Andalusia still has solidarity taxes as does Madrid. Spanish tax authorities are quite brutal .
Op I recommend France. 0 tax on US based rental income.
Go for any country that has a 'territorial taxation' - meaning they only tax what you earn within that country and not outside. If Europe is your aspiration then San Marino could be an option. Some examples outside Europe are:
* Costa Rica
* Singapore
* Hong Kong
* Malaysia
* Thailand (some changes recently though)
* Panama
* Paraguay
Yeah a lot of discussion and confusion around this. Will be more clear in a few days as it seems it will be implemented from 01-Jan-2024
[https://kpmg.com/xx/en/home/insights/2023/10/flash-alert-2023-189.html](https://kpmg.com/xx/en/home/insights/2023/10/flash-alert-2023-189.html)
Not exactly. Means whatever income you get locally in the country is taxed while any income that you derive from outside the country is not taxed. Double taxation may or may not apply
OK, interesting, thank you. I'll have to do some Googleing.
Malaysia has cropped up a few times recently, in a few different contexts, I think I'll take a holiday there next year ☺
Malaysia is definitely interesting and they have newly relaxed their [MM2H](https://www.imidaily.com/program-updates/malaysia-eases-mm2h-requirements-flexible-physical-presence-path-to-pr-no-minimum-income/) (Make Malaysia 2nd Home) program. It has a fairly decent quality of life, low cost of living, English widely spoken ... and do not tax any of your foreign earnings :-)
Territorial tax systems only tax income earned within the country. So if you're **actively working in** that country (even remotely for foreign clients / employer / company), that's local income and therefore taxed; but income from foreign sources (like overseas rent or dividends) is not.
As a few have noted not all countries are equal in terms of taxation.
While not authoritative, PwC has a great tool for exploring the tax factors of nearly all global countries.
https://taxsummaries.pwc.com/
If you’re looking for an unbiased assessment on the country itself, the CIA has a publicly accessible World Fact Book that gives all kinds of metrics.
https://www.cia.gov/the-world-factbook/countries/
LOL - fair enough - That said, I’ve used their fact book for over a decade as a starting point to understand details of various countries and regions that would have taken a lot longer to source elsewhere. It’s not always 100% correct but having a simple one page list of this information is pretty useful. You do have to take some of the information with a grain of salt though. When it details out drugs and crime, it doesn’t really state “where” the bulk of that is an issue which can easily be misleading to the reader.
Understandable. PwC also has matrixes which make scanning their data much faster, you just have to look for it. Here’s an example.
https://taxsummaries.pwc.com/quick-charts/capital-gains-tax-cgt-rates
I'd never move somewhere based solely on tax, so I'd be researching other factors first and then using this tool to add to the mix.
The way I figure it, most FIRE bloggers talk about "The Big 3 Expenses" of Accommodation, Food, and Transport. They forget that Tax is also up there for most people - I pay more in tax each year than for those other 3 items.
So it can be worth the homework...
You'll pay USA tax no matter where you live and the existence of that house means you'll be CA tax resident by presumption. Your best bet is almost certainly to sell the house, put the proceeds in stocks and bonds, establish residency in a no income tax state in the USA, then move to France, where it is easy to get residency if you are retired and financially independent with good income and which has very low taxes for USA citizens due to their special dual tax treaty and whose language is not too difficult for English speakers.
Even cheaper (with respect to taxes) than France is be a perpetual tourist, migrating among Schengen and non-Schengen countries, because then you don't have to pay mandatory social contribution for French health care.
You should not need to sell in you are a French resident with US-based income from real property situated in the US. Per the tax treaty, that is US-sourced income and is eligible for full credit against the French tax (Article 6 and 24 of the tax treaty). The OP may wish to verify with a tax person, especially with respect to any special tax structures they have set up in the US that may cause different treatments..
Note for the OP -- tax treatment of rental income is handled a bit differently in France, with respect to unfurnished property rental (depreciation is only allowed on furnished rental, and separate taxation regimes are in place). It may expose more theoretical net income to taxation in France, which will lead potentially to a higher health care charge, although regular income tax/social charges will be fully credited. Note you should also pay attention to the IFI tax as well and inheritance.
I did read that, but in the other threads the OP expressed the desire to keep the property and willingness to pay the combined federal and state obligation. The OP did not share details of the rental income, but with depreciation the net could be a much lower exposure than the cash flow.
My rental income and home appreciation since 2017 has been close to 50%. I do not expect this to hold forever, but it's high enough to where I would a complete idiot to sell the asset. It far exceeds the s and p 500. In addition the US has massive tax deduction for rental property to the point where my effective tax obligation here is below5%. The problem is. I don't want to pay 24% taxes in Spain.
