Panama, Georgia, Bahamas, Andorra and Portugal: five tax models compared.
Summary
Introduction
The first instinct of an entrepreneur considering relocating is to compare tax rates. However, it's the structure of the tax system , far more than the stated percentage, that determines what you'll actually pay. A country that taxes only local income at 20% may prove more advantageous than one that taxes your entire worldwide wealth at 10%.
Panama, Georgia, the Bahamas, Andorra, and Portugal illustrate five different tax structures. Strict territoriality, exclusion of foreign income, complete absence of income tax, capped rates, or sector-specific exemptions: each caters to a specific business profile . Confusing them leads to costly, sometimes irreversible, trade-offs.
We recently detailed the concrete steps for a successful tax transition for entrepreneurs . This comparison is a natural extension of that: once the method is known, you still need to choose the jurisdiction whose mechanism corresponds to your business model.
The rates cited here are those of current local law, based on publicly available and verifiable data. They change, sometimes rapidly, and only make sense in relation to your specific situation . No figure can replace a case-by-case analysis.
Three tax principles that should not be confused
A state can impose taxes according to three distinct principles. Territorial taxation only taxes income generated within its national borders and deliberately ignores the rest. Worldwide residency, on the other hand, taxes all your income as long as you are a tax resident, regardless of where it is generated.
Between these two extremes lie special regimes, which temporarily apply preferential treatment to newly arrived residents. Portugal provides the most discussed example of this in Europe. These systems are by nature subject to revision and rarely permanent , which necessitates planning for the future.
Why the displayed rate is never enough
A tax burden is calculated on a base amount, never on a single percentage. Two entrepreneurs operating in the same country can face very different tax rates depending on the nature of their income: dividends, capital gains, or executive compensation. It is this combination that determines the actual tax burden .
In addition, there are bilateral treaties, which allocate the right to tax between two states and eliminate double taxation. The concept of atax treaty should be understood before any arbitration, as it frequently takes precedence over the domestic law of the countries involved.
Panama: Territoriality to the very end
Panama has one of the clearest territorial systems in the world. Foreign-sourced income is not taxed, regardless of its nature or the beneficiary's status. The corporate tax, set at 25% on profits from Panamanian sources only , excludes any internationally oriented activity.
For an entrepreneur whose clientele is entirely located outside the country, the mechanism is straightforward and easy to document. However, the activity must actually be conducted from abroad and not managed from a Panamanian office, otherwise it risks being reclassified as locally sourced income.
Administrative residence and tax residence
Panama offers several pathways to obtaining a residency permit, some of which are considered accessible to citizens of partner countries. However, holding this permit does not equate to tax residency: that requires actual presence and a verifiable center of interests . Many applications fail precisely because of this distinction.
Our work on expatriation as an entrepreneur in Panama details the conditions for obtaining residency permits and the reporting obligations that remain in effect on the French side. Local VAT, ITBMS, remains payable at a rate of 7% on transactions carried out in the country.
Georgia: SME status and foreign-source income
Georgia combines two mechanisms rarely found together in a single system. The small business status allows a sole proprietor to be taxed at 1% of their turnover below an annual ceiling, while the standard income tax remains a flat rate of 20%.
Companies, on the other hand, operate under a model known as the Estonian tax system: profits are only taxed upon distribution, at a rate of 15%. As long as the profits are reinvested in the business, no further taxation occurs. This mechanism naturally favors companies in a growth phase .
For resident individuals, foreign-sourced income is generally exempt from Georgian taxation. This combination explains the country's continued appeal to digital freelancers and online service providers.
The Georgian framework for entrepreneurial expatriation in Georgia requires rigorously classifying the source of each income. A poorly drafted contract can shift benefits to local sources and negate the expected advantages of the scheme.
Bahamas: No income tax
The Bahamas levies no personal income tax, capital gains tax, or inheritance tax. Public revenue is based on VAT, set at 10%, customs duties, and property taxes. The model is therefore one of fully embraced indirect taxation .
Since the implementation of the rules stemming from the OECD's Pillar Two, very large multinational groups have been subject to a national supplementary tax aligned with the minimum rate of 15% . Sole traders and SMEs are not affected by this measure, which targets only large groups.
The cost of living as an adjustment variable
The absence of income tax says nothing about the true cost of settling in. The archipelago imports most of its food and beverages, which has a lasting impact on a resident's daily expenses. The trade-off therefore hinges as much on the cost of living as on taxation .
Permanent residency is primarily obtained through real estate investment exceeding a regulatory threshold, with expedited processing for the most significant cases. Our approach to entrepreneurial expatriation to the Bahamas incorporates these conditions from the initial assessment phase, before any acquisition decision is made.
Andorra: capped rates, physical presence required
Andorra has built a system with capped rates rather than a zero-rate system. Personal income tax is capped at 10%, corporate tax is also capped, and the local VAT, the IGI, is among the lowest in Europe at 4.5% . The principality is no longer a free trade zone but a treaty state.
This positioning changes the very nature of the case. Andorra has signed double taxation avoidance agreements and applies the automatic exchange of information, which makes the arrangement perfectly transparent to the French tax authorities . Transparency is an asset here, not a constraint.
Active or passive residence: two distinct regimes
Active residency implies working on-site and a substantial annual presence. Passive residency, reserved for the non-working population, requires a shorter minimum stay but demands financial guarantees and insurance coverage. The choice between the two determines all subsequent arrangements .
An entrepreneur who retains a French clientele must verify that their Andorran company has genuine substance. The entrepreneurial relocation process to Andorra systematically involves this examination; otherwise, the risk of establishing a permanent establishment in France remains undiminished.
