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I'm doing a self funded start-up and I moved to Panama from SF to save on taxes. I was paying over 50% tax and now I pay 0% tax. By moving here my start-up went
by panamaguy 10y ago
I'm doing a self funded start-up and I moved to Panama from SF to save on taxes. I was paying over 50% tax and now I pay 0% tax. By moving here my start-up went from unviable to very competitive. I am now able to undercut my only competitor and will likely drive them out of business sometime next year. Once that happens I'll raise my prices and make even more money.
This is business; if I didn't do this someone else would do it to me. Same thing happened to me with a previous company and a Chinese competitor. Lost ten years of savings and 4 years of my life on that one.
I much prefer living in the US but it was just impossible to make the numbers work. I could have survived with a 10-20% tax but there is no way that is happening in the near future in the US.
The point I want to get across is; irrespective on what you think is fair the US tax rate is uncompetitive and driving small business out of the country. Big companies get to stay because they can afford the more expensive tax avoidance schemes. Little guys like myself are either driven out of business or out of the country.
- tome 10y ago> I am now able to undercut my only competitor and will likely drive them out of business sometime next year. Unless they also move to Panama?
- elorant 10y agoSo why not having a company in Panama and just get a salary from it and keep reinvesting the profits? Why did you have to move there physically?
- panamaguy 10y agoUS taxes on global income if you're a tax resident of the US. There are ways to do it but at the low end it costs more than the taxes so it's not worth it.
- mixmastamyk 10y agoI thought they also do it to expats, except for some token amount such as 100k/yr.
- panamaguy 10y agoLuckily I'm not American. For those that are you are you can renounce, or roll the dice with Panamanian banking secrecy. The token amount still really helps for small business and remote workers.
- mahyarm 10y agoIf your a citizen or green card holder you are taxed on your global income even though you don't live there. If you were not a citizen / PR, I doubt you'd be able to legally start a business like that in the USA first. You do get a big ~$100k income tax deduction if you don't live in the USA, but that is a separate point. I'm not quite sure if you actually did this move from the USA.
- drcross 10y agoIt's also pretty cheap to live, or so I hear.
- turar 10y agoWhere in the US is the tax rate 50%?
- JBReefer 10y agoAfter sales tax? Everywhere.
- loeg 10y agoNot in WA, even in the 39.6% Federal bracket. Unless you own a very expensive home relative to your income (approximately 33x income at 1.5% property tax works out to 50% of income).
- bradgessler 10y agoIn California: 39.6% federal income tax + 12.3 CA income tax = 51.9%
- turar 10y agoIs that personal or corporate? It sounded like OP was talking about a business.
- bradgessler 10y agopersonal income tax rate
- turar 10y agoI'm curious how one can end up paying the full personal tax rate as an owner of a business. After expenses, depreciation, write-offs such as home office, vehicle, etc., you still don't have to pay yourself the entire corporate net income as a salary. Unless your lifestyle simply demands a top bracket salary.
- coredog64 10y ago
- lsc 10y agoThat's funny, 'cause in my experience, In America, even in California, you mostly get taxed on money you actually make. I mean, mostly; it's complicated. But mostly you pay taxes on the net, not the gross. I mostly don't pay taxes on money I spend on employees and equipment (there are a bunch of exceptions; I pay 7.5% on payroll for employees, and depriciation on capital assets is... well, a matter best left to the accountant. Still.) And, uh, 50% sure, that's what you pay if you take home a whole lot lot of money and live in California... something that usually doesn't happen during the first years of a startup. In my experience, "starting a business" take home pay rarely gets you much above the 20% tax bracket, even in California; you re-invest the rest.
- deleted 10y ago[deleted]
- deleted 10y ago[deleted]
- panamaguy 10y agoI couldn't post for a while, throttled or something. It's personal tax while I saved for later spending on the start-up. Even when optimized the US company tax rate was too high to be viable. I'm not American but could have move the company here - I wish I could afford it because I love living in SF.
- lsc 10y agoah yes, taxes do tangle time-shifting money quite a lot. The way I have seen people fund companies with labor is corp-to-corp contracting; your client pays your company instead of you, then you can (sortof) pay it out as payroll to other people or equipment that year. (for the ranges of money we're talking about here, there are often ways to write off your equipment the same year. Ask your accountant.) It is somewhat more complex than that, and it is harder to get corp-to-corp contracts than to get w2 contracts, and it still doesn't help much in carrying over money from one year to the next, but people do it, and it is a tax-efficient-ish way to get money from your labor into equipment or payroll for the business.
- no1youknowz 10y agoI have some questions. Can you email me on my name @ gmail.com? Thanks
- eloff 10y agoI lived there for ten years, learned Spanish, married a local. I did a similar thing while I was working remotely and the tax advantages were amazing. Contact me at dan.eloff @ popular Google mail.
- egb 10y agoWhat's your citizenship though? US citizen or did you switch to Panamanian?
- capisce 10y agoAnother way to keep US businesses competitive is to use tariffs and other economic sanctions against tax havens like Panama, preventing a global race to the bottom.