3% Tax in Europe’s Oldest State
San Marino is a little-known country, which is surrounded by Italy. It’s possible to move to San Marino as a tax efficient alternative to residency in Italy.
About San Marino
San Marino is the oldest surviving state and constitutional republic in the world. It was founded in 301 AD. The country is a microstate and has territory of 61 sq km. It’s the 3rd smallest state in Europe after Vatican City and Monaco. The country is landlocked and surrounded by Italy. The population of San Marino is around 34,000. It uses the Euro as its currency. San Marino has been a neutral country since 1815. The country does not have a King or a President, instead it has 2 Captains Regent who are elected by the Grand and General Council for a 6 month term.
The nearest city to San Marino is Bologna, which is 14km away. The city of Florence is 97km from San Marino.
The institutions of the Republic of San Marino
Taxes in San Marino
San Marino is not a zero tax country. But it does have some of the lowest tax rates in Europe. Tax rates range from 9% to 35% on incomes over €80,000. Dividends from overseas companies are taxed at only 3%. That means someone with a business outside San Marino who receives dividends of $1m would pay only $30,000 in taxes.
San Marino also has the lowest corporate tax in Europe. The headline rate is 17% but there’s a 50% reduction on this for the first 6 years, giving an effective rate of 8.5%. They also have special deals for high tech companies, with zero tax for the first three years, and lower taxes for the following 9 years.
Investment funds registered in San Marino are exempt from income tax. There is a capital gains tax of 8%, although many exemptions exist. Anyone planning to move to San Marino could easily arrange to shelter the majority of their income from tax.
How to Get Residency and Move to San Marino
Residency in San Marino is not difficult to get. The San Marino government is keen to attract investors who provide jobs for local residents. The easiest way to get residency is with a bank deposit of €600,000. Alternatively you can get residency by buying a house for at least €500,000. You can buy a less expensive house and refurbish it. The renovation costs will count towards the €500,000. It’s also possible to invest in a business start up that creates local jobs. Investment amounts can be a slow as €75,000 in the first year.
Citizenship of San Marino
Citizenship of San Marino is one of the most difficult in the world to get. Like Europe’s other microstates they’re not keen on dishing out passports to newcomers. If you want citizenship by naturalization you’ll have to wait for 30 years. That’s cut in half if you marry a citizen. There are dozens of better alternatives than a move to San Marino to get citizenship.
San Marino is an alternative to Italian residency. The taxes are lower than in Italy and you still have the benefits of great scenery and delicious Italian food. Incentives are strong for anyone who wants to start a business there. San Marino is better located than Andorra but not as glamorous as Monaco. There are better alternatives in terms of low taxes and citizenship opportunities for most people. But spending a few months every year in this microstate as a tax residency could be very pleasant.