Case Studies

How to Become a Tax Resident of Dominica in Two Weeks

In 2020, Kirill received Dominica citizenship by investment. A year later, he decided to transfer his business to Dominica and change his tax residence. It turned out that it is more profitable for him to pay income tax at the rates of Dominica, instead of the tax rates he was previously paying. Here's how we helped an investor become a tax resident in the Caribbean quickly and remotely.

Kirill, 69
A retiree, received Dominica citizenship in 2020
How to Become a Tax Resident of Dominica in Two Weeks

Why Kirill decided to change his tax residence

In 2020, Kirill and his wife each received a Dominica passport by investment. To get Dominica citizenship, they made a non-refundable contribution to the state fund of Dominica. The second citizenship in obtaining a Dominica second passport for Kirill and his wife was handled by the lawyers of Immigrant Invest.

In 2020, Kirill received about 7 million rubles after tax. Until January 2021, income tax in Russia was levied to a flat rate of 13%. Therefore, Kirill paid 910,000 rubles in income tax to the country’s budget.

of income tax paid by Kirill in Russia

In January of 2021, Kirill transferred his business to Dominica following advice of his tax and business consultants. Russia and Dominica don’t have a valid agreement on the avoidance of double taxation. If Kirill stayed a Russian tax resident but received income in the form of dividends from Dominica, he would have to pay the income tax twice in both countries.

Kirill thought about how to optimize the payment of taxes by changing tax residency. He read on the Immigrant Invest website what it means to get the status of a tax resident of Dominica.

Comparison of tax rates under the law of Dominica and Russia

Kirill received income from two sources. Most of his income came from stock dividends from the company he transferred to Dominica. He also collaborated with various companies by advising them on business issues. Kirill provided consultant services as an individual under civil law contracts.

Dividend income tax. Kirill received the bulk of his income in the form of dividends. Dominica tax residents do not pay dividend tax if the source of income is in Dominica. And non-residents pay the tax on global income at the rate of 15%/

In Russia, the personal income tax rate applies to dividend income and is 13%. The rule applies to the Russian tax residents.

Income tax under civil law contracts. Global income tax is levied by Dominica on a progressive scale of 15 to 35%. The rate depends on the amount of annual income.

From the 1st of January 2021, income in Russia is also taxed depending on the annual income of the tax resident. The tax return is filed before the 30th of April in the year following the reporting year. Therefore, in Russia, Kirill had to pay tax for 2021 already on a progressive scale.

Kirill's tax consultants have calculated how much income tax he needs to pay according to the rates of Dominica and Russia. To estimate the difference in tax expenses, they took 7 million rubles as the standard annual income. 5.5 million rubles are from dividends and 1.5 million rubles from the contracts.

The calculation showed that Kirill’s tax payments will be reduced three times if he pays income tax in Dominica.

Income tax for individuals in Dominica and Russia

On dividend income0%
for tax residents of the country

for non-residents
on income up to ₽5,000,000 per year

on income from ₽5,000,000 per year
if Kirill will change tax residence
to Dominica

If Kirill stays a Russian tax resident
payable for income in the amount of ₽5,500,000
On income under civil law contracts15%
on income up to EC$20,000
on income up to ₽5,000,000 per year
on income from EC$20,001
to EC$50,000

on income of more than EC$50,001
on income from ₽5,000,000 per year
payable for income in the amount of ₽1,500,000
Total payable for 2021₽333,000
if Kirill will change tax residence
to Dominica

If Kirill stays a Russian tax resident

How to become a tax resident of Dominica

On the 22nd of February 2021, Kirill consulted the Immigrant Invest lawyers. He wanted to understand how one becomes a tax resident of a second citizenship country.

Tax residency in Dominica is a three-step process. At the registration stage, it is not required to live on the island for more than 183 days per year.

Registration in Dominica
Registration of Tax ID
Obtaining a Tax Code

Registration on the island is required. The tax documents indicate the address of permanent residence in Dominica. To register, it is enough to rent a house for a long period of time, e.g. a year.

Tax ID is an individual taxpayer number. Upon receipt of the Tax ID, the person is entered into the electronic database of Dominica taxpayers. But unlike the Russian TIN, Tax ID still does not give the right to pay taxes to the budget of a Caribbean country.

Dominica Tax ID is also useful to open an account with a European or American bank. Financial institutions conduct due diligence and identity checks on new customers. Caribbean taxpayer checks are twice as fast because Caribbean countries provide comprehensive information on their citizens and tax residents upon request from banks.

Tax Code is received just in order to start paying taxes in Dominica. Only after receiving the Tax Code can the tax resident submit a returno the tax office on the island.

Lawyers warned Kirill that he would need to live on the island for more than 183 days a year to be able to pay taxes in Dominica.

The couple have already spent two months in Dominica in 2020. They loved the warm climate, sandy beaches and the untouched nature of the island. Therefore, Kirill was not hesitant about the prospect of spending a few more months in the Caribbean.

