Dealing with Taxes When You Move to Another Country - Caleb Jones

As I’ve talked about before, the number one reason I’m moving away from the USA is to save money on taxes. It’s true that I have many other reasons, but taxes are number one. As an American living in America, I am subject to the highest taxes in the history of mankind, and I personally think that’s bullshit. I mean hey! The Scandinavians pay stupidly high taxes too, but at least they get stuff for those taxes like health insurance (as bad as it is), and their taxes don’t go to bomb eight different countries that never attacked them. Nor do they go to bail out bankers, and so on. 

So, I’m quite done getting raked over the coals financially by a bankrupt government. I never break the law, I donate to charity every month, and work seven days a week. I always pay my taxes faithfully and legally, but I’m going to move out of the country so I can reduce my legal tax burden. 

Is it simple to do? Nope. Not for Americans. America is one of the few countries on the planet that actually charge you an income tax that you must pay even if you don’t live in the friggin’ country. That’s how insane our country is. 

To be fair, there is an exception called the Foreign Earned Income Exclusion. This means that if you pretty much stay out of the country all year, you won’t pay taxes on the first $100,000 of income or so. The problem is: 

  1. It doesn’t exclude all taxes, just most.
  2. Any income over $100,000 is taxed at the higher graduated tax rates America uses. That won’t apply to guys who make less than $100,000, but I make many multiples of that, so I’d still get dinged pretty bad.
  3. Worst of all, if I stay in the USA more than 35 days a year, I lose the entire exclusion. That’s right. That means I not only have to move out of the USA to get this exclusion, but I can’t come back and visit for more than 35 days per year. If I stay 36 days or more, bam, I’m taxed again.

I plan on spending several months in the USA per year even after I move away in 2021. This means I don’t get this exclusion at all.  

Sucks. 

But it gets even more complicated. 

Most Western countries, including Australia and New Zealand which I’m looking at moving to, can tax worldwide income for non-citizens who don’t live there(!). New Zealand will tax you on worldwide income even if you’re not a citizen if you stay there for more than 183 days per year. Australia, amazingly, may want to tax you as a non-citizen even if you stay one month a year if you return to the same location every time you visit. On year-round worldwide income! 

Ridiculous and insane, but that’s the state of the Western world these days.  

The slight good news is that most Western countries have treaties with the USA so that if they charge you a tax, you don’t get double-taxed in the USA and vice versa. So, you’ll never pay the same tax twice to two different countries. Not that it helps very much. 

Are there ways around this stuff? Sure. One way is to break the law, but I don’t do that. There are other ways, but they’re extremely complicated and would likely cause me great inconvenience. There’s also one “big” way, and that is to renounce my American citizenship.  

That is also a little complicated and I’ve discussed that topic on this blog before. I don’t want to do that, but many years down the road I want at least the option of doing this, meaning I need several more passports beyond my American one. 

All of this means that even though I’ll be moved out of the country on full time basis by the end of 2021, I will still likely be paying a decent amount of American taxes for several more years until I hash out all of these details. And that’s okay. As I’ve said before, five flags is a long, multi-year process. I play the long game so I’m in no rush. 

That, and there are numerous other benefits for me by moving out of the Collapsing USA that have nothing to do with taxes. Those I get much sooner. I first enumerated the reasons I want to do this seven years ago here, but I will soon write an updated article about the benefits of doing so, at least for me, so I can be more clear about why I’m doing this. 

Is it worth it to me to stay out of the USA for 330 days a year just to save some taxes on my first $100,000 income? Right now, no. So, for the time being, I will live in at least two locations, one of which being somewhere in the USA (right now that looks like Scottsdale during the winter). But down the road, I will probably feel much differently. 

Is it worth it for me to incur the likely possibility that Australia will want to tax my all-year, world-wide income at well over 40% if I go there for just a few months a year? Hell no. That means that Australia has probably been knocked off my list of possible places to live. I haven’t made a solid decision on that yet, but 2021 is rapidly approaching so that decision is coming very soon. New Zealand, despite its dreadful 15% sales tax, is suddenly looking much better. 

There’s also South American options like Paraguay or Panama, but with my frequent trips to Asia, those might be complicated. I’ll discuss these options more as I go along with this process. 

