All right, some very recent news Donald Trump talking about potentially ending what he calls double taxation of US expats
This could potentially mean an end to the US is very unique policy of
You can check out, but you can't leave the tax system. We're gonna talk about that
I'm gonna share with you an article from the Wall Street Journal came out a couple days ago
And we took the time to do our own research and analysis on that
We're gonna share comments from our own in-house
What Michelle McCurry dubbed him at nomad countless live the tax terminator
We got together and put our analysis together what this could mean for expats. It's just you me and my
Barry Goldwater mug today. So let's start with the Wall Street Journal article
October 9th Trump pledges to end double taxation of Americans abroad
The idea is the latest from the GOP nominee that goes beyond extending the 2017 tax law now
The 2017 tax law
You could have read the Wall Street Journal in 2018 and I think 2019 there were articles about how that hurt
certain expats living overseas
so
2017 tax law was not as great and Doug Casey and I talked about this at nomad capitalist live as you might think
Dateline Washington Republican presidential nominee Donald Trump says he supports lowering taxes on US citizens who live abroad
Marking a new attempt for the former president to win support from an often overlooked group of supporters now
I get hit from both sides. He's become full maga
I liked it when he was a real libertarian and on the other side
I'm a crazy communist because I don't go all in with Trump on everything
It does feel to me a month before less than a month before the election
Really you just thought of this policy now. This is a citizenship pastakes citizenship based taxation has been going on
Since the Civil War and by the what else what else came out of that was
Birthright citizenship. You're born on US soil. You are an American. That's how I was an American when I gave up US citizenship
It says it right in the form
US citizenship was obtained by birth in the United States not that both of my parents are American
and so, you know Trump was talking about that nine years ago and so hey
You want to free Ross d'Albrecht? He said hey
You want to do stuff? That's pro-Bitcoin that our team heard him talking about it Bitcoin 2024
And now you want to end citizenship based taxation. Hey, this all sounds great
You know where you've been happy to have converts not trying to be one of those guys who says, you know, you know
Too little too late
Does you know does a little bit feel like no taxes on tips?
Now it's this. It's you know, hey, who can we get into the tent? Hey, listen, I'll take it
The US has an unusual system
That's right Wall Street Journal for taxing its citizens on their total income regardless of where they earned it and where they live making the United States alone
among all major countries with such a rule and
There was a rumor that Bernie Sanders had talked about ending this because it would fall under his we're the only country
Country in the developed world that's still taxing citizens no matter where they live
They're not using the roads and the bridges and so the US does have this now
If you have active income and particularly if you're an entrepreneur, you can use the foreigner an income exclusion
If you're living in another high-tax country, you can potentially use a tax treaty
There's different things you can do to reduce your
Income for folks like myself who did not want to move from one frying pan to another who wanted to go to a lower-tax jurisdiction
Being an entrepreneur using the foreigner an income exclusion did that
I could have I think continued to pay zero tax
But in recent years not everybody can pay zero tax if you make over that for an earned income exclusion even in the business
So active income you're gonna pay something, but it's a lot less if you move overseas
Passive income is a different story
Passive income, you know, they don't really exempt that so much so people who are in Bitcoin for example
You know, that's why many of them give up their citizenship. It is pure unlike in my case
It was you know, their case is pretty much. Hey, I just don't want to pay all this tax
Other countries use systems that base taxation on where people live. So we talk about becoming
What we call a tax non-resident
Canadians Australians Germans they are making it more difficult. They're putting more tests
They're being a bit more strict on what the rules are and how they're enforced
But you can leave their tax systems while keeping your citizenship
And then you if you want to move back to the country in the future as a citizen you can
I think they will make it more difficult
I don't know that they'll go full-scale us but they'll do something like that eventually some of them
So essentially the article says an American living in Paris would have tax obligations to both france and the u.s
Now they're not going to be paying you know 90 percent
But they're going to have the tax obligations
Though the u.s tax could already contains features meant to mitigate double taxation or french citizenry not residing in new york typically wouldn't pay
Wouldn't oh france any taxes on u.s income
Yes, that's correct
And there are times when if you are an american and you pay a certain amount somewhere
You need to top it up to the irs to the u.s. Which seems unfair, you know, you didn't you know again
We help people move to pay zero percent tax five percent tax. We have some people now. Hey, I'll pay 10 or 15
That's fine. I'm happy to pay something some still want to pay zero
Those the places where it's harder to go but to tell kind of the average american expat
You don't pay anything or sorry. You're paying
25 30 percent
Hey, you got to top it up a little bit to to be even with us
That's one thing and that's bad enough, but you've got to file a return
