Countries that tax residents on local income only, ranked by Nomad Tax Index score
Countries that tax residents on local income only, ranked by Nomad Tax Index score
Territorial tax countries, one by one
1. Costa Rica
Remote workers on the Law 10008 stay permit pay no Costa Rican income tax on pay from abroad for up to 2 years, and a September 2026 bill would tax residents' foreign investment income.
Under Costa Rica's tax rules, foreign income is untaxed for new residents, and 183 days Source: taxsummaries.pwc.com, checked September 28, 2026. PwC, last reviewed June 30, 2026 in the country make you tax resident.
The 0% comes from the Law 10008 remote worker permit rather than the territorial rule: outside it, work physically done in Costa Rica is generally treated as Costa Rican-source. The permit runs 1 year and can be extended once if you spent 180 days there.
2. Georgia
Georgia taxes work done in the country but not foreign income: an individual entrepreneur in an eligible activity pays 1% of turnover up to GEL 500,000 (about $192,000) a year, and foreign dividends and gains are tax-free.
Under Georgia's tax rules, foreign income is untaxed for new residents, and 183 days Source: matsne.gov.ge, checked September 29, 2026. Tax Code Article 34(2) in the country make you tax resident.
The Georgian Tax Code treats services a resident supplies to clients abroad as Georgian-source, so remote work is taxed: at 20% by default, or 1% of turnover with small business status. Nationals of 94 countries can stay a full year without a permit.
3. Paraguay
Work done while living in Paraguay is taxed at 8% to 10% of net income even when every client is abroad, and foreign investment income is not taxed at all.
Under Paraguay's tax rules, foreign income is untaxed for new residents, and 120 days Source: dnit.gov.py, checked September 29, 2026. Law 125/1991, article 152: domicile is presumed at the place of habitual residence, presumed after more than 120 days. Law 6380 itself sets no day count for individuals, and Resolucion General 65/2020 sets none for the certificate; the certificate relies on the migration record in the country make you tax resident.
Under the tax authority's binding ruling No. 476, online work done from a home in Paraguay for foreign companies owes income tax and 10% VAT. Temporary residence has no income test.
4. Singapore
Singapore taxes a resident's trade income at 0% to 24% and leaves foreign income untaxed, but it has no visa for freelancers: the main route for a remote worker needs a salary of SGD 30,000 (about $23,500) a month.
Under Singapore's tax rules, foreign income is untaxed for new residents, and 183 days Source: iras.gov.sg, checked September 29, 2026 in the country make you tax resident.
The tax office taxes pay for work done in Singapore even for a foreign employer, so the territorial benefit is for investment income. There is no freelancer visa, and the ONE Pass needs a salary, not freelance income.
5. Malaysia
A foreign freelancer working from Malaysia for foreign clients is taxed there at resident rates of 0% to 30% after 182 days, while foreign income a resident brings in is exempt until December 31, 2036.
Under Malaysia's tax rules, foreign income is untaxed for new residents, and 182 days Source: mdec.my, checked September 29, 2026. MDEC FAQ: after 182 days a DE Rantau holder is resident under section 7 of the Income Tax Act 1967. PwC (last reviewed June 16, 2026) gives the same 182 days in the country make you tax resident.
Malaysia taxes a foreign freelancer's work there from the start: 10% withholding for the first 182 days, then resident rates. Stays of 60 days or fewer in a year are exempt, according to the DE Rantau Pass FAQ.
6. Hong Kong
A sole trader in Hong Kong pays 7.5% profits tax on the first HKD 2,000,000 (about $255,000) of profit from work done there, plus up to HKD 18,000 (about $2,290) a year of MPF, and nothing on profits arising abroad, dividends or capital gains.
Under Hong Kong's tax rules, foreign income is untaxed for new residents, and 181 days Source: ird.gov.hk, checked September 29, 2026. More than 180 days in the year of assessment (April 1 to March 31), or more than 300 days over 2 years in the country make you tax resident.
Hong Kong taxes profits from services performed there, resident or not, so a sole trader working from Hong Kong pays profits tax whoever the clients are. The Top Talent Pass needs no job offer and carries no other conditions of stay.
