On the subject of giving advice, perhaps the American poet and civil rights activist Maya Angelou put it best: “Do the best you can until you know better. Then, when you know better, do better.”
Wise words to remind all of us that we’re still trying to work out what we should do in life as we go through it. Just as importantly, her counsel is also about not being afraid to make mistakes and learning through experience.
With so many different types of tax systems around the world, it’s easy to see why people have a hard time understanding how to reduce their personal and business taxes. But believe us, there is a better way.
At Nomad Capitalist, the best offshore tax advice we can give is to change how you think and ‘go where you’re treated best.’ If you know about our services for entrepreneurs and investors, you will have heard those five magic words before.
Let’s be clear. This is not simply a snappy catchphrase; it’s a strategy that has helped well over a thousand high and ultra-high-net-worth individuals legally reduce their taxes, protect their freedom with dual citizenship, and grow their opportunities around the world.
So, what does going where you’re treated best actually mean?
Well, let’s break it down. First, it’s about avoiding hassle. If you can save time by preventing bureaucracy and paperwork and not having to do the unnecessary tax grind, that’s where you’re treated best.
Look Beyond Your Country’s Tax System
Take Estonia’s tax system for example. Some politicians in the United States have heralded its tax system as a model of how to do taxes better. In Estonia, the employer pays your monthly income, so you don’t have to make additional payments or file monthly returns. Unlike in other countries, the employer also pays your social tax separately and it’s not withheld from your salary.
Property tax only applies to the value of land, not the value of property or capital. In contrast, its tax system exempts the foreign-sourced profits of domestic corporations from domestic taxation with very few restrictions.
These tax-competitiveness advantages mean that individuals and companies spend less time on tax compliance than in any other Organisation for Economic Cooperation (OECD) country.
Now, if you’re choosing where to go, it will not necessarily be Estonia because it still has taxation. If you like what Estonia has to offer, you can get a residence permit there, and you are willing to pay their level of taxes, then great. The point is, wherever you decide to go, you must take the bull by the horns and go there.
Keep Things Simple and Fully Transparent
If you want to keep more of your money, then you probably would not choose Estonia. Moreover, why settle at all in Western countries where filing your taxes is a hassle? It’s almost as if the government in these legacy-Western countries wants to maintain control over you.
In the United States, people often spend dozens of hours a year completing endless forms complying with ever-changing requirements to file their taxes. Whether it’s you personally or whether you’re outsourcing your taxes, there is a considerable cost in terms of time and resources.
It’s commonplace when creating offshore plans to pay tens of thousands of dollars a year just in tax preparation in a country like the United States. That is a hassle.
Going where you’re treated best means avoiding that hassle. The easier your taxes are to do overseas, the better off you are and, without all the extra boxes to tick, you won’t have to fear the tax authorities.
One of the critical strategies in offshore tax is to keep things simple and be fully transparent. That’s important because the taxman will find new ways to come after you. If you can accept the world as it is and not push against it, instead of just hoping that nothing will happen or quietly slinking out, doing things properly means moving, lock, stock and barrel.
Getting out properly from under your country’s tax system, getting a second passport and choosing to move your life and business to a low or no-tax jurisdiction is the best and safest way to approach it. It’s just not worth being surrounded by fear to keep a little bit of extra money.
And you don’t have ‘plant your flag’ in just one place. If you want to legally reduce your taxes by going offshore, there are three key issues to consider: where you’re a citizen, where you have residence, and where you have tax residence. Those three things can be in different places.
Our trifecta method, devised by Nomad Capitalist founder Andrew Henderson, is a formula that allows you to live in different places around the world to save money and even eliminate your tax bill.
Offshore Tax Strategy: Why Be Limited to One Country?
The Trifecta Strategy is for people who can afford to rent or buy quality properties in different locations around the world, potentially three, in order to establish bases to live for a certain amount of time without becoming tax resident in any of them.
With the trifecta method, you spend four months living in one place, four months living in another, and four months living in a third place. You have three different homes around the world that you can rent or buy.