You've got to file reports for your foreign bank accounts if you've got a foreign corporation
You've got to file all that paperwork with the u.s. Government. So it's not just the obligation to pay
It's the obligation to file. It's the obligation to go through all the paperwork. We had one guy once
Uh client many years ago
With the structure he had it's like hey if he's going to make this move
As an americans, you know overseas
I think somebody quoted as $50,000 a year to do his taxes
It was going to be that complicated for the kind of business he had
And he wasn't you know, the guy wasn't making a hundred million dollars a year. I think he was making
Three or four million dollars a year. So that's insane for a country. He literally didn't want to live in a single day
So trump says according to a statement he sent to the wall street journal
Quote unquote. I support ending the double taxation of americans
Overseas or overseas americans
I'm going to come back to how we may interpret that in a minute like his prior campaign
Ideas to eliminate taxes on tips social security benefits and overtime pay
Trump's latest tax policy promise goes beyond extension of his expiring 2017 tax cuts
And the ideas he pushed during his first term as president and it's aimed at targeting a demographic
My opinion and I know that most people
Uh, maybe won't see why I'm saying this but again talk to Doug go watch my interview with Doug Casey
I think we touched on this a little bit and then go back and watch my interview with Doug Casey in 2021
Both done at nomad capitals live
Um, and and we kind of talked about the fact that you know the right wing
It's a little bit jingoistic these days
And do we entirely trust the right wing
To not want to go after expats because hey if the u.s. Is the best country in the world
Who would want to leave only a no good rotten trader, of course
All right, uh, I've been on fox business before I don't remember if I've been on fox news
But you know, we get a few comments people send in like oh, you know, you're trying people to leave
You're you know, you don't want to stay and fight. It's like, well, I don't want to live there to begin with
No, I don't want to fight the the
The goliath I know I don't um, I don't be happy something that these people
Um, some of these political animals I worked in talk radio and and I saw people in their 70s never been happy a day in their life
Uh, yeah, I do not want to end up like that if that's what stay and fight looks like
Um, but I I I do fear
Uh, that at some point that's what a right wing administration somewhere does now there are this is where culture comes into play
Is if a country's culture is emigration in its history, I think there's a great there's a lot more understanding
And so you have countries like ireland which are smaller and they have to be more responsive to their citizens in some ways
And people did emigrate and so there's an understanding. Hey, these people aren't bad people. They're just emigrating for their own reasons
Or I think cultures against smaller countries where people, uh, you know, where they had
You know, like a portugal where they were trading all over the world. There's a greater understanding
Not everyone's going to live here. The u.s. Is a rather isolated country. I think
Canada and australia, which are you know are in that basket, which is why I've said I could see them implementing some form of
Citizenship based taxation first because there's not an awareness of all these other places
Perhaps the way you have in europe where you're a lot closer together
So I I don't that that's my opinion. I'm not saying I I you know, I'm a capitalist
I generally voted for right wing candidates unless I was protesting
How bad those right wing candidates are when I was in the u.s. But eventually I realized the right wing is not going to
Save you either and as I was talking to some folks in my family the other day
They're like the country's too far gone for anyone to save it no matter how hard they try
So that's my uh belief on this
The article goes on and on uh one thing says a more expansive revision the tax code could open opportunities for wealthy
Americans to move overseas retain their citizenship and escape some u.s. Taxes. Yes the same way that people in every other country
uh get to do
Again, I I think that a couple other countries are creeping into
Making it harder to leave but the u.s. Is alone and you know, what's one way to test whether your country or your
Any relationship you have if it's one versus a hundred and ninety five
Or I guess in this case two Eritrea versus a hundred and ninety four
You know
Maybe you ought to listen to the other 99 percent
And when you don't that says something about your culture. It's a culture of arrogance
Um
And so here's the main point. I'm gonna get into that
What trump means by double taxation remains uncertain and the campaign officials offered no additional details
About exactly what policy change you would try to push through congress
I don't really care who wins. I don't have a dog in this fight
um, again, I I've
part of my
Leaving the u.s. And eventually giving up citizenship. I am politically homeless and Americans have a really hard time
Understanding that these days. I mean to go back to my days and talk radio
You couldn't even back then and you certainly couldn't today have anything where you know, if you had a radio station
It's not just trump trump trump trump trump or anti trump all day long the anti trump stuff never works on talk radio
But uh, you know, if you if you're if you're not in lockstep anymore people are like you're a communist
And I just look at this and I say this just feels a little bit like pandering. Oh, the democrats do it too
Okay. Well, great that everybody sucks
But here's the analysis from our own in-house
What michelle McCurry called the tax terminator?
