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7 Ways to Prepare for Higher Taxes in Your Home Country

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If you think high taxes are inevitable, or you’re so worn down by the increasing financial demands of living in the so-called advanced, democratic West, you’re not alone. 

As they sacrifice successful entrepreneurs and investors in the name of the common good, Western governments have all but forgotten who creates the wealth, who creates the jobs and who keeps the wheels of industry turning.

But fear not; there’s a world of options out there that will let you move your life, family, and business to more welcoming shores. It’s a case of preparing for ‘when’ not ‘if’ the next set of tax hikes will be announced. 

We at Nomad Capitalist have something to say about that. Below are the steps you can take to regain your financial freedom. 

Form 8833 Expat Taxes

1. Think Globally 

With so many different types of personal and business tax systems around the world, it’s easy to see why people have a hard time understanding what they need to do to reduce their personal and business taxes.

Tax residence is one of the main factors influencing how much you pay. The tendency among taxpayers is to have one because you want to avoid paying taxes to different countries.

In the majority of cases, it requires physical presence, which means spending time in a certain country to be deemed a tax resident of that country. 

For example, if you live full-time in the US, Australia, Canada or the UK, you can’t efficiently reduce your taxes simply by setting up an overseas company. 

However, with our tax-friendly quadrant, a strategy devised by Nomad Capitalist founder Andrew Henderson, you can choose the tax rate that goes with the lifestyle you want. The tax savings component of going where you’re treated best contains four core elements that you need to satisfy to reduce your taxes legally.

There are four pieces of the quadrant that you need to satisfy if you’re going to have an effective offshore corporate structure. Each part addresses a different question:

  • Where are you, as a person, leaving? 
  • Where are you, as a person, arriving?
  • Where is your business leaving? 
  • Where is your business arriving?

A common mistake is combining the personal and corporate as if they’re one entity. You are a person, your company is its own entity, and you both have to meet the requirements to pay lower taxes.

 So, how do you get out as an individual and business owner from your country’s tax system?

In order to legally lower your taxes with our tax-free quadrant, you need to consider not only the tax system and tax laws of the country that you are leaving but also the taxes and laws of the country in which you are arriving.

People wrack their brains trying to figure out how to grow their businesses, attract more clients, reduce their spending and boost their profits. Yet, they somehow fail to factor in their largest expense: taxes. 

It’s time to think globally because your businesses can operate in the cloud, where borders do not exist. You can ‘go where you’re treated best’, take yourself and your business offshore and reap the benefits of legally reducing your tax liability.

So, again, how do you get out as an individual and business owner from your country’s tax system?

The short answer is not to focus on one particular place but to follow a strategy of planting flags worldwide.

A lot of the businesses we work with have multiple components in their corporate structure. In our experience, a single corporate entity won’t always serve your needs. For certain types of activity, you might need a multi-part structure, part of which is based in a place with zero tax.

For example, with proper planning, you’re sending money to one country, your company is incorporated elsewhere and perhaps your employees are in another location. To facilitate this kind of tax-friendly arrangement, you must first establish which country the core operating component of your company structure is leaving and, in turn, where the best place to move is.

2. Open Overseas Bank Accounts to Be Ready

Having at least one offshore bank account can help diversify your wealth and move funds overseas when you need them. That’s why having your assets spread over more than one country is essential to protecting your cash. 

There are plenty of countries where you can find safe and stable banks with a relatively straightforward account opening process.

The advantages include:  

  • Diversification against political and geographic risk 
  • Protecting your assets more easily
  • Earning higher interest rates 
  • Diversify with different currencies
  • Achieving tax optimisation benefits.

If you’d like to learn how to open an offshore bank account, watch our latest video here

3. Get a Plan B Second Passport 

If the last few years have taught us anything, it’s that nothing in the world is guaranteed. Regardless of which passport you hold, the privileges you enjoy may not always be as freely available. In terms of rising taxes, having an offshore Plan B avoids a situation where you are stuck in just one place.

As a successful business owner or investor in high-tax countries, you are increasingly disliked by mainstream society, so why not go where you’re treated best and find a country where you can choose a tax rate that’s more suitable and a culture that actually wants your talents rather than rejects them.