23 Comments on “Dealing with Taxes When You Move to Another Country

  1. BD in all those years why haven’t made a list of books one should read to minimize their taxes? Also if u could superfically explain how u do it. I know I can’t do it step by step cuz of legal reasons.

  2. BD in all those years why haven’t made a list of books one should read to minimize their taxes?

    What makes you think I haven’t done exactly that? 🙂 The problem is that tax laws change all the time, so books I read 15 years ago, even 5 years ago, teach stuff that no longer applies.

    My standard advice: If you’re an American, go to Amazon and search for Sandy Botkin. Buy his most current book (he does a new one every year), read it, and do what it says. If you’re outside of the USA, do your own research on Amazon and try to find the equivalent for your country.

  3. So complicated. Why don’t you just ditch the US citizenship. Also I am not sure why don’t you just buy some other passport with your money and go through all those complicated residency to get passport programmes. Isn’t your time and energy worth more than the money you’d save on not having to buy one of those purchasable passports?

  4. Why don’t you just ditch the US citizenship.

    “Just?” You don’t “just ditch your US citizenship”. It’s a very complicated process that takes many, many years, as I mentioned in the article and in prior articles. If I did it right now I would be without a passport and would be unable to travel internationally.

    Also I am not sure why don’t you just buy some other passport with your money and go through all those complicated residency to get passport programmes. Isn’t your time and energy worth more than the money you’d save on not having to buy one of those purchasable passports?

    1. You underestimate how expensive that is. Do you think I have an extra $140,000 just laying around that I could easily spend?

    2. I am probably going to buy one eventually, but I need multiple passports, not just one, so I’m getting several through various means.

  5. 1. You underestimate how expensive that is. Do you think I have an extra $140,000 just laying around that I could easily spend?

    Yes, that is the impression I had. I understood from your posts that your liquid or semi liquid savings are on the order of several hundred thousand and a few million. That’s why I was puzzled. I thought you had enough money to just buy two passports then ditch the US passport immediately and be done with it. Also I think with your earning levels you would get the monney back on tax savings within a year or two I think.

    Malta passport you can buy for 700 000 though I guess for you there isnt a point since you get Italian ancestry passport. I am not you but if I were you id get the 140 000 dollar cost passport and Italian ancestry passport and be done with it.

    Of course if I misunderstood how much savings you have then I understand.

  6. I understood from your posts that your liquid or semi liquid savings are on the order of several hundred thousand and a few million. That’s why I was puzzled.

    I have never said how much money I have or given any numbers to that effect. Those numbers you’re quoting you pulled out of the air.

    I thought you had enough money to just buy two passports then ditch the US passport immediately and be done with it.

    Having the money and wanting to whip out $300,000 or $1 million just to buy passports are two different things. Seriously, if you had a million dollars (for example), would you spend $700,000 of that to buy a Malta passport?

    Also I think with your earning levels you would get the monney back on tax savings within a year or two I think.

    Now you’re making more sense. Yes, that is one of the reasons I may do this.

    I am not you but if I were you id get the 140 000 dollar cost passport and Italian ancestry passport and be done with it.

    I didn’t say I wasn’t doing exactly that. Going after Italian ancestry and buying a passport later if necessary. Yes. But I’m also going after Panama/Paraguay on top of those because I may not get the Italian passport. It’s not 100%. None of this stuff is.

    And I need at least two more passports in addition to my American one. (I’m not renouncing my citizenship on just one remaining valid passport.) So I dig into my savings and spend $140,000(!) on one passport, Italy decides not to give me one, then I’m right back to square one. (Now I have to buy another passport that will probably cost way more than $140,000? Fuck that.)

    Hopefully now you see why this is not a “hey man just renounce” situation and is a little more complicated. (If I was worth tens of millions then sure, but then I would have already done it a long time ago.)

  7. I have never said how much money I have or given any numbers to that effect. Those numbers you’re quoting you pulled out of the air.

    I know you don’t give numbers but it was assumed based on your comments in the past of stuff like that “you have a shitload of gold” and own some real estate etc.

    Seriously, if you had a million dollars (for example), would you spend $700,000 of that to buy a Malta passport?

    Of course not, unless I had many Millions and coudn’t get or didn’t have another European passport easily. Honestly, in my case if I didn’t have an EU passport already and wanted another one I would just marry one of my women for the passport, that would be cheaper with all the possible consequences at least at my level of money currently.

