Which Country Has the Lowest Taxes for Retirees in 2025?
For many Americans, retiring abroad isn’t just about warmer weather or scenic beaches—it’s about keeping more of your money. The real question retirees are now asking is: which country has the lowest taxes for retirees in 2025?
As governments tighten tax policies and inflation eats into savings, understanding global tax-friendly destinations for retirees has never been more important. Below, we dive into the top contenders offering low or zero tax on retirement income, compare costs, and unpack real 2025 tax laws—not just marketing fluff.
Key Criteria: What Counts as “Low Tax”?
When comparing countries, we looked at four major tax-related categories:
- Income Tax on Foreign Pensions
- Capital Gains / Investment Income
- Wealth or Inheritance Taxes
- Cost of Living (as a tax-equivalent benchmark)
We also prioritized countries with bilateral tax treaties with the U.S., and where residency or tax advantages apply specifically to retirees.
Top 6 Countries with the Lowest Taxes for Retirees in 2025
| Country | Pension Tax | Capital Gains | Wealth Tax | Residency Incentives |
|---|---|---|---|---|
| Panama | 0% | 0% (offshore) | No | Pensionado Visa, discounts |
| Portugal | 10% flat* | Exempt (NHR) | No | NHR ends 2025, still relevant |
| Costa Rica | 0% | No tax on foreign | No | Rentista / Pensionado Visa |
| Uruguay | 0% (foreign) | 0% (foreign) | No | 11-year exemption window |
| Malaysia | 0% | Yes (local) | No | MM2H visa |
| Thailand | 0% (passive) | Yes (local) | No | New Long-Stay Visa |
*Portugal’s Non-Habitual Resident tax regime is phasing out, but early retirees still qualify if applying before late 2025.
Deep Dive: Why These Countries Lead
Panama: Tax-Free Retirement for U.S. Expats
Panama remains the gold standard. U.S. retirement income is not taxed, and there’s no tax on foreign investments. The “Pensionado” visa program provides lifetime residency and discounts on healthcare, travel, and even restaurants. As of 2025, a retiree with $2,000/month pension can live comfortably in Panama City or Boquete for under $2,500/month.
Portugal: The End of the NHR, But Still Competitive
Portugal’s once-unbeatable Non-Habitual Resident (NHR) tax regime is officially sunsetting by the end of 2025. However, if you establish residency early, you still get a 10-year window with only 10% tax on foreign pensions and exemption on global dividends or capital gains. Plus, it has EU-level healthcare and infrastructure.
Costa Rica: Simplicity and Tax-Free Pensions
Costa Rica doesn’t tax foreign pensions or investment income, making it a quiet favorite among U.S. retirees. Its Pensionado visa requires just $1,000/month in retirement income. Medical care is affordable (and often excellent), and cost of living in places like Atenas or Grecia remains under $2,000/month.
Uruguay: Stability and Tax Shields
Uruguay is a politically stable option with zero tax on foreign pension income or investments for the first 11 years of residency. Even after, taxes remain low and targeted. It’s a serious choice for those looking to settle long-term in South America.
Malaysia: Top Asian Option with Full Exemption on Pensions
Malaysia’s MM2H (Malaysia My Second Home) program allows full exemption on foreign-sourced pensions. With modern infrastructure and affordable private healthcare, Malaysia is ideal for those preferring a Southeast Asian lifestyle. Just note: capital gains on local investments are taxed.
Thailand: A Quiet Loophole for Passive Income
Thailand does not tax passive retirement income (like U.S. pensions or Social Security) unless it’s brought into the country in the same year. Smart retirees defer remittance and live essentially tax-free. With a new Long-Stay Visa launched in 2025, the program is attracting a new wave of older expats.
Comparative Cost Example (Monthly Budget 2025)
| Country | Rent (1BR) | Healthcare | Food & Utilities | Total Est. Budget |
|---|---|---|---|---|
| Panama | $850 | $200 | $400 | $1,450 |
| Portugal | $950 | $150 | $500 | $1,600 |
| Costa Rica | $650 | $250 | $400 | $1,300 |
| Malaysia | $500 | $100 | $350 | $1,050 |
| Uruguay | $700 | $250 | $500 | $1,450 |
| Thailand | $600 | $120 | $380 | $1,100 |
Source: Numbeo, OECD data, 2025 regional cost surveys
FAQ: Retiring Abroad and Taxes
Q: Will I still owe U.S. taxes if I retire overseas?
A: Yes, the U.S. taxes citizens on worldwide income. But you may qualify for the Foreign Earned Income Exclusion (FEIE) or Foreign Tax Credit to avoid double taxation.
Q: Which countries have tax treaties with the U.S.?
A: Portugal, Panama, and Malaysia have agreements that help avoid double taxation on retirement income.
Q: Is healthcare covered for expats?
A: Not by Medicare. Retirees abroad must rely on local private insurance or national systems (often affordable and high-quality).
Q: Can I receive Social Security abroad?
A: Yes. The U.S. government allows payments to most countries, including all those listed above.
So, Which Country Wins in 2025?
If your top priority is zero tax on retirement income, Panama and Costa Rica are clear winners. For those wanting EU access and willing to act fast, Portugal is still a fantastic option until NHR ends. Malaysia and Thailand offer strong low-tax lifestyles with healthcare and stability.
Each retiree’s financial and lifestyle needs vary. The key is aligning your pension tax exposure, cost of living, and healthcare access in a destination that fits your long-term vision—not just your budget.