um
Donald trump has come out and stated he wants to end double taxation for americans
What does our preliminary research indicate the statement can be a broad spectrum of things and as of now
We don't have any specifics available as the wall street wall street journal says
Trump's comments could lead to any of these
Uh scenarios a through f
Option a the end of citizenship based taxation all together
So this is the policy where no matter where you live
You at least have to file a tax return report all your bank accounts report your corporations report your trust
It's laborious
Maybe you don't owe anything due to any number of reasons we help people again
We help americans lower their taxes a lot all the time
But there's still the obligation to be on the hook even if you're getting lots of exemptions exclusions. What have you?
So option a is they just give her the whole thing
Given the wording of the comment trump made double taxation for americans living abroad emphasis on double taxation
We believe this option is the least likely
And do not believe the u.s. Will leave expats in tax havens like dubai or the cayman islands alone so easily why well
I haven't lived in the u.s. For a long time, but you know back then you'd watch the political attack ads
You know so and so is in favor of you know
Giving more money to companies that ship jobs overseas
And when you get into the offshore tax game, you kind of realized okay
I kind of understand what they're saying, but they're overly simplifying it to make the average person not like that person
Not not like that candidate
And so I think it would be pretty pretty politically expedient to you pretty politically expedient
Of either party to say you know what yeah those those those people in france
We're going to leave them alone, but if you move to somewhere like dubai all bets are off or the cayman islands
We're not letting we're not letting as the article the wall street journal says wealthy americans could be able to live overseas and not have to pay tax anymore
Right again like everybody else does and in in in going along with you have to pay taxes for the roads and the bridges
Even though they have roads and bridges in the cayman islands, and it's still zero percent
But yeah, you got to pay for the schools. Well, you're not using any of those things anymore. So why would you pay?
So option a we think is the least likely from our own research from the tax terminator
Option b a sharp increase of the foreign earned income exclusion. This is how much you can earn in active income earned income, right?
Are you doing the work?
Basically they could raise that up and therefore, you know if you're a business owner or
If a salary more money tax-free and this would be a good thing if they did it because
If you live what a lot of our clients do in contrast with the average expat does you might be living a tax-free life
And so therefore the more money that you're also not paying to the u.s
That's zero on one side zero on the other side. That would be good now. How high are they going to raise it?
