Is a second residence the same as Tax residency? Why Is It Important to Understand These Concepts?
If we analyze the sociopolitical situation worldwide, it’s clear that some countries stand out from the rest in terms of offering greater social, legal, and economic security. Digging deeper into this matter, questions such as, “Is it possible to have more than one residence?” “Is it legal to have more than one tax residence?” “How can I change my tax residence?” “How can I have more than one tax residence?” come to light and generally, you won’t find on the web an honest answer that suits your needs.
We will next explain to you the whole process of how to obtain a tax residence easily and quickly, and also how to acquire more than one residence.
Before diving deep into the subject, I want to position you on the importance of having a tax residence in multiple countries. Therefore, I’m going to tell you a mini story that will surely make you see everything in a different light.
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Multiple Residences to Protect Your Integrity
At the beginning of 1975, Lebanon, a country that is 200km away from where I am standing in Cyprus, experienced a brutal civil war between its Muslim and Christian inhabitants. The local population was caught in an unprecedented spiral of violence, and many had no choice but to migrate to a new country as refugees.
In this country lived Ara Malikiam, an Armenian-origin violinist, whose excellent musical talents had earned him a scholarship allowing him to leave the country just before the outbreak of the war to relocate to Germany.
Like Malikiam, people with resources who had previously obtained second residences in other parts of the world were able to migrate under much more favorable conditions than those of refugees, thereby rebuilding their lives much more quickly. Due to his move to Europe, Malikiam found himself on a new continent in the midst of economic boom and successfully developed his career as a famous violinist in an environment conducive to prosperity.
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A Second Residence Abroad for Protection?
Given all the conflicts worldwide, immigration, inflation, crime among so many factors can make the country where you live peacefully with your family change negatively from one moment to the next, forcing you to become an expatriate. It’s a fact: Living in a single country limits you and exposes you to many risks.
Malikiam came to a prosperous European territory, but think about what is happening in Europe, gradually. Economic crisis, political instability, increasing tax pressure, loss of rights, legal insecurity, the threat of terrorism, massive migration.
We don’t have to go far back in history to see the importance of having a second residence. And it’s a story that touches us closely; how many of our relatives or acquaintances had to migrate to Latin America in search of opportunities after World War II, only to find years later that the era of great economic boom in Latin America had ended, and it was necessary to migrate again.
It’s now us in Europe who must migrate again and look for a new residence, to have everything prepared for the moment when the situation becomes difficult to save our assets and our family. So, from now on, shouldn’t we be making a plan?
Advantages of Having a Second Residence
Or even better, several. Because having multiple residences gives you the possibility to choose where you want to live, according to your preferences and needs. It offers you the option to optimize your taxation, paying less in taxes and taking advantage of incentives. It provides the protection of diversifying your assets, reducing the risk of confiscation or devaluation.
Although many people confuse a second residence with fiscal residence, they are actually distinct concepts with different implications.
Is a Second Residence the Same as tax Residency?
Even though many confuse a second residence with fiscal residence, they are in fact different concepts with different implications.
A second residence implies having an investment in another country, whether it be a home or a part of your business. Fiscal residence is the place where you pay your taxes, which depends on various factors, such as the time you spend in a country, where your economic activity is located, or where your family home is.
Having a second residence does not imply changing your tax residency, nor vice versa. Regarding the application process, it is not as complicated as some people make it seem; in fact, some countries require quite simple steps.
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5 Countries that Facilitate the Process of Obtaining a Second Residence
Today we will look at 5 countries that facilitate the process of obtaining a second residence and also have an attractive feature: their tax conditions are quite appealing.
Paraguay
We start with a South American country, a region that we have mentioned on several occasions for its stable economy and low tax pressure. Obtaining residence in this country is relatively easy. Simply spending one day in the country will grant you your temporary residence, and you won’t need to return until two years later to then obtain your permanent residence, the same one that will lead you to a Paraguayan passport.
Philippines
If Latin America doesn’t convince you, there’s also an Asian option: the Philippines, a country not often discussed in terms of second residences but that actually has a quite solid and effective system. In this region, there are two options for obtaining a second residence: the first involves having at least $20,000 in a local bank. And the second includes investing at least $75,000 in the country, which allows you to have a special residence for investors and enjoy its benefits.
Now, if you still want to be in a country on the old continent, you could set your sights on Montenegro, where the process is much easier. In Montenegro, you can opt for residence either by creating a company where you are the director or by acquiring real estate. Additionally, Montenegro offers attractive conditions, such as tax rates ranging from 9% to 15%, one of the lowest in the region.
Georgia
Then, between Europe and Asia, there’s also a very solid option in Georgia, where you can become a resident by investing at least $300,000 in the agricultural, real estate, or commercial sector. The biggest advantage in Georgia is that they don’t require monthly income or annual turnover requirements.
With this, you can obtain your residence, which also offers favorable taxes, because you will only pay between 1% and 3%, depending on the industry factor you manage.
United Arab Emirates
The United Arab Emirates is also a country with great opportunities, especially because it allows for a more agile second residence, only requiring that you sponsor a company. Which will then pay only 9% corporate taxes.
If you’re looking for new growth opportunities in the European Union, we can put you in touch with a tax advisor in Madrid or a tax advisor in Barcelona, who can answer all your questions and prepare all the necessary documentation to start. If you need more information related to obtaining a fiscal address abroad for your company in Montenegro, Romania, or Cyprus, Contact us.
