Taking up citizenship in a tax haven - stories?

[hahaha]

Just curious to see if many people on this forum have changed citizenship to a tax haven for tax mitigation. There are plenty of people here with 5M+ eggs at which point the tax on the income from the portfolio might start bothering someone just enough to consider tax mitigation strategies.

I always see this stuff in the movies but never met anyone who actually did it. Would love to hear some stories as well as how the process goes.

 

[yakers]

OPs first post, we'll see if this gets too political. No, haven't gone to reside in a tax haven, have visited some, great vacations. I do know people who established foreign citizenship but that was after marriage to a foreign national and moving to their country.
AFAIK the US taxes it nationals whereever they reside (although each country may have tax agreements with th US) so one would have to renounce citizenship to avoid US taxes, a nonstarter as I am concerned, not a financial issue.

 

[perez99]

AFAIK the US taxes it nationals whereever they reside (although each country may have tax agreements with th US) so one would have to renounce citizenship to avoid US taxes, a nonstarter as I am concerned, not a financial issue.

I think Puerto Rico is an exception for those who qualify. Keep citizenship and pay no federal taxes
https://www.districtofcolumbiataxattorney.com/articles/tax-weary-americans-find-haven-in-puerto-rico/#:~:text=Act%2022%20entices%20individual%20investors,becoming%20a%20qualifying%20new%20resident.

 

[Ian S]

Well, there's an "Exit Tax" the IRS can nail you with. And then your heirs may also get a nasty surprise upon your death. https://expattaxprofessionals.com/blog/article/tax-consequences-renouncing-us-citizenship

 

[RobLJ]

We moved to Nevada (Reno), but it was from Texas, so I guess that doesn't qualify as moving to a tax haven. (Both are non-income tax states, but that wasn't why we moved to Reno.)


Given the influx of immigrants like me, it will be interesting how Nevada generates revenue to accommodate population growth.

 

[ExFlyBoy5]

I know of a couple that moved to Andorra many years ago to avoid US taxes. I don't know the specifics except that they owned a bank in rural America and had done pretty well for themselves. One of them gave up their US citizenship (I believe it was a requirement to gain citizenship in Andorra) and the other did not. There are some issues with visits to the US as well, but not sure about the specifics. They love it there, but do miss their family back here in the states. Not sure how it will all pan out when the get "of a certain age", however.

I think it's somewhat interesting that Andorra has the longest life expectancy of any country in the world: 81 years.

 

[MichaelB]

The framing of this topic is confusing. A $5M portfolio should not generate so much taxable income that a tax haven or loss of US citizenship becomes a compelling tax mitigation strategy. Favorable capital gain rates coupled with tax free options, such as municipal bonds, should keep the total federal tax burden relatively low.

After relocating overseas, a US citizen is still liable for US taxes on investment income ( even Puerto Rico). Giving up US citizenship, income based in the US, such as pension or Social Security, would still be subject to US tax laws, unless there is a tax treaty.

Tax havens tend to have two primary constituents. Business income looking for low tax rates, and people looking to hide assets from interested parties, such as spouses, partners, and the authorities. Both require substantial involvement of specialized legal counsel, which is quite costly.

 

[brett]

Two of my work colleagues went the route of renouncing their US citizenship for tax reasons. Plus, they had established lives in a different country.

 

[Markola]

Related, the Planet Money folks did an interesting episode on offshore companies.

https://www.npr.org/sections/money/...-we-set-up-an-offshore-company-in-a-tax-haven

It turns out, the best place offshore to establish an anonymous company is....Delaware.

 

[Surewhitey]

We moved to Nevada (Reno), but it was from Texas, so I guess that doesn't qualify as moving to a tax haven. (Both are non-income tax states, but that wasn't why we moved to Reno.)


Given the influx of immigrants like me, it will be interesting how Nevada generates revenue to accommodate population growth.

Yeah, we moved back to Dallas after our 4 years in SoCal. We deferred comp'd a bit while we were in a high Cali bracket and took it over 5 years in Dallas. We made a pittance for 3 of the years, so we didn't pay the 28% fed and about 10% Cali, so it worked well for us.

TX is a great place to work, just not much more other than family time.

We lived in Mexico for 3 of the 5 & lived on the payouts of the deffered comp...

 

[yhoomajor]

It's easier said than done. So called Tax Heavens work more at Corporate level then individual level. Because you would need to hire army of Accountants and Lawyers to defend yourself quite often from Uncle Sam.

As others have said - US now has Exit Tax. So as long as you want to cut cord completely from US, you can take your lumps and go somewhere else (but even than Uncle Sam can get you on one pretext or other). It is feasible, but not very economical if you are talking less than $100mil because of all the risk and limitations (& litigations).

Two words: "Money Laundering" is all it takes for Feds to charge someone and destroy their whole life.