Property costs in Monaco are not too much more than central London or Manhattan, and HK/Singapore are comparable. You can get a decent singleton place for about 30k a year rent. Given that most liveable metro centres cost at least 15-20k a year for a proper apartment, you should just view it as an extra 10-15k a year 'tax'. If you can't afford that then you are not making enough for it to be worth becoming a tax exile. 21% is a pretty good rate, depending on the quality of government services. If you are in a 1st world country then that is good actually, in fact it is a bargain in order to get political stability, working utilities, reasonable policing and courts, a semi-competent government etc. Most of the G7 takes 35-50% of GDP in taxes, and high earners can end up paying 60-70% on their total income, once sales taxes/VAT are included. I would not go through the hassle and downsides of expatriation just to save 21% (and even in 0% tax countries, you still pay sales tax). Remember you will also probably have some long-term capital gains at lower annualised rates, and deductions like pension contributions or tax-breaks on savings accounts etc. For example, rich people living off capital gains in the USA pay a mere 15%. HK/Singapore is 16% flat tax. It's not worth moving full-time to boring holes like Monaco or Bahamas just to save 15-16%. If you trade full-time, capital gains will often be taxed as income, which is usually a much higher rate. The best tax wheeze is moving to countries which don't tax foreign-source income, and then trading the non-local exchanges from there. MANY countries give 3-5 year initial periods for non-citizens, where they don't tax foreign source income at all. Just off the top of my head, UK, Colombia, Ukraine, Philippines, Romania are all like this. The major cities in these places are far more interesting locations to live in than the conventional tax havens like Bahamas or Monaco, where there is basically no social life of any interest and you will get bored in a few months. Once your 3-5 years is up, move to another one. Many other countries, especially outside the first world, do not tax non-resident corporations, even if you are a resident of that country. So you simply set up an offshore trading co and voila, tax-free compounding. Use your savings for living expenses and you are in a de facto tax haven. You should not base your location on where the economic future is, but on where the best quality of life is for you today and in the near-future. Your after-tax income is only part of that equation. By the time China is even at half US GDP per capita, you will be old and most of your life will have passed by. You could live an easy life in Bahamas, or hang out with Eurotrash and racing drivers in Monaco, but good luck trying to do anything interesting there except get drunk, fuck gold-diggers, and top up your tan. For most 1st world residents, the best place to live is the country they grew up in, where there friends and family are, where they are familiar with things. Recreating a social network from scratch is an arduous task, and even if you do it well, it's not as good as putting in the same work to improve things in a place where you already have a network. You know the system, the language, the culture, and the places in your home country, all that knowledge disappears when you go abroad. Even moving from USA to Canada, or UK to Ireland, or Australia to New Zealand, is quite a big change and significantly disadvantages you in many ways. IMO long-term expatriation is only worth it under the following conditions: i) you live in a shithole 3rd world country and can't have a good life there, even if you work hard ii) you live in a reasonable 1st world country, but your profession is taxed at punitive rates such that you cannot hope to achieve financial independence (e.g. Scandinavia with 50-70% tax rates on self-employed high earners), and you cannot use tax reduction methods such as pension contributions, low-taxed savings accounts, or corporations to pay a more reasonable tax rate iii) you want to live somewhere abroad for a year or more for its own sake (e.g. you like travelling or the expat lifestyle, you are single with no kids, some of your friends are going abroad to work etc) iv) you have a spectacularly hot and interesting non gold-digger girlfriend(s) in some low-tax (for expats) jurisdiction like Russia/Ukraine, Colombia, Romania, Bahamas, Phillipines etc, and want to see if things work out when you live close by or together, before considering a visa marriage or relocating her back to your home country. Odds are against this working, and you can have a problem if it doesn't work out, but it can be fun to try. The downsides of 3rd world living are ameliorated significantly if you have some prime pussy to assist your transition, and help with translation, local knowledge of the best nightlife and leisure spots, getting deals at local prices instead of ripoff foreigner rates etc.
