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There is a third option as well:

I want to retire to a place WHERE I can relax AND WHERE I pay low taxes.
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ekanshgoyal
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Kinshook
I want to retire to a place WHERE I can relax AND pay low taxes.
I want to retire to a place WHERE I can relax AND I can pay low taxes.

are correctly parallel options.

sivatx2
Your second sentence is also correct, as it makes 2 actions(relax/pay) parallel:

I want to retire to a place WHERE I can relax AND pay low taxes.

First sentence is not parallel due to the tenses:
I want to retire to a place WHERE I can relax(future) AND I pay(present) low taxes.

Also, if there is an option with 2 complete sentences use comma before conjunction AND like and make them parallel:

I want to retire to a place WHERE I can relax, AND I can pay low taxes.


Correct Answer as Manhattan GMAT :
I want to retire to a place WHERE I can relax, AND WHERE I can pay low taxes
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ekanshgoyal
Correct Answer as Manhattan GMAT :
I want to retire to a place WHERE I can relax, AND WHERE I can pay low taxes
Well, the following is correct as well:

I want to retire to a place where I can relax and pay low taxes.

You might want to go thru this post, to understand when GMAT prefers to repeat relative pronouns (such as where/that).

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