Terms you will hear
- Tax residency
- The country where you are taxed on everything you earn worldwide. It depends on where you live and have your interests, not on your passport.
- 183-day rule
- A common test: spend more than 183 days a year in a country and you are tax resident there. Each country adds nuances.
- Centre of vital interests
- Where your business, income and family are. It can make you resident even if you spend few days there.
- Territorial taxation
- The country only taxes what is earned inside it. Income from abroad is free. Examples: Panama, Paraguay, Costa Rica.
- Remittance basis
- Income earned abroad is only taxed if you bring it into the country. Examples: Malta, Thailand, Mauritius.
- Non-dom
- Resident but not domiciled. In Cyprus, for example, there is no special tax on dividends and interest for 17 years.
- Lump-sum regime
- You pay a fixed amount a year on your foreign income, as in Italy or Greece, whatever you earn.
- Substance
- Your company really exists where it says: office, decisions and people. Without substance, the company is taxed where it is run.
- Controlled foreign company rules
- Rules that let your country tax the profits of your company in a low-tax country as if they were yours.
- Exit tax
- Tax on the unrealised gain of your shares when you stop being resident. In Spain, from €4M, or €1M in one company with more than 25%.
- Tax haven blacklist
- Spain's list of non-cooperative jurisdictions. A Spaniard who moves to one stays taxable in Spain that year and the next four.
- Tax treaty
- An agreement between two countries so you do not pay twice on the same income and to decide which one treats you as resident.
- Tax residency certificate
- Official document from the country where you live proving you are tax resident there. Your best evidence for your old tax office.
- Free zone
- Area with a special tax regime. In the UAE, free zone companies pay 0% on qualifying income.
- Permanent establishment
- A fixed presence of a foreign company in a country (office, agent) that makes it taxable there.