I think one should found a small company in a tax-heaven or join such a company. And do not trade under your name, instead trade under the name of the company. Another alternative: find a local individual partner in that tax-heaven, use him/her as the account owner, and you do the trades in his/her name... Your partner must be trustable and you need to make a good legal contract with him/her...
This requirement was dropped with the passage of the exit tax. Now it's just a one-time tax on any unrealized asset gains, provided you're over the set threshold (>$2M in assets or >$139k annual income the previous 5 years). The 30-day limitation on US annual visitation (w/o suffering tax liability) was also dropped with the exit tax. For traders, it's arguably better to expatriate now than it was before (provided they don't have large unrealized gains in stocks, real estate, etc). Basically, if you're a trader with mostly liquid assets, you can apply for citizenship in St Kitts or Dominica for ~$250k today, renounce, apply for a US visa, then go back to living & trading in the US, tax-free. Nice little loophole there. Though I think most would choose to live off-shore if they're going to expatriate, it's at least nice to know you effectively have the option of coming back to the US now (of course, as long as the person processing your visa application isn't the same person who just processed your renunciation). http://www.irs.gov/businesses/small/international/article/0,,id=97245,00.html http://www.wilmerhale.com/publications/whPubsDetail.aspx?publication=8394 I. Summary of Prior Law Generally, under Code §877, expatriates who met certain conditions were subject to an alternate US income tax regime for a 10-year period after the date of expatriation, during which they were required to file annual information returns and pay US tax on certain items of income not otherwise taxable to nonresident aliens (e.g., capital gains on the sale of US stock). In addition, such expatriates were subject during the 10-year post-expatriation period to US gift and estate tax on the transfer of a broader array of assets than other nonresident aliens. Also, under prior law, if any such expatriate were physically present in the US for more than 30 days in any given year during the 10-year post-expatriation period, he or she would be treated for tax purposes as a US citizen or resident for that taxable year. As a result, such individual would be subject to (1) US income tax on worldwide income earned that year, (2) US gift tax if he or she transferred any worldwide assets by gift that year, and (3) US estate tax on worldwide assets if he or she died that year. These rules will continue to apply to individuals who expatriated from the US prior to June 17, 2008. They will not apply, however, to individuals who expatriate from the US on or after that date.
These silly suggestions are so out of date.. the IRS caught on to such shenanigans ages ago. Do you follow the news? If you attempted any of this today, you're basically putting a giant target on yourself to wind up in Federal court. Better off expatriating than attempting to skirt the law with silly tax schemes.
BS, it's as legal as it can be. And: did you know that even the giga financial firms like BofA have subsidiaries in tax-heavens?... Even some US govt owned companies! One should talk first about these cases before hunting innocent individual traders who just want to save on tax... Legal tax saving is not a crime!
A corporation pays taxes to the local tax office only. That means: as an American citizen you can found a company in a country of your choice and register it officially in that country. The company must pay taxes only in that country, not in the US.
Well to clarify, I didn't mean to claim what you suggested was illegal in and of itself. I was referring to your next logical conclusion, i.e., accessing those trading gains. If you plan to actually use your off-shore trading income in any way for yourself, then you're going to get into a sticky situation if you plan on also not reporting it in your name. Yes corporations are able to source income to low/no-tax foreign subsidiaries (Goldman's 1% tax rate speaks well enough of the subject, and oddly, the press is silent). However, this income is taxed if repatriated. Now corporations don't often need to repatriate earnings, but individuals might like to, unless you plan to never need or spend your off-shore gains.
There's no corporate or income tax in Dubai, we had an American trader here for a bit (dubaiptg.com) but he said he only got the first $80k tax free before IRS starts taxing. If you're European of a Brit then it really is zero tax and since UK now charge 52% >£150k I think a lot more people will leave. For UK you are considered non-resident as long as you don't spend more than 90 days in the UK per year and don't own un-rented property back there. You are not taxed on money you send back to the UK and you can still pay into a pension scheme back home should you wish.