The trifecta strategy will look different for each person. Each person’s needs will dictate a different set of countries and perhaps even regions. It could be a modified version where you spend five months, five months, and two months in different locations.
Now, why would you want to spend time in different places worldwide?
The answer is simple: you don’t have to commit full-time to any one place and, if planned properly, you won’t trigger tax residence in any of them.
It’s also about choosing places where you enjoy the food, the culture, the climate, and the people – places where you can carve out the optimal lifestyle that suits your needs.
Another reason is this system’s benefit in giving access to new investment opportunities as a nomad capitalist. Whether you’re more committed to one place than another or have homes in different areas, you can choose to go occasionally, gain residence or citizenship, better diversify your assets, and reduce your tax bill to as low as zero using this formula.
From our experience, there are some significant regions that people want to spend time in. You’ve got Latin America, Asia, Western Europe, Eastern Europe, Columbia, Chile, Panama, Costa Rica, The Caribbean, Malaysia, Malta, Cyprus, Ireland, Georgia, Serbia, Montenegro and the United Arab Emirates (UAE).
It’s possible to spend a year in Asia, Europe, and the Americas. You can choose one place from each region and enjoy all its benefits. There are endless places to buy real estate and many where you can get a residence permit or citizenship.
Having a residence permit or citizenship can make things easier and more stress-free by allowing you to spend as long as you want. The question in all this is, where do you pay tax? If you want to open bank accounts, for example, or have brokerage accounts, you’ll be asked where you pay tax.
And so, you can choose to pay tax in one of these countries that form part of your trifecta. This version lets you choose, for example, to live in Uruguay for six months and trigger tax residence. And they’re not going to tax your foreign source income there.
Instead of being somewhere for six months and obtaining residence, there are places where you only need to spend a little, if any, time to become a tax resident. This could involve paying a fee to the country and only spending a month there.
There are tax residences that don’t require a lot of time, as long as you don’t spend four months anywhere else. You will need to plan this properly, but if you do, even four months in some countries is enough time to spend some time and soak up the culture.
Plant Flags in Countries That Serve You Better
The big advantage is that you can play around with this and figure out your desired countries.
You can set your own pace: six months in one place can get you tax residence and give you a solid base and then you can spend three months each in two other countries.
One thing that is becoming increasingly difficult is to make what are called visa runs where you have to go to a country for the purpose of renewing a residence visa. In some cases, a residence permit may not be good beyond the first year you have it because it will only be renewed if you’re always living there. In the long term, countries like Mexico don’t like people living there to leave and come right back.
That’s why having proper residence or citizenship is always a good investment.
In many Asian countries, for example, if you put money in the bank, generally you can get a residence permit. In others, you can access a digital nomad visa or pay for a golden visa through citizenship by investment. Others offer residency in exchange for setting up a business there.
The benefit of using the trifecta method, especially if you’re choosing countries with simpler tax systems and residency rules, is that you can pay zero and see all the world has to offer.
You can purchase properties that can increase in value, enjoy going back to them occasionally and let your friends use them. And when you need a place to go, it’s there, waiting for you for whatever reason.
Some countries like Malaysia, for example, through its MM2H visa program, allow you to bring a domestic worker. You can get them their visa and spend as long as they want there. You can adjust this so that staff can follow along, whether it’s a chef, a driver or a tutor for children.
The idea is to not only go where you’re treated best but also to experience the best of each part of the world without sacrificing the essentials of your success.
The Nomad Capitalist lifestyle is all about ‘going where you’re treated best’ by planting flags in different countries that serve you better than any other.
However, you’ll need to plan this carefully, and that’s where Nomad Capitalist comes in. We help seven- and eight-figure entrepreneurs and investors create a bespoke strategy using our uniquely successful methods. That will allow you to keep more of your own money, create new wealth faster and be protected from whatever happens in just three steps.
At Nomad Capitalist, we have a network of lawyers, estate agents, accountants and tax and company formation specialists based around the world. All that expertise and real-world experience come together when we advise you on how to build your holistic, bespoke action plan. Discover how we do things here.