Life in the Caribbean is a fairy tale! My wife and I have been working without letup all our lives, so at least now we will rest. And the money saved from taxes will go on education for our grandchildren and to support our health.

Kirill is ready to live in Dominica for 183 days a year

Renting a house in Dominica

An investor needs to have a house on the island in order to register. Prices for buying a house or villa start at $130,000. Renting is several times cheaper: a three-bedroom apartment in the capital will cost from $900 per month.

Kirill did not plan to buy real estate or permanently live in Dominica, so he decided to rent a house.

Real estate specialists at Immigrant Invest had selected several properties for Kirill to choose from. The couple liked the two-storey cottage on the coast with two bedrooms and a balcony overlooking the sea.

The lawyers contacted the landlord in Dominica to check the legal transparency of the contract and the property. Kirill then signed a lease for a year for $14,400.

renting price for a house in Dominica for a year

Kirill did not have to open a bank account in Dominica to pay the rent. He transferred the payment from his bank account in Germany.

Dominica citizenship by investment and a change of tax residency: renting a house in the Caribbean
Kirill rented a cottage on the Caribbean coast in Roseau, the capital of Dominica

Tax residency of Dominica in a week

Tax ID. Immigrant Invest lawyers started preparing an application for Tax ID as soon as they received a copy of the rental agreement. To do this, they filled out an application form for the tax office of Dominica, which indicated the mailing address of the investor on the island. The lawyers also attached copies of the lease agreement and Kirill's Caribbean passport to the application.

The investor or his representative personally submits documents to the tax office of the island. Therefore, the lawyers transferred Kirill's documents to a local agent in Dominica, who could continue to act on behalf of the investor by proxy.

The Dominica IRS approved Kirill’s application in four days. It was entered into the register of taxpayers and issued a confirmation certificate with a unique number. The investor also has a personal account on the website of the Dominica tax service.

4 days
Took obtaining of a Tax ID in Dominica

The Tax Code is issued upon request to the Dominica Tax Office. The request is sent through a personal account on the tax service website.

Lawyers helped Kirill to fill out an application for assignment of the Tax Code. Two days later, the investor received a notification that he was successfully assigned a taxpayer ID for filing returns and paying Dominica taxes.

When applying for tax residency, we worked with the same lawyer through whom we applied for citizenship. Therefore, the collection and verification of documents took minimal time; all the necessary copies with a notary certification were already in our hands.

If an investor were to register his tax status himself, he would have to fly to the Caribbean to personally submit an application to the tax office. Or once again, come to the intermediary in Russia to certify copies of documents. Through us, he immediately received a Tax ID and Tax Code.

Immigrant Invest Expert
Yulia Ostapenko
Head of the Legal Department of the Moscow office of Immigrant Invest

New opportunities for a tax resident of Dominica

Kirill became a full-fledged tax resident of Dominica on the 10th of March, 2021 – two weeks after contacting the lawyers of Immigrant Invest.

2 weeks
took a change of the tax residency from the moment the investor applied to Immigrant Invest

In April, the investor and his wife will fly to the Caribbean. In Dominica, the couple plan to sunbathe on volcanic sandy beaches, hike in the jungle and admire other local attractions. On Christmas and New Years, they will visit their children and grandchildren in Germany to celebrate the holidays together.

The investor will submit the tax declaration for 2021 already in Dominica: the country's tax service accepts documents until March 31st of the year following the reporting year. Kirill will complete and submit the declaration through a secure internet portal.

Kirill assumes that he will earn about 8.5 million rubles in 2021. Of these, 6 million rubles - in the form of dividends from the Dominican business, which are not taxable for the country's tax residents. The total amount of tax payment will be three times smaller than Kirill would pay in Russia considering the double taxation on dividends.

The amount of income tax that Kirill will pay for 2021

TaxWill pay in DominicaWould have paid in Russia
On dividend income in the amount of ₽6,000,000₽0₽800,000

+ ₽900,000
under the double taxation in Dominica
On income under civil law contracts in the amount of ₽2,500,000₽683,000₽325,000

Kirill will retain the status of a tax resident in Dominica, not living on the island permanently. With a Caribbean passport, the investor and his wife can travel to Dominica passport visa free countries, totalling 143 of them, in the Schengen, Great Britain, Singapore and Indonesia.

The couple plans to travel constantly as soon as the borders open. They will arrange specific travel plans so that they are not in one country for more than six months.

Kirill often visits Berlin where his children and grandchildren live. The passport of Dominica gives the investor the right of visa-free entry to Germany for 90 days

All the opportunities that opened up for the investor after receiving the Caribbean passport is explained in “Citizenship of Dominica: all about the program".

Immigrant Invest is a licensed agent for government programs in the European Union and the Caribbean.

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Let’s discuss the details

Schedule a meeting at one of the offices or online. A lawyer will analyze the situation, calculate the cost and help you find a solution based on your goals.

Zlata Erlach
Caribbean Investment Program Expert
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