Is it possible to use offshore strategies to stay in your own country but pay zero tax?
People often ask, I'd like to live in the United States but why can't I set up my company offshore
and save a lot of money? And today I'm going to walk you through the process
of what you need to know so you don't make a mistake.
There are a lot of domestic tax advisors on YouTube, on podcasts, all over the Internet
talking about things like BioRoleX and deduct it, put your money in a multi-pension plan,
stuff that has often been debunked, strategies that are, I would say, if not aggressive, outright
illegal, you want to be careful. And so for me, going offshore, reducing your taxes to
as low as zero is a very organic way and a very, I would say, safe way of keeping more of your
own money, being able to put that money back into your business and having certainty that what
you are doing is correct. You move your money offshore and you follow the step two we're going
to talk about today. And as long as you do those things properly and as long as you
follow all the rules, there's not going to be any of these shadiness associated with a lot
of the other strategies. But here's the question, can you still live in the United
States, this person asking this is from the US, have the US passport, but open an LLC in one tax
free jurisdiction and open the bank account in one of these countries and pay no tax? And the answer
is no. There's a number of things that come into play. We've talked with these over the years,
controlled foreign corporation or CFC rules, permanent establishment or PE. What you want to
look at is you don't only own the business, but in many cases, you are working in the business.
So you're both essentially the owner, but you're also an employee and you have to take
care of both sides of the equation. And so for someone who's working in their own business that
they own, they're going to have potentially a double whammy to put it in simplistic terms,
tying them to their country. So what people ask about is, how do I move my assets? That's easy
enough. And we'll talk about that. You set up an offshore company and any number of different
jurisdictions, you get a bank account for that company, you run your business through that company.
But beyond just moving your assets, you have to move, let's just say,
your tokens, your rump, you have to move your rump overseas as well to really make this work.
Now, we've talked before about the difference between how Starbucks or how Apple runs their
tax, plenty of course they have big operations in the US, both retail and actual office space.
Chances are your business is in Starbucks. If you're at the level where you have thousands or tens
of thousands of employees, yes, there are more advanced strategies. We've worked with a client who
had operations in 21 different countries and they were able to dramatically reduce their taxes,
but they still had to pay some kind of tithe to countries like the US and Canada. So you're
moving your assets and you're also moving your behind. This is where my tax friendly
quadrant comes in. We've talked about this for years. On one side of the quadrant is where you're
leaving and on one side is where you're going. Then on the other axis, it's you and it's your
business because remember, you're an employee, but you're also the owner of the business. And so
you want to figure out where you're leaving. That's the move your rump somewhere else.
So if you live in the United States, where are you going to go? And I'm going to talk
about specific rules for Americans in a minute. And also, where are you going to arrive?
Is it going to be my trifecta method where perhaps you don't have tax residents anywhere?
That's a bit more suitable for an American than other folks. Or is it going to be one place?
If you decide to move to Paris nine months a year, well, they're going to taxi even worse
in France and they wouldn't, the USC haven't really done much if that's the lifestyle you
want, then so be it. But on the other side is where's your business leaving and where's
your business arriving? And so when the question is, can I just put my LLC and some other
jurisdiction? First of all, there are some countries out there, Nevis, the country of Georgia,
where they do call their companies LLCs. In many cases, though, it is more equivalent to a USC
corporation rather than a pass through or what an LLP, for example, the UK, they are more
equivalent to an actual corporation, even though they're called LLCs. So the first thing is
we want to get our terminology right and make sure that we are not applying US terminology
wrongly somewhere else and getting stuck with a company that's not going to help us. So if you
want to move your company overseas, yes, the first thing to do is, depending on where your company
operates, set up a headquarters company in a tax friendly or I would argue tax neutral jurisdiction.
So the UAE for most people no longer qualifies for that. But you still have places like Hong
Kong, the British Virgin Islands, there are some lesser places like the Seychelles. Heck,
there are even some very high level jurisdictions. I mean, Switzerland can be very, very low tax for
certain kinds of business. We have, I think, 15 or 16 different jurisdictions that we
have all the pros and cons for all the profiles for all the amateurs for depending on what kind
of business you bring us, chances are you're going to go to one of those 16 or so different
jurisdictions, more jurisdictions than most people actually specialize in helping you figure out
with. Nomad Calculus has more choices, I believe, than anyone else, not just that we sell you over
the counter like, hey, you want to believe company? All right, here you go. But actually,
we help you figure out which one makes the most sense for you. Go to nomadcalculus.com
slash apply if you want to learn about that. So the first step is setting up the company
and then getting the bank account. Listen, bank accounts don't necessarily have to tie you
to the tax system of the country. You can have US bank accounts in many circumstances,
both for yourself, living overseas or as a non-American, as well as you could potentially
have of a US bank will open for your foreign company. We got one or two banks that will do
that under the right circumstances. You could have a US bank for your foreign corporation.
