Live in one country. Earn in another. Pay zero tax on foreign income.

In 2026, despite increasing global pressure toward worldwide taxation, 29 countries still operate tax systems that do not tax foreign-source income — either permanently, conditionally, or for extended exemption periods.

This guide by Citizenship Network explains where foreign income remains legally untaxed, how each system works in practice, and what trade-offs matter before relocating.

What Is Territorial Taxation?

Territorial taxation means a country only taxes income generated within its borders. Income earned abroad — salaries, dividends, consulting fees, capital gains — is excluded from domestic tax.

This differs fundamentally from residence-based systems (like the U.S., UK, Germany, or France), which tax worldwide income regardless of source.

Simple example

A French consultant living in Panama:

• Pays Panamanian tax only on Panama-source income

• Pays zero Panamanian tax on consulting income earned from Europe or the U.S.

The Four Territorial Tax Models You Must Distinguish

Not all “no foreign tax” countries work the same way. Classification matters.

1. Pure Territorial Systems

Foreign income is never taxed, even if remitted or spent locally.

2. Territorial With Carve-Outs

Foreign income is exempt unless deemed local due to activity location, service delivery, or incentive rules.

3. Remittance-Based Systems

Foreign income is taxed only when brought into the country.

4. Holiday / Time-Limited Exemptions

Foreign income is exempt for a fixed number of years, then partially taxed.

I. Pure Territorial Tax Countries (9)

These jurisdictions apply strict source-based taxation. Remittance does not matter.

🇵🇦 Panama

• Local tax: Up to 25%

• Foreign income: 0% (always)

• Capital gains abroad: 0%

Panama operates one of the world’s clearest territorial systems. Foreign income remains untaxed even if:

• Deposited into Panamanian banks

• Spent locally

• Transferred domestically

Residency: Friendly Nations & Investor Residency programs

Risk: Low — strong jurisprudence and banking clarity

🇨🇷 Costa Rica

• Local income: Up to 25% (employment), 30% (business)

• Foreign income: 0%

Remote work for foreign clients generally remains foreign-source if no Costa Rican customers or operations exist.

Residency: Investor Visa with moderate requirements

Advantage: Stable banking and legal clarity

🇵🇾 Paraguay

• Flat tax: 10% on local income

• Foreign income: 0%

One of the lowest local tax burdens globally under a pure territorial regime.

Residency: SUACE Investor PR (company setup, minimal capital)

Popular for: Entrepreneurs and consultants

🇧🇿 Belize (QRP Participants)

• Local tax: Progressive to 25%

• Foreign income: 0% under Qualified Retirement Program

Applies to individuals aged 40+ with qualifying foreign income.

Caution: Banking access can be restrictive.

🇬🇹 Guatemala

• Local tax: 5–7% (business), up to 7% (employment)

• Foreign income: 0%

Residency: Investor Visa → PR → citizenship

🇳🇮 Nicaragua

• Local tax: Up to 30%

• Foreign income: 0%

Residency: Immediate permanent residency

Challenge: Limited international banking

🇭🇰 Hong Kong

• Local tax: Employment max 17%

• Foreign income: 0% if duties performed outside HK

Income source is determined by where work is performed, not payer location.

Residency: Capital Investment Entrant Scheme (high threshold)

🇲🇴 Macao

• Top tax rate: ~12%

• Foreign income: 0%

Asia’s lowest marginal rate among territorial jurisdictions.

🇧🇴 Bolivia

• Flat tax: 13%

• Foreign income: 0%

Limited practical use due to infrastructure constraints.

II. Territorial Systems With Carve-Outs (12)

Foreign income is generally exempt, but classification rules matter.

🇸🇻 El Salvador

Foreign income exemption reinforced by incentive laws. Bitcoin adds complexity.

🇭🇳 Honduras

Foreign income generally untaxed, but sourcing rules require analysis.

🇸🇨 Seychelles

Foreign income exempt if non-Seychelles-source. Remote work requires caution.

🇳🇦 Namibia

Foreign income exempt unless deemed local — high classification risk.

🇬🇪 Georgia

Foreign income exempt, but work performed in Georgia may become taxable.

🇸🇿 Eswatini

Territorial system with broad deemed-source rules.

🇱🇾 Libya

Only local employment income taxed. No investment residency pathway.

🇨🇩 DR Congo

Foreign income exempt; employment-focused withholding system.

🇱🇧 Lebanon

Territorial taxation based on activity location.

🇲🇼 Malawi

Source-based taxation; no investment residency.

🇬🇼 Guinea-Bissau

Schedular territorial taxation; limited banking.

🇧🇼 Botswana

Territorial with limited foreign passive income taxation.

III. Remittance-Based Tax Countries (6)

Foreign income is taxed only when received locally.

🇸🇬 Singapore

• Foreign income taxed only upon receipt

• Capital gains generally tax-free

• Section 10L adds disposal-gain rules

🇹🇭 Thailand

• Since 2024: foreign income taxed upon remittance regardless of timing

• Privilege Residency offers long stays without PR

🇲🇹 Malta

• EU’s most famous remittance system

• Non-doms: foreign income taxed only if remitted

• Capital gains abroad remain untaxed

🇮🇪 Ireland

• Remittance basis for non-doms

• High rates when remitted

• Investor program closed to new applicants

🇲🇺 Mauritius

• Flat 15% upon receipt

• Capital gains always 0%

• Strong treaty network

🇬🇮 Gibraltar

• Tax cap system instead of classic remittance

• Foreign income often effectively untaxed

• Category 2 residency for HNWIs

IV. Time-Limited Foreign Income Exemptions (2)

🇺🇾 Uruguay

• Foreign income exempt for 10–11 years

• Afterward: dividends & interest taxed at 12%

• Business & consulting income often remains exempt

🇩🇴 Dominican Republic

• Foreign financial income exempt for first 3 years

• Investor residency offers fast PR and citizenship

Strategic Considerations Before Choosing a Territorial Country

• Where is work physically performed?

• How do banks treat foreign remittances?

• Is residency required for tax status?

• Is the exemption permanent or temporary?

• Are treaties involved?

Thailand (2024) and Uruguay (2025 proposals) show how quickly rules can change.

Final Thoughts from Citizenship Network

Territorial tax countries remain one of the most powerful — and misunderstood — tools in global mobility and tax planning.

However, success depends on:

• Correct income sourcing

• Residency structuring

• Banking access

• Long-term legal stability

At Citizenship Network, we advise clients on residency, taxation, and jurisdiction selection as a single strategy, not isolated decisions.

👉 Contact Citizenship Network for a confidential consultation on territorial tax planning, residency options, and cross-border structuring for 2026 and beyond.