    Now you’re making more sense. Yes, that is one of the reasons I may do this.

    Yes it is about the long term also.

    Hopefully now you see why this is not a “hey man just renounce” situation and is a little more complicated. (If I was worth tens of millions then sure, but then I would have already done it a long time ago.)

    Yeah I get it but… what about the option to get passport with marriage? In some countries you can get that relatively quickly and they don’t require anything else. You could just pay some woman to marry her and then divorce her after? Have you considered that? I am curious if you consider this a valid way to get passport.

  8. It is interesting how you are discovering these land mines as you dig into details. Australia sounds even worse than the US. Guess they don’t want residents, only vacationers.

    You may be screwed even after you get all those passports and renounce. You’ll still have US customers for all your books/videos, right? That means you’ll still have to file corporate tax returns and pay US tax. In some cases I’ve seen you aren’t allowed any business deductions. The fun will never end.

  9. In some countries you can get that relatively quickly and they don’t require anything else. You could just pay some woman to marry her and then divorce her after? Have you considered that?

    No.

    1. It’s lying and illegal. I don’t do any of that.

    2. It’s a shitload of work and drama, and I would know, since I’ve seen other guys have problems with trying exactly that.

    3. She can bail out of the deal at any time during the two-year process, ruining the entire thing. I don’t want to rely on a woman like that.

    4. What you’re describing isn’t as easy as it once was, even in the second-world countries.

  10. Australia sounds even worse than the US. Guess they don’t want residents, only vacationers.

    Yes, I’m sure that’s part of the rationale their government would use. I was stunned when I discovered this.

    You’ll still have US customers for all your books/videos, right? That means you’ll still have to file corporate tax returns and pay US tax.

    1. Right now, yes, but less and less as time goes on. One of my biggest business goals is to reduce the amount of business income I receive from the West, particularly the USA, and increase it in Asia and other regions. I don’t need that right now (I’m happy with a lot of American income at the moment), but down the road that’s the plan.

    2. For what remains of that American income, there are various legal ways around that. They’re complicated though. (But I will do them.)

  11. You may be screwed even after you get all those passports and renounce. You’ll still have US customers for all your books/videos, right? That means you’ll still have to file corporate tax returns and pay US tax. In some cases I’ve seen you aren’t allowed any business deductions. The fun will never end.

    What kind of nonsense is that. Why it metter where the customers are from? According to your logic if an ice cream stall in Argentina has US customer that ice cream man needs to pay US tax? That is laughable.

  12. A word of caution. If you renounce your American citizenship and the bcis determines you are doing so to avoid taxes they will ban you from reentry into the us even as a visitor.
    I am not exactly sure how they make that determination, they might ask you or they might research you. However, being excessively candid on this subject might be to your disadvantage.
    Just fyi.

  13. If you renounce your American citizenship and the bcis determines you are doing so to avoid taxes they will ban you from reentry into the us even as a visitor.

    I know. I won’t care by then. Plus if/when, by the time I do this, my blogging presence will be very different.

    Caleb, what are your opinions on being a digital nomad?

    It’s a fantastic Alpha Male 2.0 lifestyle option for men under the age of 35.

  14. Somewhat related with the taxes and residency situation – to which degree do you follow the whole International Flags plan to …

    a) spend more time in better countries, have options where to live, lower taxes, but all very lax, no new citizenship, more like a traveler officially, even though in your lifestyle you live wherever you want for however long you want practically…

    b) have second citizenship or similar “strong legal position to go to, stay forever, and be protected” in another country

    If option a) is more important, it is relatively easy to setup. What I’m doing right now. Just get a residency in a low tax country (and your country of citizenship should not tax worldwide income, which almost all except US don’t) – now pay only low taxes at your residency, and spend 4,5 months a year in a third country just “for vacation” on a holiday visa. That’s very easy to do and setup.

    For option b) a lot more complicated, but potentially worth it, depending on your fears / future problems you want to mitigate. I would be really interesting about specific problems you are thinking of here, to make all the extra work worth it?

    Since I am going with option a) for now, and I don’t see many scenarios where b) provides enough benefit.