Nothing is more important for a high-net-worth entrepreneur and investor than having a Plan B. It’s often overlooked, but the same kind of diversification that you apply to your investments and financial life should apply to your international outlook. This is especially true for US citizens for whom having a second passport offers the option to renounce their citizenship quickly and be free of their tax liability to the US. 

Here at Nomadic Capitalist, we help seven- and eight-figure entrepreneurs and investors go where they’re treated best in terms of tax, the law and personal freedom. Having a second, or even a third, passport is one of the best forms of insurance if events take an unexpected turn in your home country or, more broadly, in geo-political terms. 

The reasons for creating a Plan B are constantly changing – from conflict to recession, rising living costs or higher taxes.

 But whatever problem may arise, one thing is for sure: no one is immune from change. 

Fortunately, if things do turn sour, there is no reason to feel stuck and no reason not to look elsewhere for a better life. There’s a solution to every problem – you just need to know where to look.

Remember, this isn’t just about tax: whatever solution you embrace must take your finances, investments, citizenship and lifestyle as a whole into account. That way your solution will ensure everything is being considered and working together to meet all your needs.

Second citizenship and passports amid panic

4. Establish an Offshore Company 

A critical element of moving yourself offshore is planning to move your company sooner rather than later. You need to start planting flags and preparing the ground for your departure. 

Obtaining the most tax-efficient company structure is just part of the puzzle because you have to consider your broader business objectives. For example, choosing a random zero-tax country like the British Virgin Islands (BVI) might not suit your actual situation. 

Put simply, what works for somebody else might not work for you. Depending on your business or industry, even if you have a 0% tax rate, going to jurisdictions with zero paperwork may not be worth it. It might create issues with banking or it might create problems with customers that you want to avoid.

The number one question you should ask when establishing a foreign company is, where do you feel comfortable banking? Because not all banks will accept all jurisdictions. For example, Singapore banks will consider Hong Kong companies but will not consider BVI and United Arab Emirates (UAE) companies. 

You have to know your level of comfort with offshore banking, whether you’re open to emerging countries or want to work with more reputable jurisdictions. You also have to determine your location based on your customers. If you’re selling to the United States or Canada, for example, your customers might be squeamish about paying to a Cayman company.  

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Offshore companies are also beneficial for estate planning. Some high-tax countries, like the United States and others, have an estate tax. So, having an offshore company can reduce some of that liability.

Another good reason to take your business offshore is asset protection. Having an offshore company that holds your assets can be an excellent tool for asset protection. 

If you’re a US citizen and want to offshore your individual retirement account (IRA), you will need to have an offshore company to do so. A company set up to offshore an IRA does not have to be in a particularly reputable jurisdiction.

Of course, there is an active business tax reduction, and in some cases, an offshore company can work for holding real estate. This will all depend on where the real estate is, where you are from, where you’re living and where your tax residence is. 

No matter how much your home country increases corporate tax rates, even in the context of the move towards a global minimum tax, it’s still possible to have a low-tax overseas company structure, but only by moving to a tax-favourable place.

Best Countries for Your Offshore Company

5. Explore Moving to A Territorial Tax Country 

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
  • Where you have tax residence.

Those three things don’t necessarily need to be in the same place. The Nomad Capitalist lifestyle is all about ‘going where you’re treated best’ and planting flags in countries that serve you better than any other. Typically, these are places to reduce your taxes – maybe not for the rest of your life, but for as long as the benefits suit your lifestyle. 

Deciding where to go can be complicated because various jurisdictions compete to lure high-net-worth people to live and invest in their own countries in return for low taxes. However, there are numerous different ways that you can structure your personal tax situation regardless of what the country offers overall.

While there are a limited number of tax-free countries, there are plenty you can make tax efficient. You’d be wrong if you thought you had to move to a zero-tax country like the UAE, The Cayman Islands, or Vanuatu to minimise your taxes. 

Zero-tax countries will only suit some people. That’s not the case for everyone: perhaps because the countries are too remote, too small or there is little genuine economic activity.

Fortunately, there are many countries around the world which will allow you to structure your tax affairs internationally and pay no or low taxes. If you’re unsure where to start, let us create a bespoke action plan for you. Get in touch to start the process here

For example, territorial taxation is a form of taxation based on residency, which means that when someone is a tax resident in a place, only what is determined to be local income is taxed. 

