Many places that don't trade capital gains will in fact tax trading "capital gains". The 0% capital gains law is usually intended to avoid taxing things like profit on real estate, sale of businesses etc, not to give speculators a tax break. Depending on your frequency of trading, you could easily find your trading profits assessed as income, and then you have a nice court case to fight with the tax authorities, with threat of jail unless you hand over 40%+ income tax plus social security payments, interest, fines etc. Unless you have very solid legal advice from a big firm to the contrary, then I would forget about using 0% capital gains laws unless you are a very long-term trader/investor. A better option is go to a genuine tax haven (Bahamas, Monaco, Gibraltar etc), or go to a place where they don't tax foreign source income (e.g. Hong Kong, Singapore, Netherlands and so on). Alternatively, leave your home country and then simply don't reside anywhere for more than 6 months, and you aren't legally subject to tax there (the "perpetual traveller" option). Finally, I don't know anybody trying to minimise tax whose trades under their own name. You use a limited company/corporation, registered in a jurisdiction that does not tax non-citizens and provides anonymity. P.S. thetraderprofit: "If you change your citizenship, and depart the U.S. with more than $500k in assets OR you have paid an average of more than $100k in taxes during the immediately preceeding 5 year period, the United States will continue to tax you AS IF you were a citizen for an additional ten years." Again I refer you to my point about using companies for your dealings. Just do all your trading through a foreign corporate entity for the next 10 years, and you have zero tax liability in the US. When you need cash, just take out capital from your company. E.g. if you start with $500k, then loan this to your offshore company, trade with it, make profits etc. Once you have enough surplus profit, just take back your $500k out of the company, which you have zero tax liability on (since you already paid tax on it in the US), and live off that for the next 10 years. If you need extra cash, get a loan from your company, or get a bank to make you a personal low-interest loan secured on the company assets. If you want fast cars, boats, planes etc, just buy or lease them using the corporation's money. You can always pay yourself $30-40k a year to satisfy the IRS - the tax on that amount is pretty small. Besides, like all extra-territorial rulings, this only affects you if you do business in or return to the US, *and* the IRS knows your income. The IRS may say it can tax a Dutch citizen, but unless Dutch law agrees that the IRS has jurisdiction over Dutch citizens living in Holland, then who cares what the IRS thinks? Just use an anonymous offshore company with nominee directors & shareholders and then how is the IRS even going to know what you are doing? You are a foreigner, residing abroad - end of story. If you must, get an arranged marriage and a prenup agreement, then divorce as soon as you are judged non-liable by the IRS. This is one repeated problem with the whole offshore taxation issue. You have to think outside the box and be creative (and have good advice) to avoid tax whilst remaining legal. If you think it is a matter of simply looking at lists of countries with zero capital gains, or listening to IRS/government propaganda, then you aren't approaching it the right way IMO. You should utilise *every* legal means possible to eliminate tax, otherwise you might as well stay at home and save the hassle.
You can also go to Denmark to know what about real taxing . We pay 70 % in direct taxes. And 25 % in VAT.
Cutten, do the brokers for example IB accept Cayman or Gibraltarcompanies? I don`t think so. Anyone has knowledge of lowcostbrokers accepting Offshorecompanies?
Why shouldn`t IB accept offshore customers? They are (partially) based in ZUG/Switzerland, which is a terrific tax haven (apprx. 5 % - negotiable)! Regards Hittfeld
I guess you better verify some of the above information: When you open an account, you got to prove your identity. If you are a US citizen - or us-resident-alien- and you wanne trade US markets, every bank/broker in any of the western countries will pass this information to IRS!!!! Even so in Switzerland (although your stockholdings of US equities would be held in the US in the name of the swiss bank/broker)!! This caused some uproar with swiss bankers, but the IRS insisted - otherwise no US business. Kind of blackmailing. The very same would apply with Netherlands. Re "perpetual traveller" : If you are citizen of A, live 4 mth each in B, C and D, most double taxation treaties would give the right of taxation to A (exept local incomes from real estate properties). So check for yourself, don´t believe me - and be careful. Hittfeld
As a resident of Australia, I can choose to move to a different country (eg. Hong Kong or Bahamas) and avoid taxes on capital gains. However, if I want to live in Australia (which I do), then I can only stay here for 183 days if I want to avoid capital gains tax. An alternative, where I can stay in Australia for 365 days per year, is to trade through a company that is incorporated outside of the US, in a country that does not tax companies. However, do the capital gains from trading attract US tax? I am concerned that it does, under the idea of "income effectively connected with US trade or business". I would appreciate thoughts on this ...