    Something like my country of citizenship going crazy, taxing me 90% or confiscating my wealth, and if I don’t show up “cancelling” my passport or something is what I could think of – that would be extremely unlikely. Like if I lived in the former Russian Empire before Communism, I’d like a US passport to flee to. Or as a Jew in 1935 Germany, I would prefer option b) a lot. But today I don’t really see such a problem near- mid-term , 30+ years out who knows. Maybe I’m missing something?

  15. I want both of your A and B options. But yes, many guys can do “partial” five flags and it’s a much easier process. I’m doing the complicated version. 🙂  That’s why I’m giving it a lot of time and being very patient about it all.

    But today I don’t really see such a problem near- mid-term , 30+ years out who knows. Maybe I’m missing something?

    I don’t either. As I stated here, I think it’s possible but unlikely. But that’s not the reason I’m doing this; it’s just a distant added possible benefit.

    The main reasons I’m doing this are A) taxes and B) international mobility / flexibility.

  16. Its interesting many non-US Internet entrepreneurs are encouraged to incorporate a LLC in the state of Delaware so they pay less taxes. The corporate tax rates in my country is 29% to that you have to add several smallers taxes and fees.
    I’m not interested to incorporate in my home country. I’m contemplating more attractive options such as Ireland (12%) (where I used to live and may return) , the UK and the US.

    New Zealand corporate income tax (CIT) rate is 28% that is higher than in the US I believe?
    Why not keep your US company and live abroad?

  17. Why not keep your US company and live abroad?

    Well, a company can be registered in any country on Earth, and it’s not that big of a deal to move from country to country if necessary. Why not then have it in the best jurisdiction possible, wherever that might be?

  18. Its interesting many non-US Internet entrepreneurs are encouraged to incorporate a LLC in the state of Delaware so they pay less taxes. The corporate tax rates in my country is 29% to that you have to add several smallers taxes and fees.
    I’m not interested to incorporate in my home country.

    Right, because you won’t pay a USA federal income tax, just the corporate. I would get stuck with both.

    New Zealand corporate income tax (CIT) rate is 28% that is higher than in the US I believe?

    Yes but that’s a very temporary Trump anomaly. As soon as the next president / congress gets in, US corporate taxes will almost instantly rise right back to their usual high and insane levels.

    Why not keep your US company and live abroad?

    There are 190+ countries on the planet. Is the USA literally the best and lowest-tax country out of all of them to have a business?

  19. Does anyone know of countries where a US citizen can safely have bank accounts?

    It would be nice to have money safely off shore away from our legal system. All kinds of things can ruin you financially. A hospital bill. A car accident that has claims above your insurance limit. Social justice warriors who don’t like your politics. A pregnant woman, fake or real.

    The list is endless and your only defense is to pay lawyers $500 an hour. Or just ignore them because your money is out of reach. I’m thinking a second flag might be a simpler, easier form of asset protection.

  20. Does anyone know of countries where a US citizen can safely have bank accounts?

    Just about any country. The problem is many foreign banks (not countries, banks) will refuse Americans because of FATCA.

  21. @Sven
    Its interesting many non-US Internet entrepreneurs are encouraged to incorporate a LLC in the state of Delaware so they pay less taxes.

    FWIW, that isn’t generally true. What state tax rate you pay is complicated and has little to do with where the company is incorporated, more where it is headquartered and where the money is generated.

    The reasons many companies are headquartered in Delaware is that the business law is far more favorable, in terms of liability, insurance is more favorable to businesses, and officer liability is handled better, along with the fact that business law courts there a vastly more effective and efficient than in most states. (The biggest one for me, and the reason my businesses are incorporated in Nevada is the so called piercing of the corporate veil, where, under some circumstances in some jurisdictions, your limited liability can be stripped away and lawsuits can be filed directly against you as a person — exposing your personal assets — rather than against he company where liability is limited to the company assets. Sounds pretty unlikely doesn’t it? Well you’d be wrong, I have actually be sued in that way before. Of course we settled out of court because you cannot actually obtain anything approaching justice in the American court system.)

    In Nevada, the “corporate veil” has been pierced exactly one time in the past fifty years. Where I live, in Illinois, it happens all the time.

    Having said that, this is even more reason to incorporate overseas in a suitable jurisdiction, since, for example, in some places suitors can’t even find the name of the directors, never mind actually sue them directly.

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