What Are the Tax Implications of Dual Citizenship?

Having dual nationality, and therefore, dual citizenship, is undoubtedly an advantage for the person involved: greater freedom of movement, the possibility of entering more countries without a visa, etc. But what are the tax consequences from a tax perspective?

Generally, taxes are applied in the country where you earn your income. For example, if you are a European citizen and engage in agricultural activities in Chile, you will have to pay taxes in Chile for that income.

Continuing with the same example, if that citizen decides to return to their country of origin, they will have to demonstrate the source of their income there to avoid being taxed again for the same income, which is known as “double taxation.”

The general rule in this matter is that taxes are generated in the country where you generate your income. For example: if you are a European citizen but have agricultural activities in Chile, you pay taxes on that income in our country.

Following the previous example: if that citizen decides to return to their country of origin, they must demonstrate the origin of their income there, thus avoiding paying taxes again on that income, which is called “double taxation.”

Each country has its rules to avoid double taxation. In the case of Chile, these rules seek to make our country more attractive to foreign investors and, at the same time, encourage Chileans to invest in other countries.

Chile currently has 25 Double Taxation Agreements with as many countries, including Spain, Portugal, and a dozen European nations, according to the Secretary of International Economic Relations.

What if you decide to opt for residency or citizenship in Europe?

Whether through a Golden Visa, a Digital Nomad visa, or if you want to take your business to the Old Continent, you will also encounter rules that seek to prevent double taxation, depending on the specific case you find yourself in.

For example, in the case of Spain, in addition to the aforementioned agreement with Chile to avoid double taxation and prevent tax evasion regarding income taxes, there are local regulations that complement it.

An example is the so-called “Beckham Law,” which contains a tax benefit under which foreigners can pay lower taxes and, at the same time, are exempt from declaring profits produced outside the country.

Under this law, foreigners only pay taxes on their assets and assets located in Spain, regardless of the assets – stocks, financial investments, properties, and bank accounts – they own abroad.

If you remain as a Digital Nomad in the Hispanic country, you are also covered by this law: except for the income you must demonstrate to obtain the visa, you can access an exemption from the tax on other income for 5 years.

In the case of Portugal, this country also has an agreement to avoid double taxation with Chile, in force since 2008. But there are other rules that seek to attract foreign investment.

For a long time, the regime par excellence in this regard was the Non-Habitual Residency (NHR) regime. But this rule became ineffective as of this year 2024, remaining only for those who obtained it before the date.

However, there is another visa that, in qualified cases, allows access to tax benefits similar to the old NHR: it is called the HQA Visa, for “highly qualified activities.”

Those eligible for this visa are subject to a fixed tax of 20% on any income generated in Portugal, for a period of 10 years. Additionally, for the same period, the interested party is exempt from taxes on their income from abroad. These benefits are aimed at attracting highly qualified professionals for areas such as science, innovation, and entrepreneurship.

If you are interested in learning more about the topic, schedule a meeting with our team. Whether for a Golden Visa, as an entrepreneur, or to retire in Europe, at AIM Global, we are experts in social mobility. We have the best professionals to help you with your project of becoming a citizen of the world.

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