Thinking About Moving to a New Country, 8 Tax Considerations

7 Considerations When Thinking of Moving to a New Country

Thinking of Moving to a New Country?

For some U.S. taxpayers who want to reduce their overall tax rate by ‘going offshore’, their internet research may lead them to believe that they can simply become a tax nomad and crisscross the world carefree with paying little to no tax. What these online hustlers do not tell the U.S. taxpayers is that since the United States taxes individuals on their worldwide income, just acquiring additional citizenships, developing ‘Plan B’s’, investing in Golden Visas, and only living a few months in different foreign countries does nothing to reduce your U.S. tax liability. In fact, by acquiring additional citizenships and passports you may inadvertently be increasing your overall tax liability and draining your wealth.  Let’s take a look at the real-life circumstances for taxpayers who decide they want to pursue the nomad lifestyle and avoid taxes without proper international tax/legal planning with a certified tax and legal specialist.

First, Avoid Online ‘Offshore Planning’ Swindlers

For taxpayers who are diligently researching what they could do to reduce their taxes by going offshore, they will undoubtedly come across some glossy online marketing materials, articles, and videos that want taxpayers to believe all they have to do is pay some non-attorney, non-tax professional five to six figures to develop an individualized approach to going offshore.

Most of these websites are gimmicks.

If the only experience that a person has in helping people go offshore is that they went offshore, then that is not the experience you need. For example, if the only experience a person has with a restaurant is that they ate at that restaurant, are you also going to trust that person to cook you the same meal they ate at the restaurant — simply because they ate at the restaurant where a professional chef cooked the meal? No, of course not.

In fact, many of these internet swindlers are using fake names and manipulating the facts of their experiences to make them seem better than they really are.

What They Want You to Imagine Will Happen

Once you purchase their 5-6 figure ‘going offshore’ strategy and invest in a few Citizenships and Investment Visas,  you will be traveling the world, spreading your assets across different countries, planting flags in your countries of choice, and reducing your tax liability significantly to the point where taxes are just an afterthought.

What Really Happens

You have multiple citizenships which are little to no good for you because these are not countries that you would probably want to live or invest in. There may be several other fees and taxes that come along with maintaining these different citizenships you were not told about. You have problems opening foreign accounts due to FATCA. The offshore asset protection trust you created has additional fees as well which you did not anticipate, and the U.S. government still taxes you on all of your income and requires you to report all these newly acquired foreign assets.

Expatriating From the U.S. vs. Going ‘Offshore’

At our firm, we specialize exclusively in offshore disclosure and expatriation. Expatriation is the formal process of giving up your U.S. citizenship or relinquishing your green card (LTR) if you held it for a long time. And because U.S. citizens and LTRs may be subject to an exit tax at the time of expatriation, it can be a long and arduous process — and it may benefit the Taxpayer to enlist the help of a Board-Certified tax/legal specialist.

Most people expatriate because they are either not originally from the United States and/or they inadvertently became a Long-Term Lawful Permanent Resident. Most of these people have citizenship in another country where they previously lived, worked, and/or have family members and other ties. 

But, just giving up your U.S. citizenship because you think you are going to pay less tax because of something you heard in a video on YouTube is a huge undertaking that can have serious ramifications — especially for taxpayers who have lived the majority of their lives in the United States, have family members in the United States, have investments and friends in the united states, etc.

There is No ‘Going Offshore’ Pot of Gold

Many of these ‘going offshore’ plans being peddled online are outdated and/or never worked in the first place. If they did work, then they would be much more popular, and you would find attorneys and CPAs across the globe pursuing these strategies for their clients. It is not as if these shysters discovered some incredible ‘going offshore’ strategy that experienced tax specialists are not aware of, rather, it is that these plans do not work and are not something that a licensed professional would recommend to a taxpayer seeking to go overseas.

Why These ‘Going’ Offshore’ Plans Do Not Work

The United States taxes individuals on their worldwide income. Thus, even if you buy 10 passports and seven golden visas, the U.S. government is still going to tax you on your worldwide income and require you to report all of your foreign accounts, assets, and investments on various international information reporting forms. To avoid the long arm of the IRS, the taxpayer has to formally expatriate.

For high-net-worth individuals, the resulting exit tax can be very expensive — and from a cost-benefit analysis, expatriating from the U.S. and the resulting exit tax is not cost-beneficial — even when the U.S. government will not tax them going forward, post-expatriation.

Why?

Because at the end of the day, most wealthy taxpayers want to live in countries that offer certain luxuries — and most of these countries have their own set of taxes and fees even if they are not technically considered income taxes in that country.

What If You Do Not Expatriate?

For taxpayers who are not technically expatriates from the United States — but just going offshore or moving assets offshore —  just moving their assets overseas will do nothing to reduce the tax liability — and little to protect your assets. In fact, acquiring more foreign assets and trusts will significantly increase their reporting requirements on various international information reporting forms such as the FBAR, Form 8938, Form 5471, etc. In addition, due to the various fees and additional non-creditable taxes that foreign countries levy, a U.S. person may find themselves in a much more complicated tax situation than they were previously resulting in paying additional taxes in foreign countries as well as having a much more complicated U.S. tax return due to the strict enforcement of the international reporting protocol by the IRS and FinCEN.

Use a Licensed Attorney/Tax Professional

If you are going to pay a non-licensed individual tens of hundreds of thousands of dollars to create an individualized plan for you, the first thing you need to do is obtain real information about the individual and company that is offering these services. Attorneys are licensed in different States, and you can find their information on the various bar websites. CPAs are also licensed and you can find their information on the websites as well. If you are unable to verify anything about a person who is offering these types of services, how could you possibly entrust them to your seven or eight-figure investment portfolio?

Golding & Golding: About Our International Tax Law Firm

Golding & Golding specializes exclusively in international tax, specifically IRS offshore disclosure and expatriation.

Contact our firm today for assistance.