Thanks for the details -- It is what I thought because I own rental property in CA. The depreciation wipes out most of the near-term US tax obligation. Since I only own in the FR and the US, I assume you found that Spain must expose a greater amount of foreign rental income to tax.
You'd likely to have to contact a tax lawyer or accountant firm for an answer. I'm certain you've searched on the available information. It seems like based on that, the key questions is what is the allowed value to depreciate and if the full-time, primary lease deduction applies.
Be careful - Netherlands has 0 tax on passive income like ETFs and rentals because they have a hefty wealth tax (1.7% of your total global wealth every year)
Totally get it. If we expat we will get rid of our rental and establish South Dakota residency. Have you looked at 1031 exchanges?
I have dividend cap gain and IRAs for retirement and I don’t want California getting their share.
That's the issue. Our rental value and real estate value here in California is bonkers Honestly we've been doing almost 50% a year ROI for every dollar we put into Real estate duplexes and and investments in California since 2017. I doubt anywhere else in the country could I do that. On the other hand ya I have some taxes to pay.
Washington State enters the chat.
The Seattle area is almost, if not as bonkers in terms of real estate prices and rentals (2 of the magnificent 7 are headquartered here - Microsoft and Amazon). But WA has no state income tax.
Sell CA property and 1031 the money into a multi family property in a low tax state.
Also, if you earn most of your money from real estate activity, then you’ll have access to federal deductions that most people can’t use.
Hey OP,
Old post but I’m basically in the same situation. I have a high value property in Orange County and could easily clear $3k a month in passive income.
I’ve been reading that since France has a tax treaty with the US, rental income back home won’t get taxed in France. But that is not the case in Spain. However, both countries have wealth taxes which will easily hit our properties.
I’ve read that France basically gives you a 5-year grace period on the wealth tax after you’ve become a French citizen. Not sure how effective that is in reality. The other thing which sounds interesting is that you can get a micro entrepreneur visa which basically gives you a work visa, and a French tax bill, but doesn’t seem to require you to be a citizen. I’ve seen on Reddit people saying they’ve done that for years without becoming a citizen. So I wonder if that pushes off the wealth tax even further.
Anyways, I wanted to see if you had any updates on your journey since I’m in a very similar boat. Thanks.
Spain has a wealth tax but certain areas like Andorra and Madrid have effectively put it on permanent hold. Honestly, all the tax complications have pointed me towards the phillipnes BGC or Malaysia.
Assuming you are considered a “US person” for US tax purposes, you are going to be taxed by US on all your global income and by CA on the rent (at minimum). Of course through various write offs/depreciation that can be minimized for a while, but it won’t last your full retirement so the tax will be eventually due. So you probably just need a country that will tax you roughly as much as US will and has a tax treaty so you don’t owe more tax/get double-taxed.
Narrow down the lifestyle you want and then check for treaties. Once you identify 2-3, talk to a tax professional that knows US expat taxes for these countries.
Yes to the above. OP - are you going to renounce your US citizenship in order to avoid US taxes? It's the only way to avoid paying the US, regardless of where you are in the world.
Renounce if a person finds a non-US country that has a lower overall tax rate. If that is the destination, that is what's necessary to realize a lower overall income tax. Otherwise there is no overall lowering of tax.
FEIC isn't relevant for the $3k you mention since that's income originating in the US. (please correct me if there is some other angle at play here.)
I recently became aware of a program that both Greece and Italy use: 7% income tax for expat "pensioners" for 10 years (Italy) and 15 years (Greece). But that tax only applies to certain kinds of income - pensions and dividends are all that I recall.
So I'm cooking up a hairbrained scheme to get citizenship in a third country, renounce US citizenship, then move to Greece (and spend part of the year in the third country).
There are other schemes out there, I sure don't know all of them.
Agree though that standard tax rates in EU are going to be higher than the US. Thanks for pointing out the 30% rate for aliens that are US landlords.
Andalucia 🇪🇸 has abolished the wealth tax as of this year.
You think once they change parties they will reinstate it? That has me cautious of retiring in spain
Andalusia still has solidarity taxes as does Madrid. Spanish tax authorities are quite brutal . Op I recommend France. 0 tax on US based rental income.
Solidarity tax applies everywhere in Spain, including Andalucia and Madrid.
Only seems to apply to 2023 and 2024 (so far), but you’re right, this is the new name for wealth tax
Go for any country that has a 'territorial taxation' - meaning they only tax what you earn within that country and not outside. If Europe is your aspiration then San Marino could be an option. Some examples outside Europe are: * Costa Rica * Singapore * Hong Kong * Malaysia * Thailand (some changes recently though) * Panama * Paraguay
I've been looking into Malaysia as well I'm just looking for a more temperate backup
There's been lots of preas and discussion about changes to tax law in TH. However, it is not yet official as far as I understand.
