Live Tax-Free in This Tropical Paradise

A Legit Way to Slash Your Global Tax Bill.

Last time I visited Costa Rica—a vacation several years back in the jungle near Arenal volcano—the term Pura Vida, or “Pure Life,” was plastered everywhere. I imagine that’s only because Vida Libre de Impuestos doesn’t really have the same ring to it. 

But for those, like me, looking to reduce their overall cost of living, I’d argue the longer phrase is a much better ad campaign. 

Vida libre de impuestos means “tax-free living” in Spanish, and that’s exactly what Costa Rica offers as part of the country’s new digital-nomad visa program.  

As a U.S. citizen, you’ll still owe some taxes to Uncle Sam. But combine Costa Rica’s program with a properly structured financial life back home and you can legally create a global tax rate that tops out at a miniscule 10% to 12%. 

Fully legit. 

Now, let me say here that this is not a column about Costa Rica or its digital nomad program. Costa Rica’s program is just a useful example of what’s possible when you take tax matters into account as part of a holistic examination of moving overseas to live and work. 

Do your research, and you can radically reduce your tax obligations. In some countries, that’s because of the way local tax code treats residents. In other countries, it’s a special tax situation in place specifically for digital nomads. 

Either way, you create a low-tax life that lets you keep more of your money. 

In Costa Rica, that situation lasts just two years. In Portugal, it lasts a decade. In the Cayman Islands, Dubai, and elsewhere, it’s permanent.  

Let me highlight once again that this is a totally legal and legit path to tax minimization. It’s not based on stretching the bounds of credulity. It’s not creative accounting. This is all on the up-and-up, and fully supported by local and U.S. tax laws. 

I focus on this for today’s dispatch because I know there are lots of people like me who are looking for ways to stuff their nest egg with as much cash as possible before the tides of time ebb and we have to retire.  

To that end, I’ve built a step-by-step, how-to presentation on this topic that I will be speaking about at International Living’s Ultimate Go Overseas Bootcamp conference in Denver this September. (Details on how to attend here.) 

It’s a topic near and dear to my heart. 

As I’ve noted in previous columns over the years, my retirement accounts suffered mightily at the hands of a divorce. Then, I returned to school at UCLA to pursue my dream of writing screenplays, which only snarfed up even more of my nest egg. And living on your savings in Southern California while going to school is not the cheapest plan in the world.

For me, moving to Europe, while a lifelong dream, came with an ulterior motive: Reduce my cost of living to increase my savings.

A big part of that centered on the local tax situations in the countries I researched.

Taxes are a key reason I originally chose Prague. The Czech tax plan hugely benefits freelance, self-employed workers. I get to write off the first 60% of my income as the costs of funding my self-employed life. On the remaining 40%, I pay a flat 18%. It’s a fantastic tax-reduction plan for freelance workers looking to keep more of their income, which they can then funnel into retirement accounts.

Now, however, the tax world is changing in fundamental ways because of the rise of digital nomadism.

More than 50 countries currently offer digital nomad visas in some fashion. As such, competition for nomads is fierce and countries are using various incentives to attract them. Some countries are offering nomads a larger amount of time in-country without having to reapply for a visa. Others are offering tax incentives.

In fact, tax incentives are part of the reason I’m now relocating my life and family to Portugal.

The Iberian country’s new digital nomad visa has a particularly attractive tax benefit for new arrivals. Because of that benefit, my global tax rate for the next decade will plunge—legally—to a shockingly low number well below 15%. (I’ll be doing a special presentation on this at the Denver conference.)

Ultimately, today’s dispatch is just an amuse-bouche, a little something to get you thinking, “What if…”

What if I do change my tax residency—how would my life and savings improve?

I’m here to tell you from personal experience that both improve markedly.

My personal savings rate is sharply higher, and my retirement accounts are noticeably plumper. In part, that reality is tied directly to the tax benefits I purposefully chased in moving to Europe on a digital nomad visa.

Pura vida… only from an impuesto perspective.