The current flat tax position had been under threat by the current government – until media pressure forced them to postpone their plans to increase corporate taxes.  This does suggest that things may change in the short-term though.  Plus, let’s be honest – the quality of life in Albania is likely to be less than in the UK – so is 10% tax a big enough draw to relocate?

In Estonia the flat tax rate is 21% for the current tax year – but we Britons know very little about the nation and whether it would be a good place to live.  We suggest anyone seeking a less taxed nation and considering Estonia reads the excellent ‘Estonia in Eight Questions’ article on the AngloEstonian website…

Latvia taxes its citizens at 25% according to KPMG and Lithuania imposes a flat rate of just 15% on personal income, and income from distributed profit is subject to 20% income tax.  Or what about the Czech Republic where the flat tax rate on personal income tax is just 15%, or Montenegro where it’s only 9%?

All of these nations have to be observed up close and personal though – you need to ensure you could live as an expat in such a country and enjoy a good standard of living.  You will need to learn a foreign language, local employment prospects may be limited, and so the tax savings you will of course enjoy could end up being irrelevant if you’re not able to earn an income!

So Where Can You Pay Less Tax AND Have a Better Standard of Living?

If nations such as Albania and Latvia fail to float your ‘quality of life boat’ – let’s look at where Britons can pay less tax within Europe and be much more likely to enjoy an improved lifestyle…

How about Ireland?  Okay, so the nation has teetered to the brink of bankruptcy and been bailed out – but if you read our recent report about living in Ireland, you’ll see that the Celtic Tiger will roar again soon thanks to the excellent fundamentals it has in place for renewal and growth.

In Ireland a married couple with a joint salary of a really healthy EUR 65,600 can legitimately pay just 20% personal income tax.  What’s more, they can enjoy a tax rebate every time they self fund even routine medical treatment such as a doctors visit, and you can’t argue against the fact that the standard of living in Ireland is high can you?

Another country we recently revisited to assess the standard of living available is Bulgaria – it’s a nation where you can enjoy a decent standard of living, find affordable real estate, meet pockets of British expats and have access to decent education and healthcare standards (if you pay to go private).  And Bulgaria flat taxes its residents at a rate of just 10% …bonus!

It’s certainly a nation to therefore consider if you want a decent quality of life for far less tax…and you want to remain living in Europe.

However, in truth it’s not actually difficult to find countries that tax less than Britain’s top rate of 50% income tax.  You may not need to go as ‘foreign’ as Bulgaria or cap your income to avoid the highest tax rates as in Ireland.  The top rate of personal income tax in Malta is just 35% for example, and the way of life and standard of living on this stunning Mediterranean island is of course far better than in the UK.

Or what about Cyprus where the top rate of personal income tax is just 30%, and where pensioners can get away with legitimately only paying 5%?  Whilst the standard of living has declined and the cost of living has increased in Cyprus over the last few years, it’s still a fabulous place to live compared to the UK.

Where NOT to Live in Europe if You Want to Pay Less Tax

Perhaps it would be easier if we just published a list of the high tax nations in Europe for you to avoid – then you’ll know that wherever you move to on the continent you’ll enjoy lower personal income tax rates.

So, with the UK taxing its citizens at a maximum of 50%, where else squeezes the very life blood out of its citizens with excessively high taxation?  Austria has the same top rate of tax as Britain, as does Belgium.  Denmark’s top rate can be as high as 51%+ although with certain cuts and breaks and allowances the top rate payable is usually much lower.

The Netherlands and Norway’s top rates can reach in excess of 50% when you add in social contributions etc., and then you have Sweden which takes the high tax crown.  In Sweden the top rate of personal income tax in 2011 tops 57% – ouch!

How to Plan Your Low Tax Move Abroad

The trouble with tax is that it’s seldom as simple as we’ve implied above!  You often have to factor in the likes of capital gains, social security contributions, and VAT.  What’s more, a great deal depends on your personal situation.  For example, in some countries there are reasons to ensure income is spread between married partners, in other nations certain types of income are taxed differently.  Unlike in the UK where you can reclaim very little against your tax burden, in some of even the highest tax nations the expenses you can personally offset against tax are generous.

What all this means is that you need to carefully research the taxation realities of your chosen nation carefully before you commit to moving abroad.  Fortunately the big accountants have started producing tax rate cards and news for most countries, and these can be a good place to start.

Try the likes of Deloitte’s international tax guides, PwC’s international tax services section and KPMG’s tax newssection for example.  Additionally consider employing the services of an international tax professional and getting your affairs in order before you relocate.

And Finally…Where to Live Abroad if You Don’t Want to Pay Any Tax at All!

We recently wrote the definitive guide to having a legal tax-free lifestyle.  The nations suggestions are not limited to Europe however, so if you don’t mind perhaps moving further afield and maybe keeping much of your wealth offshore, we suggest you read it and familiarise yourself with the nations in the world where you’ll perhaps pay no tax at all!

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