Uh, you know probably not into the millions
Um, but perhaps the system stays the same
But the fve has increased substantially to provide much greater relief to upper middle class american professionals lawyers doctors
accounts, etc some of them by the way don't qualify for the foreign earned income exclusion because
um
Their businesses are not truly businesses. They don't they don't fully qualify for the fve and high level workers
Living abroad. Yeah, I had a friend who um
Lived in Abu Dhabi made a million dollars a year was a u.s citizen
He did not run that through a company because he was an employee. He couldn't they just pay him. Here's your money
Um, and he was paying tax on 90 percent of that money as if he lived in the u.s
Despite living in Abu Dhabi big disadvantage
Uh, so option b is they exclude more money if you're a seven or eight figure entrepreneur. I doubt that's ever going to keep pace
Um, but it could be more relief
and quite frankly the restrictions on what you make above the fve and it's it's um
You know, there are some restrictions there for sure
Option c we might potentially see an exemption from cfc rules controlled foreign corporation rules for americans living abroad providing
They meet certain conditions for example a u.s citizen entrepreneur becomes a bona fide resident of a nice country
And this is what i've told you i've suggested this a few times over the years
Uh, i.e a country with it which the ua e uh us. Hey the usa is a tax treaty
So i've suggested. Hey some countries might kind of do like a back door of what the us is doing
But they'll carve out countries they like so let's say, you know in france
We talked about recently one of the candidates for was a president or prime minister
Wanted to implement citizenship based taxation did not get in so fine. We will live to see another day
But my thought was always that maybe a country in europe
Would say okay if you moved with if you moved to other e u countries. We can't or won't bother you
So therefore you could move to ireland or malta or cyprus and be a nondom if they included the um the broader
You know ea countries you can move to switzerland do a lump sum you can move to poland for the lump sum
Um, you can move to idly for the lump sum grace for the lump sum
uh spain for you know their program
Um and so theoretically
You know somebody who has a european passport is afraid of this happening
But their place to move would be within the european union
Maybe that'd be more likely to stay an option and so now
Uh our team is suggesting. Hey the us might exempt you
Uh entrepreneurs and business owners from rules
That include your companies in the equation if you move to a country with which they like and so that may be exempted
from guilty
Um, which is a whole new formula under the tax law on um, you know, low and intense, you know
Low tax and intangibles and all that kind of stuff as well as sub part f which became broader
Uh under the last tax law provided their businesses also incorporated there
So it could be something where uh again, let's take those nondom countries ireland cyprus cyprus and malta
Have relatively favorable corporate tax regimes
Now depending on how it works
You might be you might still have some of the same restrictions on how you use the money
um because of their mitten spaces
but
um
That could be one way that the us could say all right fine
If you go to another country and you incorporate there like, you know
Don't be shopping around would be option c you can't put your company
In the cayman islands and then go and live in a nondom country and then never remit the money
And you're essentially living on you know very very very low taxes
But if you incorporate into place where there's, you know
Five or ten or twelve and a half percent tax on your business and they're on our nice list
All right, we'll leave you alone
Now the challenge would come and play with some of the lump sum countries
Maybe switzerland could work although it's a lot of work for certain people
um
Italy wouldn't work because italian corporations are a mess
But the lump sum is a good deal
So if you had to incorporate in the same place that wouldn't be ideal
So you'd still be paying something
But you'd have more places to live in
And if you are the person whose wife will only move to spain, I guess that would well it wouldn't work for you because spain
I don't know if they include the canary islands or something
Anyway, the option c is you get an exemption on some of the taxes on your business to where you just run the business
If it's incorporated there and the us could leave that alone
Option d we could potentially see capital gains tax exemptions on investments made in the country of bona fide residents of
US citizens abroad for instance a full capital gains tax exemption
Drive from the sale of properties or certain types of businesses provided certain criteria are met
By the way, do you know who did renounce his us citizenship?
