Reducing Your Tax Burden: Leveraging Territorial Tax Systems

Reducing Your Tax Burden: Leveraging Territorial Tax Systems


Territorial Tax Systems: A Tax-Saving Plan B Option

In today's climate of increasing taxes, many are looking for ways to reduce their tax burden. One potential solution is to leverage a territorial tax system.

What is a Territorial Tax System?

A territorial tax system taxes residents only on income earned within the country, not on worldwide income. This contrasts with systems like those in Canada and the US, which tax residents on their global income.

How Can a Territorial Tax System Help Reduce Taxes?

By becoming a tax resident in a country with a territorial tax system, you can avoid being taxed on income earned outside that country. This can significantly reduce your overall tax liability, assuming most of your income comes from your home country.

To take advantage:

  1. Establish tax residency in a country with a territorial tax system
  2. Become a non-tax resident in your home country

Top Territorial Tax Countries in Latin America

Several Latin American countries offer territorial tax systems and straightforward residency options:


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  1. Panama: Spend over 183 days per year, personal tax 0-25%, corporate 25%
  2. Nicaragua: Spend over 180 days, personal 0-30%, corporate 30%
  3. Belize: Spend over 183 days, flat 25% personal and corporate
  4. Costa Rica: Spend over 183 days, personal 0-25%, corporate 30%
  5. Paraguay: Get temporary residency, personal 0-8%, corporate 10%

Incorporating a territorial tax country into your "Plan B" can be a powerful way to keep more of your hard-earned money. With the right planning, the tax savings can be substantial.

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