Simple - you move to a country that doesn't tax your trading income. Voila, you just saved your annual tax bill. A Canadian citizen can do this, whereas a US citizen still has to pay US taxes even if he moves to a total tax haven.
Great advice. You seem to have put a lot of thought into these matters. Are you an expat ? If so, where do you currently live ?
Thanks for the reply. I'd like to clarify some things about myself, I live in an eastern european country (you can probably guess which already), I'm single with a gf, no children and in my 20s. I don't really have a social network here, besides family that is. I do however know the local landscape and can navigate fairly well, it's a factor which I've only recently started to value more. However, I'm fairly unhappy and have zero sense of belonging and like someone who moves around a lot said - "you can always go back". I've recently been away from home for months and it didn't bother me too much, partly of course was because the gf was native. From the places you talked about, only Philippines stick out as the climate is nice and there's no language barrier. Romania and Ukraine are pretty much unlivable and UK isn't much better. Places like Monaco, Bahamas, Cyprus or even Dubai I've ruled out as they are too small. For someone who lives in London or NYC, the cost of living isn't much different but for most (including me) Monaco or Bahamas are just too expensive. What I meant by 21% was, dividends from my LLC are taxed at 21%, this doesn't include any health insurance or pension as it's something I don't value at this stage. Thanks again for the very informative post.
I would non-file if I lived in a foreign country and made income in the foreign country - no way would I file a return or pay taxes to irs regardless of the current laws. 35 million us citizens were non-filers last year and less than .001% have been audited. The amount of non-filers is growing rapidly past 10 years.
Well, the real question is - "what is the monetary value of a US citizenship for a successful individual?" If I am making a million dollars a year in Hong Kong, would I be willing to give up extra 20% (or more, assuming the future increases in the marginal tax rates) for the nebulous benefits of being a citizen of the best country on earth? When do the costs outweigh the benefits?
What exactly makes you Americans think you are still living in the best country on earth? As a non-American I just don't see what is so special about the US. However, I can see many disadvantages.
Costa Rica? dont think so new taxes coming , like global taxes just like in USA bad for traders and also a TOBIN TAX:eek: they got the idea from Germany and france just great , if this tax plan passes in Costa Rica is over there for traders the FTT as high as %3 LOL
Good post from GoC, with quite a few years of expatriation under my belt I can relate. Some notes though, starting with one on a previous post (also by GoC ?) stating that you can take primary residency in a tax friendly country and pay your taxes (or absence of taxes) there than live whereever you want. Not that easy, especially in Continental Western Europe, where governments will try and tax people who they judge have important interest in the country (either if they spend more than half the year in this country, or run some kind or their main business there, or simply have their kids registered and going to school there). As about having to pay sales tax, there is none in HK for instance. Again there are particular hassles when using a HK company, I would suggest to trade with a BVI/Belize etc... company and only use a HK based account and possibly HK company adress if you need one. Mainland China doesn't tax foreigners on their foreign source income either btw for the first few years (later it's pretty easy to keep not paying from what i have read, from memory one has to leave 1 month in a row per year ). As of Monaco beeing particulary boring, it depends on what you're looking for, but you're right next to a very pleasant area in France and Italy, and there's no border crossing nor checking. Cost of accomodation given by CoG sounds cheap though, I'm not sure one should look for expatriation if not to better his life standard - how is living in a tiny single room apartment improving one's life standard ? Another aspect is how performant a country's tax department is. You can move to a place like thailand and never be bothered on your foreign tax income for instance, and hardly on your local income. There are even well known underground banks which allow you to reappatriate and export funds to anywhere in the world without the need for any declaration nor ID card. It exists in other asian countries as well. I've been thinking lately to all the british moving to Spain, do they pay any tax in Spain on their foreign income ? If so how easy is it for them to declare only a tiny portion of this income and rapatriate funds to Spain to enjoy a decent lifestyle ?