purportedly for tax purposes
former uk prime minister boris johnson who sold
Uh a property in london, but he was born in new york and he therefore had a us passport
The uk exempted his sales his primary residence and the us said well, uh, no one else is taxing that you're our citizens
So please, uh, please send us the money and he said how ridiculous that was
I think eventually it was surmised. He paid and then he renounced his citizenship. That's my understanding of the situation
Uh, and so could the us say if you live in a country as a bona fide resident? That's a that's a term that's
You know part of some of these equations. Uh, we're not going to tax you on that
But would they say hey, you're a bona fide resident in
uh tax friendly malta
but
Um, we're not going to exempt those dividend free stocks
in singapore
Uh, that's option d would be where you live. You might get some exemptions with that exempt capital gains on bitcoin
Would seem perhaps not now. Maybe if you hold it in an exchange in that country, I don't know how that would work
Uh, but option d could be some capital gains tax exemptions. That doesn't sound too good
Option e might be us citizens who moved in nice countries again
i.e with a tax treaty so countries that aren't taxing zero
fully exempt from us taxation or at least to a large extent and then option f was a combination of
Uh, the previous four options
So it could be you get more foreign and or nicom exclusion and they exempt capital gains where you live on certain assets
Maybe you sell a business in the country of residence
And you pay some tax there and the us doesn't make you top it up or you sell your house
And there's no capital gains tax after x years and so the us leaves you alone
uh
Some version of that
in conclusion
Our team and this is our opinion just from what we've read and kind of dug a little deeper. Um
You know, we have
You know a couple people in house who are you know trained in this area
And of course we have a network of experts we work with
But in conclusion, it is unlikely in our view they say that even under donald trump
The us will completely abandon citizenship based taxation. However, we could see increased exemptions
And opportunities to utilize tax treaties proper tax planning may be needed
Probably will not mean things are as simple as just moving to another country. And again, even if you're leaving canada
It's not just as simple as just move to another country. There's still planning involved
Even when there isn't citizenship based taxation
Uh one thing to point out here is the us may potentially reconfigure the exit tax
So that is triggering people to part the us as opposed to when they
Uh renounce us citizenship i.e. again, how canada does it? So be careful what you wish for to some extent because if you are able to get out
It's going to be interesting to see how good are they going to make any of these restrict any of these
You know improvements to double taxation
To where maybe they say, okay, listen, you can leave and we're going to give you more exemptions
And we're going to give you certain exclusions if you move to the right place
Uh, but hey, when you leave you have to pay the exit tax then because we're going to have a new category of taxed on residents
So the idea that you should just sit around in the us waiting forever
Um is wrong and what I would suggest is
That might move americans
Into more of a plan a camp than a plan b camp
We've had a lot of americans who say get me the second passport get me the third passport
Get me a house that I can move to i'm going to start getting comfortable with that
And if things ever get squirrely enough
I might just have to push the exit button on the whole place
Whereas if you're saying hey, I can move overseas
Um, and I can get you know, I can reduce my taxes more easily as an american under this law
Uh, the goal would be to move as soon as possible now
The goal is always to move as soon as possible if you're trying to reduce tax because the longer you stay in
The bigger the exit tax will be but if it's not based on expatriation and giving up your citizenship
Based on simply moving abroad under one of these options or something else
Um that potentially brings the obligation to pay an exit tax forward
In which case you'd want to get out sooner than later to minimize that exit tax obligation
So there's a couple good things quote-unquote about us citizenship based taxation
One is you don't really need a tax resident somewhere else everyone views you as an american taxpayer
Uh, and the other one is
You know, you have a little bit more flexibility because of that about how you you know
What you've what you've got to do to exit the us tax system
And so some of those benefits may go away if the us allowed you to get out
Our view we'll see what happens. We'll see if Trump gets elected
Our view is that citizenship based taxation will in some form continue
And for me, I mean, that's just again part of the culture. We own you
And I I I pushed back more on the culture than the taxes because I I said this repeatedly
I paid zero most years. I think I paid eight or nine thousand dollars one year and other years
I was out. I paid zero. Um, I didn't have quite as unrestricted use of my money
But didn't bother me at the time
Because I was able to do things and I look back and say, you know
I look back in retrospect and say it was a little bit messy compared to how I do it now
But back then it's like whatever. It's messy. It's the price of being a u.s. citizen
I wasn't paying
um
For me to think it's kind of offensive really offensive actually is
Even if you leave our country, we're going to punish you because hey, why would you leave?
Is it the best place on earth?
So we're gonna, you know, so even if even if they even if they 10x the foreign earned income exclusion to over a million dollars
Number one if you make more than a million dollars
Okay, cool
number two
Is it about the numbers or it's about the principle
I happen to think life's about principles. So that's our view on this
We always like to take a couple days and actually do some research rather than just talking about it
That's our view. I think Americans, you know, want to continue to have a second passport
But I think that the equation is if you think there's any chance that this happening
Where are you at financially now and where are you going to be at financially five years from now?
It may be better to have some kind of plan a ready, which means you're going to be not living in the u.s. now
Or in the near future
To to take advantage of this