5 Countries in Latin America Where You Can Live Tax Free in 2023
Some of the most attractive countries with territorial tax are located in Latin America. This can be a great region for expats. They have a more laid back lifestyle, sunny weather, friendly locals and ,if you go to the right countries, no taxes for expats.
That’s because many countries in Latin America operate a territorial tax system. That means they only tax citizens and residents on income that’s generated within the country. Income generated in other countries is completely exempt from taxes.
Europeans or Canadians moving to Costa Rica or Panama can live completely tax free there as both are countries with territorial tax. American citizens will have to do a bit more planning as the IRS follows them wherever they go in the world. But even US citizens can take advantage of the foreign income exclusion on the first $120,000 of foreign income. A married couple can double that.
Combined with the low cost of living in Latin America, living in one of our top 5 countries with territorial tax in Latin America will improve your lifestyle considerably.
Let’s take a look at 5 of our favourite countries with territorial tax in Latin America:
Costa Rica
Costa Rica is a long time favourite for expats. While it’s certainly not the cheapest option in Latin America, you won’t have to make any compromises on lifestyle to live in Costa Rica. This Central American country has everything from beautiful beaches on both the Pacific coast and the Caribbean coast to perfect spring like weather in the country’s Central Valley year round.
You’ll be able to find US and European style houses and apartments throughout the country with every modern amenity.
Residency in Costa Rica is pretty straightforward. You just have to show that you have regular income. As a resident of Costa Rica you can take advantage of the territorial tax system. You’ll only be liable for tax on any income earned in Costa Rica. Any income from overseas is exempt from taxes in Costa Rica.
Panama
Just to the south of Costa Rica, Panama is another one of the countries with territorial tax in Latin America. It’s a country that offers its residents plenty of opportunities to invest and take advantage of Panama’s friendly business environment .
Panama is also a great place for expats to live. You can enjoy warm weather year round and a low cost of living.
Panama’s territorial tax system offers you another advantage: Tax exemption on foreign sourced income. As long as you don’t work in Panama, your foreign source income will be completely exempt from taxes
Panama has recently changed it’s rules for the friendly nations visa, making residency a bit more difficult. But it shouldn’t be a problem for most people to get residency in this Central American country.
Nicaragua
Nicaragua is a great country to live in. It has many of the same benefits as countries like Costa Rica, Panama and Ecuador but at a fraction of the cost.
You can find modern, comfortable houses throughout Nicaragua for a fraction of the price you’d pay in other countries.
The country’s territorial tax system means that you won’t have to pay any taxes on foreign income.
Residency is relatively easy to get and will allow most people the opportunity to live tax free in one of the cheapest countries with territorial tax in Latin America.
Paraguay
Paraguay is another of the countries with territorial tax in Latin America offering a low cost of living and warm weather year round. Paraguay’s capital Asuncion has modern amenities, great restaurants and even some nightlife making it an appealing destination for expats looking to get away from big cities like New York or Sao Paulo. And you won’t have to give up too much living in Asuncion.
Paraguay’s territorial tax system means you won’t pay any taxes on foreign income as long as it wasn’t earned in Paraguay. And with the countries low cost of living, this could be a great place for retirees or expats looking for an inexpensive lifestyle.
Paraguay is also one of the easiest countries to get residency and even a second citizenship. You can get residency in Paraguay just by showing that you have a bank account in the country with a few thousand dollars.
Residency will allow most people to enjoy the country’s territorial tax system. Your foreign sourced income will be exempt from taxes in Paraguay.
Uruguay
Uruguay was one of the last countries in the world to introduce an income tax. Income taxes were only introduced in Uruguay in 2007. This was only for Uruguayan sourced income. All income from outside Uruguay was tax free. They amended this slightly in 2011, making dividends and interest from abroad taxable for residents. Other overseas income is still tax free.
See KPMG’s guide to taxes in Uruguay here.
So, if you like the idea of having a tax free existence on the beaches of Punta del Este, Uruguay could be for you.
