Thanks for the link. Although I don't feel concerned as neither a US citizen nor a US resident, it could be useful for other posters. For those who might be able to exploit it, keep in mind there are a several countries where no tax whatsoever is to be paid from capital gains, without any restrictions on one's use of trading profits. Hong Kong beeing one of those, but american citizens still have obligations towards the IRS even though they take HK residency.
Actually I trade free of tax, because i'm from uzbekistan and here is no tax on capital gains. Find somebody from uzbekistan, open account on his name change passwords and trade in US.
I am not a tax consultant but I think they will tell you 100% tax free is very difficult or impossible to achieve legally for a person living a normal life. Americans will have to change citizenship .Then there are a number of countries that don't tax cap gains or have low income taxes. Most countries which don't tax cap gains will tax you on income if you are found to be a " professional " trader. You will have to stay under the radar to avoid income tax, by having another activity and by not being professional (daytrading would put you in the pro category), but you will still have to pay other things such as for ex. social security and healthcare which can be very high 10-20% of your declared income. The best solution from a legal point of view is moving to a very low tax country, i.e. tax haven but there are always some drawbacks or taxes. Another solution would be to move to a no cap gain tax country, with banking secrecy, establish accounts , then leave and become a permanent traveler. You then stop paying all taxes and social security .
way too quick an analysis... Belgium happens to be a very friendly country for people living off their capital, with some of the perks identified in the article below. It caused outrage in some circles in Europe when it agreed to the tax treaty with Hong Kong, which is a great way to enjoy european profits in exchange of very little tax for belgium companies. http://www.henleyglobal.com/media-events/articles/bel/ Hong Kong is not mentionned here, but the tax rate is a flat 15 or 16%, no tax on capital gains for individuals and often for companies, including for day traders as well as no tax on offshore income. Also very little compulsory expenses for retirement, health care etc... which plague most european countries. In France for instance they are often a much bigger plague than the income tax for the self employed and the employer (and indirectly for the employe who perceives only a ridiculous portion of what the employer pays for him, before himself getting hammered with the income tax, the wealth tax , the allowed to breath tax and gosh knows what tax... Besides I doubt Singapore is faring much worse than HK although i haven't checked for a long time. It's possible to get a resident permit to proven entrepreneurs in both HK and Singapore, and also for others who don't have a business plan involving the local economy but who are able to invest in the local economy (business, but also stocks and sometimes real estate - there for instance http://www.sentosacove.com/home.html ) 1.2 million USD (in Singapore I think that's the minimum amount) or 1.5 million USD (in HK, amount required for Capital Entrant Scheme was increased from 6.5mil HKD to 10mil HKD a few months ago). To the OP, there are also a bunch of develloping countries with rather high taxes on paper, but who welcome foreigners with a bit of money and don't care much about the incomes and cap gains they earn overseas - as well as locally sometimes . Moving there costs far less than moving to HK or Singapore.
BTW, Trade2live is right about some countries which don't tax cap gains at first sight, yet will tax them if you are considered a professionnal or even an active trader. Switzerland and Belgium belong to that list, although it's worth checking out how it works when dealing through an offshore corporation , ie Hong Kong corporation for Belgium residents. Switzerland cantons (like small provinces) also package special tax deals for wealthy immigrants. Hong Kong Trade and Development Council (HKTDC), which has many offices worldwide, is usually helpful if you need info.
Another friendly country with no cap gains even for day traders AFAIK and easy to move to for EU citizens is Gibraltar... Also a great place for cigar smokers, which I care about, but it's *very* small.
Under the same topic and with no intentions to divert from the op, is there any advantage of setting up a DST (Delaware Statutory Trust) for trading purposes? Could anyone point to resources? I searched this board and found little info. I know it is not tax free, but does it soften the blow?
Since I have or can procure citizenship in multiple countries, for me a better tax free trading vehicle is the Canadian TFSA, unfortunately IB in Canada does not provide this service. If IB provided the service, I'd stuff the account with 6 figures, pay the penalty, and be done with taxes for life. My goal is simple. I want nothing to do with any tax paper work in any country. I have found a solution which I'm not sure is wise to post in full on a public message board. Concisely, the solution involves procuring a third world passport ( quite easily done in places like Mexico or Honduras ), and a Seychelles business shell.