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Yes, if you're making $50k a year. But not if you're an entrepreneur pulling in $1m a year. Everything involving intellectual property rights is generally very

Yes, if you're making $50k a year. But not if you're an entrepreneur pulling in $1m a year. Everything involving intellectual property rights is generally very fluid and easy to move around. A smaller scale example would be living life as a perpetual traveller°: an internet based entrepreneur who makes $200k a year and bases him/herself in a jurisdiction that does not tax income. Or who travels around between countries to avoid tax. Instead of paying 40% tax on $200k (= $80k gone, poof) you put that in your pocket and use that to pay for travel expenses. "Going into tax exile" essentially ends up paying for itself, and then some. That is why companies (and individuals) participate in tax avoidance. °: exception; this doesn't apply to Americans. You get to pay US taxes wherever you reside, above a certain income threshold.

csomar 9y ago
How does this apply to other countries? Aren't you supposed to get residence in some country before losing the residence connection of your original country? That being said, there are countries with loose taxation like Thailand where you can establish residence and avoid taxes as long as you are not operating in the country itself.
- charlesdm 9y ago
  Not really, but it's better to have official residency somewhere, though. Some countries are quite flexible on residency, however. Cyprus offers residency after spending 60 days per year in the country, and exempts foreign income from tax. In Malta you can get residency by paying €20k a year (no requirement to spend any time in the country), and foreign income is also exempt from tax, etc. > That being said, there are countries with loose taxation like Thailand where you can establish residence and avoid taxes as long as you are not operating in the country itself. I believe you can run foreign companies from Thailand without having to pay tax there, as they have no CFC laws. So the example the poster above gave basically applies, but you would book all your income in ForeignCo and take a small salary in the Thai company from fees you charge ForeignCo. That's essentially a zero tax country then.
  - eloff 9y ago
    Panama also does not tax foreign income. I worked remotely from Panama for many years and it was lovely. My take home salary was better than what could be achieved working for the likes of Google or Facebook, stock compensation not considered. I met my wife there too. But the threshold to get residency is higher.
  - seanmcdirmid 9y ago
    No countries tax foreign income but the USA and Eritrea.
    - eloff 9y ago
      Not true at all. Canada, for example, taxes your worldwide income. USA and Eritrea are unique in that they will tax your worldwide income even if you no longer live in those countries (are non-resident.) No other countries in the world have the brass balls to do that.
      - sgt101 9y ago
        From what I understand they will rebate your tax based on the local taxation you have paid, provided you can prove that. Alternatively you can give up your citizenship... I think very few people with US citizenship ever do that.
        charlesdm 9y ago
        That is because there is a cost associated with renouncing US citizenship. You'll get hit with an exit tax on all your assets, making it extremely painful. The US really does not want you to renounce, because then they can no longer tax your global income. They essentially punish wealthy people (financially) for renouncing.
        seanmcdirmid 9y ago
        You actually don't have to prove anything, you just state that you paid taxes and how much you paid (if taking a foreign tax credit). As for rebate, that is something else, meaning those taxes were already withheld by the IRS for some reason.

csomar 9y ago

How does this apply to other countries? Aren't you supposed to get residence in some country before losing the residence connection of your original country? That being said, there are countries with loose taxation like Thailand where you can establish residence and avoid taxes as long as you are not operating in the country itself.

charlesdm 9y ago
Not really, but it's better to have official residency somewhere, though. Some countries are quite flexible on residency, however. Cyprus offers residency after spending 60 days per year in the country, and exempts foreign income from tax. In Malta you can get residency by paying €20k a year (no requirement to spend any time in the country), and foreign income is also exempt from tax, etc. > That being said, there are countries with loose taxation like Thailand where you can establish residence and avoid taxes as long as you are not operating in the country itself. I believe you can run foreign companies from Thailand without having to pay tax there, as they have no CFC laws. So the example the poster above gave basically applies, but you would book all your income in ForeignCo and take a small salary in the Thai company from fees you charge ForeignCo. That's essentially a zero tax country then.
- eloff 9y ago
  Panama also does not tax foreign income. I worked remotely from Panama for many years and it was lovely. My take home salary was better than what could be achieved working for the likes of Google or Facebook, stock compensation not considered. I met my wife there too. But the threshold to get residency is higher.
- seanmcdirmid 9y ago
  No countries tax foreign income but the USA and Eritrea.
  - eloff 9y ago
    Not true at all. Canada, for example, taxes your worldwide income. USA and Eritrea are unique in that they will tax your worldwide income even if you no longer live in those countries (are non-resident.) No other countries in the world have the brass balls to do that.
    - sgt101 9y ago
      From what I understand they will rebate your tax based on the local taxation you have paid, provided you can prove that. Alternatively you can give up your citizenship... I think very few people with US citizenship ever do that.
      - charlesdm 9y ago
        That is because there is a cost associated with renouncing US citizenship. You'll get hit with an exit tax on all your assets, making it extremely painful. The US really does not want you to renounce, because then they can no longer tax your global income. They essentially punish wealthy people (financially) for renouncing.
      - seanmcdirmid 9y ago
        You actually don't have to prove anything, you just state that you paid taxes and how much you paid (if taking a foreign tax credit). As for rebate, that is something else, meaning those taxes were already withheld by the IRS for some reason.