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I'm an expat free-lance consultant working for a U.S. client in a European country that is not my home country. I'm also an E.U. citizen.

Currently, my combined income tax and social security contributions are now more than 50% of my salary. I would like to relocate to a Central or South American country that has relatively low income tax and low social security contributions while still maintaining basic infrastructure.

When I researched this on my own, I found that many countries have a low income tax burden but that as a freelancer, you then get penalized when you have to pay that country's equivalent of social security tax,which is often double what an employed worker would pay.

I'm a bit stuck in terms of how I can declare myself because my company will not allow me to incorporate so wherever I transfer to I must continue to be a freelancer and contribute to social security.

I am very interested in relocating to a Spanish speaking country. South and Central America appeal to me. In particular, Uruguay.

If there is anyone on this forum that is already working as a freelancer in Central or South America and could give me some advice as to a country that fits my above described criteria, I would be most grateful. Discovering the rate of Social Security contributions for freelancers has been my biggest problem in my research.

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To clarify, you're just after the lowest tax + ssec burden country in that region? –  Mark Mayo Mar 19 at 13:20
    
well, low cost of living wouldn't hurt either ;) –  gina Mar 19 at 13:29
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isn't it a bit too broad? –  Vince Mar 19 at 15:11
    
Sorry, not sure what you mean. You mean my requirements? –  gina Mar 19 at 16:56
    
I meant the number of countries is quite huge. It would require to check the fiscal policy of maybe 100 countries to know which is the most tax-friendly. –  Vince Mar 19 at 17:22

10 Answers 10

If you want to stay in the EU, you could try Bulgaria, income tax is flat at 10 percent, the cost of living is relatively low too, even in the capital.

I'd personally recommend a place like Veliko Turnovo, which is an historic town that boasts a relatively young population due to its university and has a sizeable community of expats (most notably British ones).

P.S. This answer addresses the original question prior to its clarification, with respect to the edit, this guide by PWC points to Chile as a good place to live from an economic and tax-oriented perspective.

Alternatively, you could always go for the usual suspects such as the Bahamas, Bermudas, Cayman Islands and Virgin Islands, who are all in or around the Central/South American region.

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Bulgaria never occurred to me. On paper, that looks like a good option. Truth be told, I'm from a warm country and not sure I could take the cold of Bulgaria. I'm not dead set on staying in Europe. Just need to be in a place that does not have too much of a time difference from the U.S. South America would be fine as well. –  gina Mar 19 at 16:55
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@gina Bulgaria is not that cold, arguably winter can be harsh in large parts of the country but it's actually quite warm in the summer. –  Gala Mar 19 at 17:14
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According to en.wikipedia.org/wiki/Tax_rates_of_Europe, Bulgaria is really the most worker-friendly state of EU. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 8:40
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@gina Bulgaria has a typical continental climate with cold winters (though this winter I'm told was quite mild, with temperatures rarely dropping below -5) and hot summers. There's plenty of sea towns where winter is even milder and quality of life is fairly good. Couple that with some of the fastest broadband speeds in the world and it makes for a good choice :) –  Nobilis Mar 20 at 8:57
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I grew up in Bulgaria and I can confirm that the winter there could be very cold –  Dirty-flow Mar 20 at 14:52

Go to the Caymans. They have the Cayman Enterprise City with a Campus made for freelancers as you: http://www.caymanenterprisecity.com/ Or if you want to stay in the EU, consider Malta. They have a residency form (Economic Self-Sufficiency), when you have to show that have 14.000 euros in the bank and a health sec and you can do what you want.

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How would that Caymans affect double taxes? Because income from enterprice will surely be taxed in EU. However, I don't know what with income that stays within enterprice. Malta sounds more viable. Would you provide details, how high are taxes there to be payed by freelancer? –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 19 at 15:15
    
Malta is not a bad idea. I was looking into it but could not figure out the social security contributions aspect for freelancers. Anyone know? –  gina Mar 19 at 16:51
    
Here is the concrete question addressing EU-citizen and Caimans: expatriates.stackexchange.com/questions/614/…. Can you answer it? –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 19 at 16:59

Off the top of my head Bahamas and Cayman Islands come to mind. The only question that you have to check is whether you will still need to file and pay taxes in the EU country where you are a resident on the income made on the Bahamian or Cayman entity that is owned by you.