7. Panama
Panama leaves foreign dividends, interest and pensions untaxed, but the Index taxes remote work done in Panama as Panamanian-source: 29.3% of profit at $100,000 of revenue in income tax, educational insurance and social security.
Under Panama's tax rules, foreign income is untaxed for new residents, and 183 days Source: impuestospanama.com, checked September 29, 2026 in the country make you tax resident.
The remote worker visa assumes that work for foreign clients is foreign-source, but Panama's own regulations treat services performed in Panama as Panamanian-source, and no ruling settles which applies. Foreign investment income is untaxed for every resident either way.
What territorial taxation covers, and what it does not
Territorial systems tax by source, not by residence. Foreign dividends, interest and gains are the clear winners: Panama's return instructions have individuals subtract foreign-source income, Paraguay's income tax law leaves capital placed abroad outside income tax for every resident, and Hong Kong's profits tax does not reach profits arising abroad, even when they are remitted.
Work is different. In most territorial countries the source of pay for services is where the services are performed, so your laptop decides, not your client's address. Singapore, Malaysia, Hong Kong, Paraguay and Georgia all tax remote work done on their soil. Costa Rica's Law 10008 permit carves it out for its holders, and Panama's rule is disputed.
"Territorial means 0%": what holds and what fails
Holds
You live in Paraguay and hold a portfolio of foreign shares in a brokerage account abroad. Dividends and gains on capital placed outside Paraguay are outside its income tax, so that part of your income pays 0% for as long as you stay.
Fails
You move to Kuala Lumpur, keep invoicing clients in Europe and treat the fees as foreign income. Malaysia taxes work done from Malaysia, withholding 10% for the first 182 days and then charging resident rates of up to 30% on the profit.
Tax residency in a territorial country
A territorial rate helps only once you are resident there and no longer resident at home. Paraguay presumes residence after more than 120 days, Malaysia counts 182 days in a calendar year, Singapore, Georgia and Costa Rica use 183, and Hong Kong certifies people who ordinarily live there or spend more than 180 days there in a year of assessment.
The certificate matters because your former country will ask for proof. Paraguay's tax office issues one to residents with a tax ID, up-to-date filings, a Paraguayan ID card and a record of entries and exits, and Hong Kong's Inland Revenue Department issues a certificate of resident status for treaty claims. US citizens stay taxable in the US on worldwide income in all of these countries.
Using a territorial country as a remote worker
- Work out where your work is done: in Singapore, Malaysia, Hong Kong, Paraguay and Georgia, work done there is taxed there.
- Keep investment capital in accounts and assets abroad, since capital placed in the country produces local income.
- Choose the permit with the tax effect you need: Costa Rica's Law 10008 stay is the one here that exempts remote work pay.
- Count your days toward residence and ask for the tax residence certificate each year.
- Register and file locally for your work income, even where the rate is low.
Where you sit decides the source
Hong Kong taxes profits from services performed there whether or not you are resident, and Malaysia exempts only stays of 60 days or fewer in a year. A few weeks of work from a territorial country can create a local tax bill, even for someone who is tax resident somewhere else.
Near relatives: remittance systems and newcomer regimes
Some countries reach a similar result another way. Mauritius taxes Premium Visa earnings only when they are brought into the country. Uruguay's newcomer regime lets people who become resident from 2026 keep foreign dividends, interest and gains out of income tax for the year of arrival and the next 10 years, while taxing work done there at up to 36%.
Territorial countries are 1 of 3 routes onto the low tax countries list, next to countries with no income tax and flat or special regimes. For investors, Singapore and Hong Kong have no capital gains tax on individuals and also no inheritance tax, while Georgia and Paraguay exempt foreign gains.
How this list is ranked
Every country here has a territorial system, so the order comes from the Nomad Tax Index score, with ties going to the lower band at $100,000 of revenue. The bands tax the reference profile's work where it is done, which is why Singapore, Malaysia and Hong Kong show a real rate despite the territorial label, and why Panama waits for its source question to be settled.
David's note
I read "territorial" as good news about investment income and neutral news about work. If your income is fees for work you do at your desk, compare Paraguay's 8% to 10% or Georgia's 1% with the other low-tax routes, not with the idea of 0%. Remote work pay is truly untaxed only where a specific permit rule says so, as Costa Rica's does.
