Which countries do not tax foreign income in 2026? Learn about 9 jurisdictions with the territorial principle of taxation, residency requirements and tax nuances for businesses and freelancers

Living in one country and earning in another is a perfectly legal tax strategy if the jurisdiction applies the territorial principle of taxation. In such countries, taxes are paid only on income received within the state, while foreign income is not included in the tax base.

In 2026, despite the global trend towards taxation of global income, a number of countries continue to adhere to a purely territorial model. This makes them attractive to entrepreneurs, consultants, digital nomads and investors with international income.

Below are 9 countries where foreign income is not taxed, provided the source of income is correctly determined.

Regardless of the stage of development of the company, a personal business lawyer helps to make legally safe decisions, supports issues of taxation, corporate law and relocation of business abroad.

Order a consultation with a business lawyer and protect your company from tax and legal risks today.

What is territorial taxation?

The territorial system means that:

- Only income from local sources is taxed;

- Foreign income is not subject to taxation, even if the funds are brought into the country;

- The place of business plays a key role, not tax residency or citizenship.

TOP-9 countries with purely territorial taxation

Panama

Panama is one of the most famous territorial jurisdictions in the world.

- Local income tax: up to 25%.

- Foreign income: 0%.

- There is no foreign capital gains tax.

Even if the funds are received in Panamanian accounts or spent within the country, foreign income is not taxed. An investor visa allows you to obtain a PMP, and citizenship - after several years of residence.

Costa Rica

The country uses a classic territorial model.

- Employment: up to 25%.

- Business income: up to 30%.

- Foreign income: not taxed.

Remote work for foreign clients is usually considered foreign income if there are no local customers or business operations.

Paraguay

One of the simplest and cheapest tax systems in the region.

- Flat rate on local income: 10%.

- Foreign income: 0%.

The tax regime does not depend on the actual number of days spent in the country. Paraguay is often considered a basic jurisdiction for tax optimization in Latin America.

Belize

The territorial system works particularly well within special programs.

- Local income: up to 25%.

- Foreign income: 0% (within the QRP).

The Qualified Retired Persons program is suitable for people over 40 with proven foreign income. At the same time, the banking infrastructure requires careful planning.

Guatemala

A lesser-known, but tax-attractive jurisdiction.

- Local income: 5–7%.

- Foreign income: not taxed

There are simplified regimes for small businesses and freelancers. It is important to clearly distinguish the place of provision of services.

Nicaragua

A classic territorial model with strict rules on the source of income.

- Local income: up to 30%.

- Foreign income: 0%

Although the legislation is favorable, financial and political stability create additional operational risks.

Hong Kong

One of the most developed territorial systems in the world.

- Maximum rate: 17%.

- Foreign income: 0% (provided the activity is not carried out in Hong Kong).

The key is the place of performance, not the client or payment.

Macau

Separate administrative territory with very low taxation.

- Maximum rate: around 12%.

- Foreign income: 0%.

Suitable for entrepreneurs and self-employed individuals looking for a territorial model in Asia with lower entry thresholds than Hong Kong.

Bolivia

Formally a purely territorial system.

- Fixed tax: 13%.

- Foreign income: not taxed.

In practice, it is used less often due to the weak banking infrastructure and the lack of investment visas.

Important! Territorial taxation does not mean the complete absence of taxes. Errors in determining the source of income, actual presence or local clients can lead to taxation even of foreign income.

Countries with territorial taxation in 2026 remain a legal tool for international tax planning. However, the effectiveness of such a model depends not only on rates, but also on migration rules, the banking system and the actual location of the business.

Countries that do not tax foreign income open up great opportunities, but errors in business structure can lead to unexpected taxes and penalties.

A personal business lawyer will help you correctly determine the source of income, choose the optimal jurisdiction, register a company and minimize tax risks when doing business internationally.

Legal support is especially important when relocating a business, opening accounts and working with foreign clients.

Get individual advice from a business lawyer and build a tax-safe work model today.

Reminder! Are you planning to invest in real estate under the Golden Visa program? We have already told you which programs in 2025 have become the most profitable for investors. The article compares the UAE, Greece, Turkey, Latvia and Asian countries, the real return on real estate and key risks that should be considered before investing

Photo - generated by Gemini

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