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Sadly, the company I freelance for does not allow me to incorporate. Hence my current predicament. Both the Bahamas and the Cayman Islands have a high buy-in. I'm looking for a place which does not require a lot of up front capital to relocate. –  gina Mar 19 at 13:53
    
Every tax-paradise, with exception those within EU, is for sure double-taxed. People who settle there and don't pay taxes in home country are prosecuted and imprisoned. It's a hot thema currently in Germany. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 19 at 14:02
    
@Łukasz웃Lツ That's what lawyers and accountants are for. :) –  Karlson Mar 19 at 14:05
    
@Karlson lawyers and accountants are specialized in saying you everything is fine and taking money away from you. They won't help you if German tax office would interpret your company's villa you're living in as your personal property and declare you tax-sinner. Big companies can simply go around it, but for freelancers it's hardly possible, and for sure too risky. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 19 at 14:13
    
@Łukasz웃Lツ Makes me glad I don't live or have business in Germany. :) –  Karlson Mar 19 at 14:56

Forbes actually has an article about a study conducted by HSBC about where it's best to be a freelancer/expat worker.

Essentially when you factor in no tax, and conditions, Dubai did pretty darn well, as did Singapore for conditions. However each still has its downsides, which you can read into more there.

Bottom line - even if a place has no tax and you can earn tons, do you really want to go there? Sometimes money isn't everything :/

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The time difference will disqualify everything except US and Belgium. :) –  Karlson Mar 19 at 14:35
    
Thanks Mark. Agreed about your Dubai comment. Yes, money is not the only thing to take into consideration. I looked at the Forbes article but I think that the HSBC study was looking at people who were sent by their companies to live as expats in these countries. In my circumstance, I would be choosing of my own accord to go, so would be missing the company compensation packages that makes the transition often such a sweet one. Any thoughts? –  gina Mar 19 at 14:35
    
From friends/ex-colleagues who have been, the pay can be amazing, and the apartments etc brilliant, but again, you're stuck inside because most people can't handle the heat, if you're single it's tough as a lot of western-style mixing isn't readily available (eg drinking in public). Between Dubai and Singapore, I'd choose Singapore - yes they're strict, but there's so many more options, and friends have really enjoyed living there. –  Mark Mayo Mar 19 at 14:38
    
@gina You can go "Mark Mayo", who doesn't seem to spend much time anywhere. :) –  Karlson Mar 19 at 14:38

Having done an analysis of this a while back, investigating what happens in various countries if a freelancer (incorporated as a company) earns $100k, I'd pip for Singapore. This chart says it all:

enter image description here

TL;DR: In Singapore you keep 99.9%, in San Francisco 56.9%. Full analysis here and the spreadsheet behind it here. Note the lengthy disclaimers up top, the payment structure used for the comparison is not optimal in all five countries and a good accountant can save you a bundle in any of them.

The main flies in the ointment are that getting entrepreneur visas in Singapore is quite tough these days and (oops, didn't read carefully enough) the time difference with the US East Coast will kill you. Then again, it might be worth it to work nights for a while...

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Thanks jpatokal for your thoughtful post. I'll bet a lot of people reading this post will appreciate your input. I"m a bit stuck you see. The company I work for won't allow me to incorporate, so any country I relocate to I need to continue operating as a freelancer in, hence my predicament. –  gina Mar 20 at 9:04
    
Interesting data. In the Netherlands I currently am taxed at 42% on my income (second highest taxed country in the world); if I earn even more money my tax would be 52%. I am on a payroll but it would not differ for a freelancer. As freelancer you would have to make separate arrangements for pension. Even though I am on a payroll have an extra pension next to my companies pension (much like a freelancer would need to have) which is an extra 1 per cent. –  Ivo Limmen Mar 20 at 10:22
    
@IvoLimmen With all due respect, it seems you don't understand how income tax works: 42% is the rate on income in one tax bracket, you pay less on the first 33k. Of course, you can't reason ceteris paribus, not even getting in the fairness, public services or anything like that, if you were to do the exact same job, say, in the UK, you would pay lower taxes but also probably be offered a lower salary. Also, since by your own admission you don't reach the 52% bracket, you are not even a particularly high earner so there is no reason to think you would be much better off elsewhere. –  Gala Mar 20 at 14:15
    