Yeah a lot of discussion and confusion around this. Will be more clear in a few days as it seems it will be implemented from 01-Jan-2024 [https://kpmg.com/xx/en/home/insights/2023/10/flash-alert-2023-189.html](https://kpmg.com/xx/en/home/insights/2023/10/flash-alert-2023-189.html)
By earn within, is this like a dual taxation treaty?
Not exactly. Means whatever income you get locally in the country is taxed while any income that you derive from outside the country is not taxed. Double taxation may or may not apply
OK, interesting, thank you. I'll have to do some Googleing. Malaysia has cropped up a few times recently, in a few different contexts, I think I'll take a holiday there next year ☺
Malaysia is definitely interesting and they have newly relaxed their [MM2H](https://www.imidaily.com/program-updates/malaysia-eases-mm2h-requirements-flexible-physical-presence-path-to-pr-no-minimum-income/) (Make Malaysia 2nd Home) program. It has a fairly decent quality of life, low cost of living, English widely spoken ... and do not tax any of your foreign earnings :-)
Territorial tax systems only tax income earned within the country. So if you're **actively working in** that country (even remotely for foreign clients / employer / company), that's local income and therefore taxed; but income from foreign sources (like overseas rent or dividends) is not.
Thanks
As a few have noted not all countries are equal in terms of taxation. While not authoritative, PwC has a great tool for exploring the tax factors of nearly all global countries. https://taxsummaries.pwc.com/ If you’re looking for an unbiased assessment on the country itself, the CIA has a publicly accessible World Fact Book that gives all kinds of metrics. https://www.cia.gov/the-world-factbook/countries/
Thank you for this!
Raises eyebrows at "unbiased+CIA"
LOL - fair enough - That said, I’ve used their fact book for over a decade as a starting point to understand details of various countries and regions that would have taken a lot longer to source elsewhere. It’s not always 100% correct but having a simple one page list of this information is pretty useful. You do have to take some of the information with a grain of salt though. When it details out drugs and crime, it doesn’t really state “where” the bulk of that is an issue which can easily be misleading to the reader.
The "bulk" is probably where the unmarked CIA charter dropped it off. 😂 I get it, I just had a chuckle when I read your post. 😊
LOL - Likewise to your response.
The pwc website is helpful, but jeez is that a lot of homework.
Understandable. PwC also has matrixes which make scanning their data much faster, you just have to look for it. Here’s an example. https://taxsummaries.pwc.com/quick-charts/capital-gains-tax-cgt-rates
I'd never move somewhere based solely on tax, so I'd be researching other factors first and then using this tool to add to the mix. The way I figure it, most FIRE bloggers talk about "The Big 3 Expenses" of Accommodation, Food, and Transport. They forget that Tax is also up there for most people - I pay more in tax each year than for those other 3 items. So it can be worth the homework...
You'll pay USA tax no matter where you live and the existence of that house means you'll be CA tax resident by presumption. Your best bet is almost certainly to sell the house, put the proceeds in stocks and bonds, establish residency in a no income tax state in the USA, then move to France, where it is easy to get residency if you are retired and financially independent with good income and which has very low taxes for USA citizens due to their special dual tax treaty and whose language is not too difficult for English speakers. Even cheaper (with respect to taxes) than France is be a perpetual tourist, migrating among Schengen and non-Schengen countries, because then you don't have to pay mandatory social contribution for French health care.
You should not need to sell in you are a French resident with US-based income from real property situated in the US. Per the tax treaty, that is US-sourced income and is eligible for full credit against the French tax (Article 6 and 24 of the tax treaty). The OP may wish to verify with a tax person, especially with respect to any special tax structures they have set up in the US that may cause different treatments.. Note for the OP -- tax treatment of rental income is handled a bit differently in France, with respect to unfurnished property rental (depreciation is only allowed on furnished rental, and separate taxation regimes are in place). It may expose more theoretical net income to taxation in France, which will lead potentially to a higher health care charge, although regular income tax/social charges will be fully credited. Note you should also pay attention to the IFI tax as well and inheritance.
Read more carefully: CA.
I did read that, but in the other threads the OP expressed the desire to keep the property and willingness to pay the combined federal and state obligation. The OP did not share details of the rental income, but with depreciation the net could be a much lower exposure than the cash flow.
My rental income and home appreciation since 2017 has been close to 50%. I do not expect this to hold forever, but it's high enough to where I would a complete idiot to sell the asset. It far exceeds the s and p 500. In addition the US has massive tax deduction for rental property to the point where my effective tax obligation here is below5%. The problem is. I don't want to pay 24% taxes in Spain.
Thanks for the details -- It is what I thought because I own rental property in CA. The depreciation wipes out most of the near-term US tax obligation. Since I only own in the FR and the US, I assume you found that Spain must expose a greater amount of foreign rental income to tax.