Portugal: After the NHR, the IFICI regime
The non-habitual resident (NHR) scheme, long emblematic of Portugal's attractiveness, is closed to new arrivals. It has been replaced by the IFICI scheme, often presented as NHR 2.0 , whose scope is significantly more restrictive than that of its predecessor.
This new system applies a flat tax rate of 20% to Portuguese income from eligible sectors, primarily research, innovation, and certain highly skilled professions. Foreign-sourced income is exempt, with the notable exception of pensions .
A sector-specific system, not a universal system
Eligibility is based on the nature of the business activity and registration with specific organizations. Entrepreneurs whose business does not fall into the listed categories are subject to the standard progressive tax scale , which is among the highest in Europe. Therefore, prior verification is crucial.
Corporate tax has also been reduced to 20%, with a lower rate applicable to the first tranche of profits for SMEs. Our analysis of entrepreneurial relocation to Portugal compares these factors with the actual cost of setting up a business in Lisbon or Porto.
Exit tax and Article 4B: what France considers
Leaving France is never simply a matter of changing your postal address. Article 4 B of the French General Tax Code defines tax residence by the household, the principal place of residence, the professional activity, and the center of economic interests. Only one of these criteria is sufficient to maintain a connection to France.
In addition, there is the exit tax under Article 167 bis, which makes unrealized capital gains on shareholdings taxable when certain ownership thresholds are exceeded. A deferral of payment exists, particularly for investments within the European Economic Area, but this is accompanied by annual reporting obligations, the failure to file of which is heavily penalized.
Economic substance and abuse of rights
The tax authorities examine the concrete reality of the establishment: premises, employees, management decisions made locally, and contracts signed locally. A company lacking substance becomes a disguised French permanent establishment in the eyes of the auditor. The line between tax avoidance and abuse of law is quickly crossed when the arrangement has no other purpose than tax avoidance.
The automatic exchange of information, via the common reporting standard, has made these checks almost automatic. The five jurisdictions studied here participate in it, which mandates complete transparency from the first year of residence.
Choose according to your activity, not according to the rate
A software publisher, an independent consultant, an investor, and an industrial group executive do not all face the same constraints. The first seeks favorable treatment for reinvestment, the second simplified reporting, the third capital gains regime, and the last a robust tax treaty . No single jurisdiction ticks all the boxes.
Three questions to consider before any arbitration
Where are your clients actually located, where will your management decisions be made, and what portion of your assets are already established? Answering these three questions typically eliminates half of the options considered. The rest involves structuring your strategy , not comparing percentages.
The timing is just as important as the choice itself. A sale planned in the medium term, a dividend distribution or a fundraising requires precise sequences, otherwise taxation may arise at the wrong time .
Comparison of the five jurisdictions
The table below summarizes the structuring parameters of each system. It does not replace a situational analysis, but allows the logics to be situated in relation to each other .
Jurisdiction | Taxation logic | Reference rate | Suitable profile |
Panama | Strict territoriality | IS 25% on local source | Clientele entirely outside the country |
Georgia | Foreign source outside the scope | 1% SME, 20% IR, 15% distribution | Independent and growing company |
Bahamas | No income tax | 0% Income Tax, 10% VAT | Established assets, high mobility |
Andorra | Residence, capped rates | 10% IR and IS, IGI 4.5% | Proximity to Europe desired |
Portugal | Sectoral IFICI regime | 20% flat-rate tax eligible, IS 20% | Research and innovation profiles |
The thresholds, ceilings and eligibility conditions vary from year to year. Checking the current information is essential before making any decision .
Testimonial: A software publisher in Georgia
The head of a software publishing company, whose anonymity we are protecting, initially considered Dubai. His business, entirely reinvested in product development, did not foresee any distribution for several fiscal years .
The analysis revealed that the Georgian distribution-based taxation model was a better fit for its trajectory. The transfer was structured over twelve months, with a locally recruited technical team and a management contract signed on-site .
Two years later, the organization passed a document review without reservation. It wasn't the rate that made the difference, but the consistency between the chosen system and the reality of the business .
Frequently Asked Questions
Can one have multiple tax residences?
No, only one tax residence is considered at any given time. In the event of a conflict between two states, the bilateral convention applies successive criteria, including permanent home and center of vital interests . The tie-breaking rule systematically decides in favor of a single country.
Does the exit tax apply to all departures?
It targets taxpayers holding significant shareholdings at the time of their change of residence. Below the legal thresholds, it does not apply. An automatic deferral of payment exists for taxes owed to countries within the European Economic Area.
How long should a transfer take?
A realistic timeframe generally spans six to eighteen months, depending on the jurisdiction and the complexity of the assets. Rushing the process remains the primary cause of failure , as economic substance cannot be built in a few weeks.
Are these five jurisdictions tax havens?
None of them currently appear on the European list of non-cooperative jurisdictions. All participate in the automatic exchange of information, a key criterion used by international organizations. These lists are subject to change and should be checked regularly .
Should I create a company or remain a sole proprietor?
The answer depends on income level, reinvestment needs, and local distribution practices. Georgia and Portugal lead to different trade-offs on this specific point. The choice is made after careful calculation, never on principle .
How does a Coreway coaching program work?
It begins with a comprehensive assessment of your financial and professional situation, followed by jurisdiction selection, structuring, and ongoing support during the relocation process. The specific details are available upon request and can be tailored to your individual needs.
Are you hesitating between several of these jurisdictions? You can study your tax relocation with Coreway Consulting to compare each option with your business model.
Conclusion
Panama, Georgia, the Bahamas, Andorra, and Portugal do not fall into a single category ranging from highest to lowest taxes. They represent distinct tax structures , the relevance of which depends entirely on your income structure and the actual location of your business.
The right choice is never the lowest rate. It's about finding a balance between the chosen regime, your business model, and French exit rules .