@jpatokal's calculations make sense for someone who is a freelancer and can live somewhere while getting income from elsewhere but let's not mistake that for a complete evaluation of the various tax systems. –  Gala Mar 20 at 14:17
    
@GaëlLaurans I guess you don't have much respect by claiming I do not earn that much. And yes: I do understand the bracketing system. –  Ivo Limmen Mar 20 at 14:32

You could try Panama. The time difference is zero (in winter). The weather is consistently 30C. You are not taxed on money earned outside the country. US Dollars are normal currency. Flights to the US East coast are reasonable.

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I looked at Panama as well but the way I understand the law there, if I move there and work from my home in Panama for the U.S. company, then I would be subject to income tax as the money I earned would be earned in Panama. If there is anyone participating in this forum that is currently living in Panama and could shed some light on this point, I would welcome the advice. –  gina Mar 19 at 17:26
    
@gina going to tax paradise, you'd have to give up your EU citizenship, which for most people would be unacceptable (you loose diplomatic protection, which for EU citizens is quite strong) –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 13:52
    
@Łukasz웃Lツ Why would you think you have to give up EU citizenship to live in Panama? –  Gala Mar 20 at 14:19
    
@GaëlLaurans because otherwise you'd have to pay income taxes in your countre, which makes the whole operation vain. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 14:24
    
@Łukasz웃Lツ Very few EU countries collect (or conversely exempt you from) income tax based solely on citizenship. Just taking one example I happen to know a little: If you make most of your money in France or live there semi-permanently, you are liable even if you give up your nationality. If you live full-time in Panama and get your income from, say, the US, France will leave you alone. If you don't have property or something like that in France, you don't even need to report anything. But you can remain a French citizen. –  Gala Mar 20 at 14:26

The most important thing to take into account is the double taxation. It doesn't help you to find a country with almost no taxes, only to find yourself arrested and imprisoned after returning to your country (or simply visiting your relatives) as tax-sinner (it's a hot thema in Germany).

Fortunatelly, you can become a resident of any EU country, which will make you free of double-taxation. From what I know UK has very little social taxes (social, rental + health security).

From my personal experience, taxes in Poland are relatively moderate (and much lower as, for example, in Germany). As contractor (self-employed), you pay 19% of your income, VAT doesn't apply for service export, and social taxes are bulk - about 200 Euro a month. It's not exactly what you expect, but it's fully legal.

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Hi, I looked into Poland but I couldn't understand under what circumstance one could qualify to have the flat 19% income tax applied. –  gina Mar 19 at 14:14
    
@gina as freelancer, you are self-employed so you pay company tax, not personal tax. Anyway, Bulgaria seems more promising. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 13:51
    
Yes, Bulgaria does seem more promising. I'm looking into it now. –  gina Mar 20 at 17:11

Have you considered the US? It varies state to state, but you will certainly do better than %50(Although not freelancing myself I'm not sure about the tax rate in that situation). Some parts of the country have low living expenses as well.

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I did but the U.S. is tricky as I would need a work visa. –  gina Mar 19 at 18:57
    
Taxes for a single person can get ugly and into a range of 30-35% –  Karlson Mar 19 at 19:30

Try the Isle Of Man.

It has a curious status as a British subject but is still independent. It also has a great IT infrastructure.

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And the taxes there are? (value) –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 13:56

The best place is Russia -- 13% taxes and there are no too much attention to you even you would`nt pay it at all. Also there is so much vodka and beautiful girls so you would never want to leave it out.

http://www.transitionsabroad.com/listings/work/shortterm/articles/jobs_in_russia_freelancing.shtml

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The road police forcing you to pay bribes, high crime rates and businessmen going to prison for criticizing the government are also to consider. In current situation, it's hardly advisable for EU citizen to invest in Russia. You could find your assets confiscated in case of severe economic sanctions. –  РСТȢѸФХѾЦЧШЩЪЫЬѢѤЮѦѪѨѬѠѺѮѰѲѴ Mar 20 at 13:55

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