And so, again, that's the kind of thing that we specialize in is having a relationship
to the banks to where you're not banking in some far-flung island. There are countries
where banking in the country is the kiss of death. There are other countries, in some
cases, the United States falls into this category where banking there is fine. And so,
if you feel comfortable banking in the United States, you may offshore your company,
but not offshore your banking, right? Where the money goes is not necessarily the issue.
It's generally where is the work being performed, going back to those myriad of things
such as CFC, PE, and similar rules before. And so, you can easily move that company overseas,
but the issue is you're going to have to go with it. And so, if you are an American,
the general thing to qualify for, just to keep this simple. And I'm not giving you
formal tax advice here. That's why you go to the website and
learn how our team and our network can help you. But, simplistically speaking,
you want to qualify for the foreign or an income exclusion, whereas you're out of the
United States for roughly all but about a month every year, or you're spending a little bit
more time in the United States, but you actually have one base that you're living in.
And so, depending on what kind of lifestyle you want to lead,
do you want to be living the life that I've led for many years? A little bit less so today,
but led for many years where I'm constantly going into different places, have homes around the world,
aren't necessarily spending that much time in any one given place. I did that for years.
Well, Americans actually have an easier time living that lifestyle because
they are always U.S. taxpayers. I'll come to that in a minute. But if you want
more time in the U.S. or if you just happen to like going to one place and making that
your home, then you're going to have more time in the U.S. to spend. So let's just call it between
one and three months is generally the amount of time you could spend in the U.S. while
offshoring your business. Americans are effectively the only country, for now at least,
where you are going to pay tax on those foreign corporations, even if you're entirely
running it overseas unless you meet certain criteria. If you have foreign partners,
if you have a foreign spouse, there may be a way for you to reduce that tax down to zero.
But no matter what, you're going to pay either somewhere probably the single or low double digits
as an American due to what's called guilty now, or you could potentially pay zero. But either way,
there's going to be restrictions on how you use that money. And so your company's kind of become
to, again, just to be simplistic, it's going to become a bit more of a Berkshire Hathaway in
many people's cases because you're going to have money that if you don't reinvest it in
your business, you might invest it into buying your home overseas. And so there's a lot more
to it, as you can see, than just, hey, I'm going to set up my company overseas and stay
living in the United States. But in any case, you want to be out of the country where you were
to be taxed in. For Americans who have, because of their passport, that tax burden that follows
them no matter where they live, the goal is simply meeting the criteria on a personal level
of being out of the country. And then what we've talked about before in our nomadic
capitalist R&D channel is you want to make sure you don't have people who are working for
you in the United States, at least doing certain kinds of jobs, sales being one that's
like the kiss of death. And so what you may have is if you have operations in different
countries, you have staff on the ground, you have factories, you have different things,
you're going to need to have a multi-part corporate structure where that part of the
structure is going to be tax-neutral. And it doesn't have to be tax-neutral.
It could be 3% or 2% or 5% or 10% or you could choose to run your company through
Ireland and pay 12.5%. Yes, it still is unless you're making big, big, big money.
You know, you could choose to go to other places in Europe and pay 9% and 10%.
There's a lot of choices out there for low tax, but my suggestion generally is
take the tax burden on yourself personally. If you want to live somewhere, let's say you
want to live in Ireland, have an Irish part of your structure that employs you,
maybe have some other people, maybe have people in the US who want to move to
Ireland or you replace them with people in Ireland, and that's a part of your
structure, but keep the top part of the structure tax-neutral. And so understand
where everybody works, including yourself, and where that work is what dictate things,
more than just where the company's set up and more than where the banking is.
