If you are an expat who is moving out of the United States, taxation is a huge issue. No matter where you are, it’s natural to want to keep more of your money. With so many options out there, it wouldn’t be smart to move somewhere that will hurt your bottom line.
Though the new Trump administration has made some big promises in this realm, at this point it is nothing more than a just that: a promise. Anyways, most are aimed at corporate rates.
Even so, the United States has the 10th highest personal tax rates in the world. The decrease would have to be drastic to make the country more competitive on the global landscape.
Given that statistic, there are many places with lower taxes. Below are five viable options where an expat can settle. I’ve attempted to spread my recommendations to different areas of the world, in the spirit of diversity.
Quick note: Generally, residency is required to take advantage of nation tax rates.
Tax Structure: Per KPMG, Professional Tax is levied on personal income from employment and professional practices. Employers are required to deduct the professional tax from the salaries of their respective employees on a “pay-as-you-earn” basis.
Note: Though in China, Macau is an autonomous region on the south coast. If you are a high roller, it’s very popular for its gambling scene.
United Arab Emirates
Tax Structure: Per Deloitte, In addition to the 0% personal rate, there is also no capital gains, inheritance, or wealth tax. That being said there is a levy on the transfer of real estate property.
Note: If taking up residence in the United Arab Emirates, make sure you do your due diligence. This will come into play especially with their judicial system as their have been some high profile cases arise in recent years. Be aware there is no separation between church and state.
Tax Structure & Notes: Though 0% on income tax, the Bahamas make it up in other ways (stamp duty tax & real estate tax). Per Deloitte, owners and life tenants of land must pay an annual real estate tax. That rate used with be determined on the basis of it being either commercial or owner occupied.
Those extra dollars may be worth it just to lay on that beautiful beach! I know I’m county my lucky stars in anticipation.
Tax Structure: Resident individuals are subject to income tax on Guatemala based income. An individual is considered a resident if they stay in the country for 183 days in a year or if they have economic interests in the jurisdiction.
Note: If looking for charitable opportunities, Guatemala is a hot spot. I’ve known several individuals who have partaken.
Rate: 13% for residents and 30% for non-residents
Tax Structure: Per Worldwide Tax, “Russia has a uniform rate of tax on the income of individuals. As of 2016 tax in Russia is payable at the rate of 13% for an individual on most income. (non-residents 30%). Exemptions are granted to certain income earners.
Note: Though their tax rate is attractive, be weary of the government in charge. Vladimir Putin is known to take matters into his own hands.
If an expat wants to go back to the US in the future, he or she will need to transfer their money into US dollars. This will cost anywhere between 1-2.5% with the bank and can amount to a big chunk of cash. In this case, he or she will benefit from the use of a money transfer company, such as World First. With much lower markups, it only makes a whole lot of sense.
When asked about their fee structure on their FAQ page, World First replied: “We don’t charge fees when you make a personal transfer with us for over $10,000. For personal transfers under $10,000 we charge $10.” It is also stipulated in this expat review of the firm.
For those wondering, tax shelters have their place in this discussion, you don’t necessarily have to live in the jurisdiction to take advantage of them. The aim of this article is geared toward locations with a favorable tax rate structure.
In practically, tax shelters are financial “arrangements” most widely utilized through the vehicle of business. For clarification purposes, individuals use them as well. Mostly in the investment realm.
Let it be known that these are not your ONLY options. For further research, see a very informative article by Trading Economics here. It will come in handy!