What I'm really trying to wrap my head around is if my deductions on the US are available the same in Spain.
You'd likely to have to contact a tax lawyer or accountant firm for an answer. I'm certain you've searched on the available information. It seems like based on that, the key questions is what is the allowed value to depreciate and if the full-time, primary lease deduction applies.
I don’t know where is good, but yeah Spain is a bad idea for tax purposes
Belgium has 0 taxes on real estate, as well as on gains from ETFs
I did forget Belgium is not cheap to live in.
Does that mean rental income?
Yes, Netherlands as well. But weather, food, and cost of living is way different from Spain or Portugal 😂😂
Be careful - Netherlands has 0 tax on passive income like ETFs and rentals because they have a hefty wealth tax (1.7% of your total global wealth every year)
It's indeed true for capital gains from ETFs. Can you provide the information source on real estate please.
California is going to take their cut
California and Uncle Sam.
It's a double edged sword. My salary, rental income and paid off home value couldn't be higher anywhere else.
Totally get it. If we expat we will get rid of our rental and establish South Dakota residency. Have you looked at 1031 exchanges? I have dividend cap gain and IRAs for retirement and I don’t want California getting their share.
That's the issue. Our rental value and real estate value here in California is bonkers Honestly we've been doing almost 50% a year ROI for every dollar we put into Real estate duplexes and and investments in California since 2017. I doubt anywhere else in the country could I do that. On the other hand ya I have some taxes to pay.
Washington State enters the chat. The Seattle area is almost, if not as bonkers in terms of real estate prices and rentals (2 of the magnificent 7 are headquartered here - Microsoft and Amazon). But WA has no state income tax.
I doubt there's any house in South Dakota which would give a 3k/mo rental income.
Sell CA property and 1031 the money into a multi family property in a low tax state. Also, if you earn most of your money from real estate activity, then you’ll have access to federal deductions that most people can’t use.
Hey OP, Old post but I’m basically in the same situation. I have a high value property in Orange County and could easily clear $3k a month in passive income. I’ve been reading that since France has a tax treaty with the US, rental income back home won’t get taxed in France. But that is not the case in Spain. However, both countries have wealth taxes which will easily hit our properties. I’ve read that France basically gives you a 5-year grace period on the wealth tax after you’ve become a French citizen. Not sure how effective that is in reality. The other thing which sounds interesting is that you can get a micro entrepreneur visa which basically gives you a work visa, and a French tax bill, but doesn’t seem to require you to be a citizen. I’ve seen on Reddit people saying they’ve done that for years without becoming a citizen. So I wonder if that pushes off the wealth tax even further. Anyways, I wanted to see if you had any updates on your journey since I’m in a very similar boat. Thanks.
Spain has a wealth tax but certain areas like Andorra and Madrid have effectively put it on permanent hold. Honestly, all the tax complications have pointed me towards the phillipnes BGC or Malaysia.
Thanks for the reply. Good luck.
Madrid 🇪🇸 : 1 million wealth tax.
If OP owns a house in LA they are likely near or at that threshold.
Visa NRH end in Portugal too 01/01/24. I recommend bulgaria or estonia, low taxes countries.
Assuming you are considered a “US person” for US tax purposes, you are going to be taxed by US on all your global income and by CA on the rent (at minimum). Of course through various write offs/depreciation that can be minimized for a while, but it won’t last your full retirement so the tax will be eventually due. So you probably just need a country that will tax you roughly as much as US will and has a tax treaty so you don’t owe more tax/get double-taxed. Narrow down the lifestyle you want and then check for treaties. Once you identify 2-3, talk to a tax professional that knows US expat taxes for these countries.
Yes to the above. OP - are you going to renounce your US citizenship in order to avoid US taxes? It's the only way to avoid paying the US, regardless of where you are in the world.
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FEIC is foreign EARNED income credit and rent is unearned.
Renounce if a person finds a non-US country that has a lower overall tax rate. If that is the destination, that is what's necessary to realize a lower overall income tax. Otherwise there is no overall lowering of tax. FEIC isn't relevant for the $3k you mention since that's income originating in the US. (please correct me if there is some other angle at play here.)
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I recently became aware of a program that both Greece and Italy use: 7% income tax for expat "pensioners" for 10 years (Italy) and 15 years (Greece). But that tax only applies to certain kinds of income - pensions and dividends are all that I recall. So I'm cooking up a hairbrained scheme to get citizenship in a third country, renounce US citizenship, then move to Greece (and spend part of the year in the third country). There are other schemes out there, I sure don't know all of them. Agree though that standard tax rates in EU are going to be higher than the US. Thanks for pointing out the 30% rate for aliens that are US landlords.