And I think, again, people talk themselves out of certain advantages where you can
bank in a place like the United States. Certain people may qualify that,
for that certain people may not. If you come and say, hey, I want to open a company
in a jurisdiction with the smallest number of rules and I'm going to be, you know,
a guy floating around the world and I want to put $5,000 in my business checking or my
business current account, you know, you're going to have fewer options than someone who says,
I'm going to put in a couple hundred grand and keep it there when then you're going to have
options like Singapore open up. And then when you get into the high six figures,
Switzerland opens up and there's all kinds of options in between. So those are the things
that you want to think about. Are you willing to make the move? Now, I would argue that when
you make the move, your business is going to, you're going to learn things for your business
as I have, where you're going to open up new markets. When we started this, I had lived outside
of the United States when we, you know, switched nomadic capitalists into a services
business. I'd lived outside of the US for years at that point. But the more I live
the more connections I have, the more I realize, wow, there's a lot of opportunities in this country
for our services. Now your business may be different, but you know, we went from having 100% of our
clients pretty much back close to 10 years ago, being from US, UK, Australia, Canada,
that was pretty much the whole mix. Maybe someone from Poland once in a while or something
like that, to now having a very diverse number of clients to where who knows what could
happen with an election or an economy or any number of things in any place in the world
when you go out and actually be in the world and you're running your company
as a nomadic capitalist, rather than just a guy who wants to save tax for that moving,
I think that's going to actually make your business stronger. And so the key for reducing tax
have a headquarters. My general suggestion, not applicable to everyone or every situation,
but my general thought is keep that neutral. And that if you want to live somewhere where
there's some tax obligation, you personally take the tax obligation on top of that. So again,
going back to Ireland, Malta, Cyprus, if you can be a non-dominous country, you may pay some tax
personally, you may have a local corporate structure to isolate the headquarters from
tax from your activities and what you're doing there locally. Again, you want to get that
memorandized, you want to get that documented, there's things you need to do, not just hope
for the best. There's a lot of documentation you want to do from the kind of people we have
on our network to make sure that you're doing things properly. But then you take on, hey,
in order to live in Europe, I will pay some personal tax, but my company is still going to
operate at zero. And then if we need subsidiaries to employ various people or have local
operations, we'll have those and those may pay some tax on their own based on how
they interact with that headquarters. Some people's companies are, I do consulting,
I've got two employees, one lives in the Philippines, one lives in, you know,
Belarus and, you know, our clients send us wires once a month and there's seven of
them and it's pretty easy and that could be a one-part structure. Again, if you're an
American you've got a disadvantage. If you're not an American, you're still going
to want to move out of your country and become taxed on a resident and depending
on where you're from, there may be an issue in terms of how long you can
actually spend in your country. It's not as simple as the 183-day rule where
you get to spend 182 days and 183 somewhere else. Most Western countries in
particular have more tests to drag you into the tax net. So again,
being simplistic, not tax advice given that there's how many different
millions of permutations, but, you know, if you say I'm going to spend nine
months outside of my country, I would say in a decent number
of situations that's going to be reasonable depending on how you
structure your life. And so the goal is onshore is the new
offshore. We're looking at higher level jurisdictions. We're not looking for
the cheapest, most flimsy jurisdiction like a Belize or something.
I've seen time and time again these guys who want to sell you to go to Belize.
Oh, just run your whole business through a subsidiary.
Well, there's all sorts of legal risks there. There's expropriation risks. There's
all a number of different things that could come from that. You want a strong
topco in your organization. And so this may seem complicated,
but the reality is if you make the move, move your rope.
And if you move the assets, and if you're legitimately running your business
as a nomad capitalist, which again I think has a lot of advantages to
actually growing the business, not just keeping taxes,
but actually growing it, so you're winning on both sides,
it's pretty straightforward. If you meet the criteria,
you save the money. If you're out of the tax net, or if you have the
foreign-earned income exclusion, if you have,
you know, for the Americans, for wherever you're from, if you have
those things, and if you're running the business properly, and if
everything's set up to employees, if everything's set up properly,
well then you've got a pretty strong fortress to legally reduce your tax.
And even though people who offshore that's kind of concerning,
well it's really not, because it's legal. You want to do it legally, but you
want to have documentation. You want to do things properly.
You want to have the right people in your corner. And that's a lot easier
than these guys who are telling you to go out and get a lease
on your house, it's more expensive than you want, and then deduct too much of it.
Not only is that inorganic, not only are you doing things in a country like the
U.S. where you're incurring expenses, just so you can get write-offs,
you're operating your business inorganically, but you're wasting a lot
of time in the process. But what I'm seeing more and more from people is
aggressive strategies. Yeah, you shouldn't be writing off your Rolexes.
A lot of people probably shouldn't be writing off their private jets,
especially the U.S. is more strict than some other countries,
including the offshore countries that we work with in terms of
what you're even allowed to write off. And so people have this idea,
anything you buy could just be written off. That's not true.
So it's actually a lot safer, generally speaking, to go offshore
when you follow the rules, rather than trying to stay in your country
and flitter around trying to figure out some way to reduce your taxes
by being aggressive. I like to sleep well at night.
That's why they call me the goody-two shoes of the offshore business.
We do things properly. If you'd like to do that, you can go to nomadcapitalist.com
slash apply, learn how we work. I've spent the last, how many years,
close to 15 years at this point, building a network around the world.
We've got a whole team. All they do is manage our network of experts
around the world, make sure that they're still up to par,
make sure they know what's changing in the world.
We have more information not only on all these different jurisdictions
to set up your company. We have hundreds of banks in our database
that we continue to stay up to date with,
where are the best banks for you personally, for your business,
where are the best places to move? Call it a one-stop-shop,
everything for your personal and corporate tax reduction
for where you're going to get a residence. I would argue if you're an
American, you want a second passport because one day you might say,
if I don't even live in this country, why am I paying 10 percent?
Let me bounce. You need a second passport to get out for good.
All under one roof, nomadcapitalist.com slash apply.
And we'd be happy to help you with this.
That's the answer to living tax-free in the U.S.
Yeah, if you don't make a lot of money, there's a way to do it.
You can get all the different exemptions and capital gains as a retiree.
I'm talking to people who are seven and eight figure entrepreneurs.
That's who we help.