When you add it all up, moving to a territorial tax country and becoming a tax resident can protect most of your income, offer a place to call home for a time, and enjoy the benefits of travel.

Even if they increase taxes, choosing territorial tax countries won’t impact you because if you’re not making any money in that country and your income is coming from abroad, it won’t be taxed. 

6. Avail of Special Tax Regimes

The European Union countries of Ireland, Cyprus and Malta have non-domicile tax programs. Otherwise known as the non-dom scheme, you can claim non-dom status if you can show you have a substantial presence in one of these counties and intend to live there permanently or for an unlimited period. 

Instead of being a regular tax resident, this allows you to pay domestic tax only on the income or gains that you bring or remit into that country. A remittance is money you bring into the country, typically for living expenses, by transferring it into your bank account. It’s different to your worldwide income. 

Non-dom programs are ideally suited to people who have substantial worldwide income because unless it is remitted into the country, you pay no form of tax on it.

If you are a non-dom resident in Ireland, you don’t have to worry if Ireland increases the tax on income earned in the country. This will not affect you in a material way if your income is foreign-sourced because, under non-dom status, it is not taxed. Taxes only apply to income you make there or bring in to spend on a remittance basis.

Ireland Safest Countries in Europe for 2023 1

7. Renounce Your US Citizenship

As a US citizen or green card holder, you are deemed to be a US tax resident no matter where you live. So, even if you live full-time abroad or nomadically, you will always be seen as a US taxpayer. 

For this reason, renouncing your US citizenship is the best way to eliminate all US taxes and any future tax hikes. You are then free to explore the available low- and no-tax living options. 

If you renounce, you’re no longer required to file a US tax return and report your non-US bank accounts, foreign companies, or income that is not US-sourced. In fact, you don’t report or pay tax on any of your overseas activities.  

 You cannot be stateless, so the first step is to get another passport to establish citizenship in another country. There are different ways to achieve this: 

  • Securing citizenship by investment (CBI), for example, in one of the Caribbean nations, can be cost-effective and fast.
  • Other ‘Golden Visa’ programs in Malta, Greece, Cyprus or Italy, for example, take longer but offer the benefits of EU citizenship.
  • With many Americans of Irish, UK or Italian descent, citizenship-by-descent (CBD) options can be explored. 

7 Ways to Prepare for Higher Taxes in Your Home Country: FAQs

What country in the world pays the highest income tax?

The Ivory Coast has the highest tax rate in the world, which is a staggering 60%. Finland, Japan, Denmark, and Austria are among the top countries with the highest personal income tax rates at 56.95%, 55.97%, 55.90% and 55%, respectively.

Is the US a global or territorial tax system?

The US has been enforcing citizenship-based taxation for more than a century. This means that US citizens are taxed on their global income regardless of where they reside. The taxation system in the United States follows a progressive structure, which means individuals with higher incomes pay a higher tax rate, as well as more total taxes. In the US, citizens or permanent residents earning over a certain amount for the year are typically required to file federal income tax returns. This shows how much money you earned during a particular tax year and the amount of federal income tax to be paid. 

Which countries have territorial tax systems?

Territorial tax systems mean taxable income is only that earned within the country. Territorial taxation is a popular taxation system used by many countries, including Hong Kong and Malaysia. If you want to learn about the most liveable countries that implement this system, you can read this article.

Which country has the best tax system?

Territorial taxation is the most favourable tax system for the majority of entrepreneurs and investors, aside from countries with no taxes. Considering the limited number of countries with zero-tax policies, this strategy may not be as practical, and territorial tax systems are more straightforward to navigate. Some of the best tax systems include Singapore, Paraguay, Hong Kong and Gibraltar. 

Which EU country has the lowest taxes?

Bulgaria has the lowest personal and corporate tax rates in the EU at 10%. Other low-tax European countries include Georgia, the Czech Republic and Montenegro.

Which EU country pays the most tax?

The European countries that pay the highest taxes include Finland, Denmark, Austria, Sweden, Belgium, The Netherlands and Portugal.

Go Where You Are Treated Best

The Nomad Capitalist lifestyle is all about ‘going where you’re treated best’ and 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, tax and company formation specialists all around the world. All that expertise and real-world experience come together when we advise your holistic, bespoke action plan. Discover how we do things here.

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