6 Least Tax Friendly Places to Retire

6 Least Tax Friendly Places to Retire
August 28, 2019 Felicity Anderson

6 Least Tax Friendly Places to Retire

If you are planning to settle down in a new country in your old age and make the most of your property gains and pension savings, then it is probably best to avoid one of the least tax-friendly places to retire.

When you retire and leave British shores, your income tax liability follows you and you will need to declare your taxable income in your new home country.

Many countries, especially those popular with retirees, such as Australia and Spain, operate double tax relief, meaning that you will not be subject to income tax on your pension in both the UK and your new home.

There are, however, some countries that do not operate double tax relief. There are also other taxes to consider too, such as local sales, property, inheritance and capital gains tax.

Today CashLady explores 6 of the least tax-friendly places to retire.

The least tax friendly places to retire

1. Germany

Offering great healthcare and a high standard of living, Germany is one of the most popular countries to live in Europe.

It is, however, subject to high taxation, with full income tax liability for anyone living there, no matter whether the money was earned in Germany or at home.

The taxes on your pension can be as high as 45%, even if you come from a country like the UK, which has a dual tax agreement in place.

2. Belgium

Another European country with much to offer retirees, such as reasonable property prices, great healthcare and high quality of life, Belgium is also one of the highest-taxed.

Rental income from property and capital gains are not taxed heavily but additional pensions savings and inheritance are subject to high levies.

3. Italy

6 Least Tax Friendly Places to Retire

It is a sun-soaked country that has it all, from beautiful scenery and delicious food to a wonderfully laid back way of life.

Unfortunately, Italy also has high taxes. An income tax of 48.8% puts it up there as one of the most heavily taxed countries in the world.

The good news is that while pensioners are still taxed on their income, the rates have just recently relaxed with the beginning of a new tax regime rolled out by the government earlier this year.

Retired immigrants who have not been resident in Italy for the last five years and are in receipt of a pension could be eligible for a 7% flat-rate tax on all their foreign income.

There are, however, several eligibility rules and they must move to one of the specified regions in central or Southern Italy.

4. India

While there is much to be enjoyed about relocating to India, it lacks support for less well-off retirees and there is a number of barriers to attaining visas, purchasing property, inheritance and managing a private pension.

It is also subject to the highest sales tax in the world, with sales rates on goods and services ranging up to 40%.

The tax system is a little more complicated than in many other countries and the way you are taxed depends on your immigration status.

Residents, for example, are taxed on all worldwide income, including pensions but they can be subject to special treatment. UK pensions can be transferred under a system called Qualifying Recognised Overseas Pension Schemes (QROPS).

These schemes are approved by the HMRC and are designed to help retirees access their pension from anywhere in the world.

5. Switzerland

6 Least Tax Friendly Places to Retire

Switzerland’s taxes are generally relatively low, but its taxation system is complex and subject to change.

You may be taxed depending on the area in which you live and your immigration status. Switzerland is divided into 26 cantons, and each canton has autonomy over its own immigration process.

Switzerland does consider pension income to be taxable and retirees moving there can choose between two options on how they will be taxed.

You can choose to be taxed just like everyone else, deducting a percentage of your income every month or you can pay a lump sum on arrival in the country.

6. Iceland: least tax-friendly retirement choice

Iceland is a unique and beautiful country, but it is undoubtedly an expensive place to retire to.

The UK has a double-taxation agreement with Iceland to ensure people do not pay tax on the same income in both countries.

While this will free up your pension funds, your savings will be stretched by the high cost of living, which is down to a  24% standard rate of sales tax and hefty costs of imported food, which are passed onto consumers.