Most countries will not tax the income of a 'perpetual traveller' that (1) has told their tax authority that they are no longer a resident for tax purposes AND (2) does not live in that country for more than 183 days per year.
Hey Cutten, Absolutely brilliant post! You've got some seriously smart concepts in your head, I'm very entertained. You're one of the few guys I really like around here. Just to add some oil to the tax fire, here's a post about how I approach various taxes, fitting 2 completely different, yet tax-wise intertwined / related companies under one entity, taking the 'material purchase' option of a jewellery design business (gold, silver, platinum), which can be theoretically work materials, yet practically investments. http://www.elitetrader.com/vb/showthread.php?s=&postid=363698&highlight=tax#post363698 Well I'd like to add that for me, the taxation issue seems interesting. Somebody Australian (like me) PM'ed me to this board, and it throws up an interesting question about tax. Australian tax is horrific (48.5% peak individual tax, 30% for incorporated companies, yet not worth the hassle unless you do 75K+) I'd like to be able to avoid 30% by cruising around in the Cayman Islands or sth like that. The onwers of my beach house here are about 26 years old, and both, although Australian, work on a boat in the Caribbean. They pay no tax. They come back here once a year and buy some place. They're only working on a yacht, but you see - with no taxes it will still make you wealthy. No tax means double income, means pure redundancy, measured by western "standards" of wealth. Now that we're here, I'll pour some real oil into the fire; Did you know that Telstra (Australia's telco giant) is going to transfer all of its assets (~$6bn) to Bermuda, in order to be a locally registered business in a tax haven and therefore not to pay a cent tax to the Australian ATO, despite operating there? You see, even the big giants are trying the 'big boy version' of the thing we're all trying to do here. Avoid tax. But then, I could also turn it around and just make tax a moral question. I.e. which country would you morally want to give half of your money? A country that spends hundreds of billions on arms and nuclear warheads (yeah there are such countries ... umm), or maybe you'd want to give it to a country whose moral policies you agree with, such as New Zealand, which has the most modern and green laws in the world, as well as laws to prohibit nuclear items of any kind (many if not all US vessels and submarines aren't allowed in Kiwi harbours!), or maybe Canada or Ireland, which are both beatiful to live in and both have equally great law systems and society, like like New Zealand. Although all of them are 'rich' nations and will tax you heavily. All I'm really getting at is : Maybe find the place in the world you like living the most, be it Germany, Australia, Italy, Russia, Canada, Brazil, Argentine, Mexico, Madagascar, Greenland or Iceland, and then move to that place, live there, and pay tax there. Pay whose government and lifestyle you agree with. I think if you know what your money is used for, really in the sense you agree with, then tax becomes a different thing. It just becomes contributing to the better life around you, by sharing what you have. So there's the moral issue to it, too. There are a lot of things that can be said. I won't bore you any longer. Good night. Scientist.
Lol, so how do you think all those offshore hedge funds trade? Pretty much every major broker in London and other financial centres accepts offshore accounts.
To legally avoid US tax you would already have given up your US citizenship, and no broker is going to pass info on a Dutch or Swiss citizen to the IRS (unless you are suspected of drug dealing or terrorism). Besides, you would be opening a corporate account, not a personal account (as I mentioned previously), so you would just have one of your nominee directors provide ID. The reporting problem would then not exist. The situation you are referring to is US citizen expats who are illegally evading US income tax they are liable for. The situation I was referring to was people who've given up citizenship and are building up trading profits in a non-US corporation - an entirely legal and above-board proposition. In almost no country is this the case - only in the US, Phillipines, Libya and one or two other 3rd world countries is taxation extra-territorial. In the UK for example, you simply declare that you are becoming non-resident, and as long as you leave the country before the next tax year, you are no longer liable for any tax on income earned outside the UK. This is pretty much the case in most G7 and EU countries. In most cases you can even return for up to 90 days per year to country A whilst retaining your non-resident status, and the days of arrival and departure are not counted to this total - so you can spend 45 periods of 4 days in your home country. If in future this situation changed, you could still easily get tax residence in an offshore jurisdiction. Stay there for 90 days then spend the rest of the year wherever you like.