Advice needed from Central or South America based freelancing expat

Question

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.

Answer 1

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.

Answer 2

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 :/

Answer 3

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.

Answer 4

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:

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...

Answer 5

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.

Answer 6

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.

Answer 7

I live in Guatemala and know 4 or 5 freelancers who get their assignments from internet freelancer-matching sites. None of them pay taxes. I've asked a Guatemalan friend who is studying to be a lawyer about the situation, and she says there is no attempt by the government here to tax people who work here but work for companies outside of the country. Maybe there is some law on the books somewhere, but there is no enforcement so people who work in the government wouldn't know what to do if you walked into there office and asked to pay taxes. I've traveled in other Latin American countries and think the situation is more or less the same in all the less-developed countries in Latin America; this opinion come from talking to people who have worked in other countries in Latin America.

When I say the less-developed countries in Latin America, I'm excluding Chile, Mexico, and probably Columbia and Brazil. I don't know about Argentina. I also lived for years in Mexico, where I also knew several people freelancing there, working for employers resident outside of the country. Mexico has a special visa for creative work, due to there history of attracting writers and artists and wanting to continue to attract such people. With it, if you get paid for your work by a bank outside of Mexico, you are not subject to income tax. You didn't say what kind of work you do, so I don't know if it could be considered creative. Mexico isn't as cheap as Guatemala, but the infrastructure is better, and it's easier to get a resident visa (Guatemalan officials like to find mistakes in one's application in order to collect yet another fee). Chile is on par with Mexico as far as being developed, and has substantially less crime.

Answer 8

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.

Answer 9

It's interesting to see the suggestions of Bulgaria, Russia, and the United States when the OP is clearly asking about South and Central America and a Spanish-speaking country.

As a Latina, I would tell you that South America would be a great choice. Your number one option should be Ecuador- a very beautiful country with USDs as official currency. And Ecuador has a tax at source rule - provided that you pay tax in your country Ecuador will not require you to pay any additional tax. So you don't need to worry about the taxes. The cost of living is super low- one of the lowest in Latin America. You can easily apply for a retirement visa for Ecuador.

Your second choice should be Colombia.

Uruguay, Chile, and Argentina have high costs of living. The same goes for Caymans. Panama is super small.

Answer 10

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.

Answer 11

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.

Answer 12

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

Answer 13

For someone based out of Europe there are quite a few possibilities to consider. Eastern European countries are hot favorites for residency due to low taxation. TO overcome the challenge of social security tax you would have to incorporate to avoid those charges legally. Estonia is one such country where you have the possibility of paying 0 taxes and distributed profits are taxed only once @ flat 20%. You shall never pay taxes until you make withdrawals. Estonia offers E-Residency which allows you to bag projects from anywhere in the world and receive payments in Estonia, without ever setting foot in the country. That should overcome your challenge of weather as occasional visits if needed would not bother you at all as Tallinn is just a few hours from any European city.

Residency in Panama is a great option and Paraguay would work as a great destination as well to maintain residency and be able to avoid taxes on foreign income. Incorporate in Estonia and live in South America. Pay minimum salaries to justify yourself but never pay more than what is the bare minimum per hour of the country.