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0% tax on foreign income: territorial countries, and the catch for remote work

Territorial countries tax only local income, so foreign income can go untaxed. The catch: in most of them, work you do while living there counts as local, whoever your client is.

Last checked October 27, 2026 · 4 min read

How territorial tax works

A territorial country taxes its residents only on income from sources inside it. Income from abroad is outside its tax, which is why these countries appear on every list of 0% options.

The word that matters is source. Most territorial countries place income from work where the work is done, not where the client is or where you are paid. A remote worker living in the country and working from a laptop there is earning local income.

So the 0% reaches foreign investment income, such as interest, dividends and gains on assets held abroad, and work genuinely done elsewhere. For work done inside the country, you need a specific exemption.

Paraguay

What is taxed
Personal income tax applies only to income from activities carried out in Paraguay. Interest and dividends count only when the capital is placed in Paraguay, so foreign investment income held personally falls outside it.
Work
Work done in Paraguay is Paraguayan-source whoever pays for it, and so is work done abroad for Paraguayan clients. Income from personal services is taxed above a yearly threshold (G 80,000,000 when the law was enacted in 2019), at 8% to 10%.
Residence
Temporary residence lasts up to two years, renewable, and comes before permanent residence; proven investors can skip it. The law sets no day count for tax residence. A tax residence certificate needs a tax number (RUC), filings up to date and a record of your entries and exits from the migration office.

Panama

What is taxed
Income produced in Panama, wherever it is received. Foreign income is outside it.
Work
We found no official ruling that exempts work done in Panama for foreign clients. Plan on it being taxable.
Remote worker visa
A non-resident visa for nine months, renewable once, with at least B/.36,000 (US$36,000) a year of foreign-source income, health insurance and a sworn statement not to take work in Panama. It carries no tax exemption of its own.
Residence
Buying real estate worth B/.300,000 with funds from abroad gives a two-year permit and then permanent residence. Tax residence takes more than 183 days in the year, or a permanent home in Panama.
Banks
The EU removed Panama from its list of non-cooperative tax jurisdictions on October 9, 2026, which lifts the extra scrutiny European banks had to apply to Panamanian transactions.

Costa Rica

What is taxed
Income generated in Costa Rica, including from services provided there. Foreign investment income is taxed only for certain companies in multinational groups.
Work
Services rendered in Costa Rica are local, so a remote worker living there is taxed, except under the digital nomad law, whose status carries a total income tax exemption. It requires US$3,000 a month (US$4,000 with family) and lasts one year, renewable once.
Pending
On September 23, 2026 the government filed bill 25.796, which would tax residents, individuals included, on foreign investment income. It has not passed.

Georgia

What is taxed
Foreign-source income of a resident individual is exempt.
Work
This is the trap. Services count as Georgian-source when they are performed in Georgia, and also when the provider is a Georgian resident and the client is abroad. A resident’s income from foreign clients is Georgian income.
Small business status
Individual entrepreneurs with small business status pay 1% of turnover up to GEL 500,000 a year. Some activities are excluded, consulting among them.
Residence
183 days in any continuous 12 months, or a separate status for high-net-worth individuals.

Malaysia

What is taxed
Foreign income received by individuals is exempt until December 31, 2036, provided it was taxed in the country it came from, with exceptions where that country does not tax it.
Work
Work done in Malaysia is Malaysian income wherever you are paid. Under the DE Rantau nomad pass, foreign remote workers owe no Malaysian tax for stays up to 60 days; from 61 days their income is taxable.
DE Rantau pass
US$24,000 a year for technology roles or US$60,000 for others; 3 to 12 months, renewable once, up to 24 months in all.
Residence
182 days in the year, with alternatives for linked periods. The tax residence certificate is free and takes about 10 working days.

A warning from Thailand

Thailand changed its rules in 2024. Residents are now taxed on foreign income earned from 2024 onward in whatever year they bring it into Thailand. A proposed relief was still a draft in October 2026. Territorial rules change, which is why every guide here carries a date.

Where 0% really applies

Foreign investment income
Untaxed in Paraguay, Panama, Costa Rica and Georgia, and in Malaysia when it was taxed where it came from.
Remote work done in the country
Taxed in Paraguay, Panama, Georgia and Malaysia. Exempt in Costa Rica under the digital nomad status.
Work for foreign clients done abroad
Outside the tax in Paraguay, Panama and Costa Rica. Not in Georgia, where a resident’s services to foreign clients are Georgian income wherever they are done.

Sources

Checked against these sources on October 27, 2026. Rules change: check them again before you act.

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Questions, answered.

01Can I live in Paraguay and pay 0% on my remote income?

Not on work you do while living there: it is Paraguayan-source and taxed above the threshold, at 8% to 10%. What goes untaxed is foreign investment income you hold personally.

02Which of these gives a remote worker 0% on their work?

Costa Rica, under the digital nomad status, for up to two years. In the others, work done in the country is taxed; Georgia’s 1% small business status is the lowest rate, for activities that qualify.

03Do I still need to leave my home country properly?

Yes. A territorial country only taxes you less once you are resident there and no longer resident at home.

The rule is the start. Your facts decide the rest.

Tell us where you live, where you earn and what you are setting up. We will go through how the rules apply to you on a call.

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