How to Pay Zero Taxes Forever (Legally)
Summary
TLDRThe speaker shares his journey of legally minimizing tax payments by leveraging different tax systems across countries. He discusses the importance of lifestyle and freedom in choosing where to live, and how it influenced his tax strategy. As a US citizen, he utilized foreign income exclusion and foreign corporations to avoid taxes. After renouncing his citizenship, he gained more control over his finances, investing globally while maintaining a low tax liability. The video highlights the benefits of living in tax-friendly countries and the impact of government policies on personal freedom and financial decisions.
Takeaways
- 💼 The speaker has legally paid very little in taxes in some years, even zero, by strategically managing their tax residence and income sources.
- 🌍 The concept of 'tax residency' varies by country, with some only taxing income earned within their borders, while others tax global income regardless of where it's earned.
- 🏖️ The speaker values lifestyle and freedom, which led them to a nomadic lifestyle and choosing countries with tax-friendly policies.
- 🏠 The speaker has homes in multiple countries and doesn't spend enough time in any one place to be considered a tax resident there, thus avoiding taxes.
- 💼 The speaker's business structure involves foreign corporations that are not distributing profits, which contributes to the low tax liability.
- 🌱 The speaker is moving towards countries with non-dom systems, lumpsum systems, or territorial systems where they pay taxes based on a fixed amount or only on local income.
- 💡 The speaker emphasizes the importance of considering the value received from taxes paid, questioning the return on investment for high-income individuals.
- 🌐 The speaker discusses the differences between Western and emerging countries' tax systems, noting that the latter often have simpler tax codes based on the number of days spent in the country.
- 🏆 The speaker suggests that living in countries with lighter government intervention can provide a sense of freedom and less adversarial relationship with authorities.
- 💰 The speaker highlights the potential for tax optimization through legal means, such as setting up businesses in jurisdictions with favorable tax laws and understanding global tax competition.
Q & A
Why did the speaker pay very little or no taxes in some years?
-The speaker paid very little or no taxes in some years because they utilized legal tax strategies and structures, such as residing in countries with favorable tax systems, using foreign corporations, and not taking money out of those corporations, which led to no country claiming them as a tax resident and thus not taxing them.
What is a non-dom system in the context of taxation?
-A non-dom system refers to a taxation system where individuals who are tax residents in a country but do not have their domicile there can be taxed only on income earned within that country, not on income earned abroad.
How does the speaker define 'finance, freedom, and lifestyle' in relation to taxes?
-The speaker defines 'finance, freedom, and lifestyle' as the three main aspects that people consider when planning their taxes. Finance refers to lowering taxes and protecting assets, freedom is about choosing where to live and work without tax implications, and lifestyle pertains to the quality of life and personal preferences in choosing a place of residence.
Why did the speaker decide to become a 'nomad capitalist'?
-The speaker became a 'nomad capitalist' to enjoy the freedom of choosing where to live and work without being constrained by high tax burdens. They wanted to take advantage of the global opportunities for lower taxes and a better lifestyle.
What is the significance of the '183 days' rule mentioned in the script?
-The '183 days' rule is significant because it is a common threshold used by many countries to determine tax residency. If a person does not stay in a country for more than 183 days in a year, they may not be considered a tax resident and thus not liable for taxes in that country.
How did the speaker use foreign corporations to minimize their tax liability?
-The speaker used foreign corporations to minimize tax liability by not taking money out of those corporations, thus avoiding personal income tax. They reinvested money through more complex structures, which allowed them to legally avoid paying taxes in countries where they were not physically present.
What is the difference between a territorial tax system and a residential tax system?
-A territorial tax system taxes only income earned within the country's borders, while a residential tax system taxes an individual on all their worldwide income, regardless of where it is earned, as long as they are a tax resident of that country.
Why did the speaker choose Malaysia as a base for a long time?
-The speaker chose Malaysia as a base due to its blend of being immigration and tax-friendly, offering a favorable environment for living and doing business. It also provided a strategic location for their lifestyle and business interests in Asia.
What are some of the strategies that the speaker suggests for legally reducing tax liability?
-The speaker suggests strategies such as living in countries with territorial tax systems, using foreign corporations, not taking money out of those corporations, and structuring one's lifestyle and business in a way that minimizes tax obligations while maximizing personal freedom and lifestyle choices.
How does the speaker view the relationship between government and citizens in terms of taxation in the countries they have lived in?
-The speaker perceives a difference in the relationship between government and citizens in terms of taxation, noting that in some countries they have lived, the government is less adversarial and more appreciative of taxpayers, which contrasts with their experience in the United States where they felt there was a more hostile and heavy-handed approach to taxation.
Outlines
💼 Tax Optimization and Lifestyle Freedom
The speaker discusses their personal journey of paying minimal taxes, sometimes even zero, through legal means. They emphasize the importance of aligning tax payments with perceived value received from government services. The speaker explores various tax systems around the world, such as non-dom systems, lump-sum systems, and territorial systems, which can significantly reduce tax liabilities. They also touch on the concept of 'tax freedom' and how it relates to personal lifestyle choices, including the desire to live a nomadic life and the benefits of doing so, such as experiencing different cultures and opportunities for investment.
🌍 Navigating Tax Systems and Expatriate Lifestyle
The speaker elaborates on their experiences with different tax systems, particularly in emerging countries where the tax criteria are often simpler, based on the number of days spent in the country. They discuss the benefits of living in countries with territorial tax systems, which only tax income earned within the country, and how this can be advantageous for expatriates. The speaker also shares personal anecdotes about living in various countries, highlighting the cultural and lifestyle aspects that influenced their decisions. They mention the importance of government attitudes towards citizens and how a less adversarial relationship can contribute to a better living experience.
🏛️ Building a Tax-Efficient Global Lifestyle
In this section, the speaker talks about the practical aspects of creating a tax-efficient lifestyle through global mobility. They discuss the importance of understanding the tax laws of different countries and how they can be leveraged to reduce tax burdens. The speaker shares insights on how to legally structure businesses and personal finances to minimize taxes while living abroad. They also touch on the emotional and psychological benefits of choosing one's tax rate and lifestyle, and how this can lead to a greater sense of freedom and personal fulfillment. The speaker concludes by encouraging listeners to consider their options and take control of their financial and lifestyle choices.
Mindmap
Keywords
💡Tax Liability
💡Non-Dom Systems
💡Tax Residence
💡Lifestyle
💡Foreign Income Exclusion
💡Nomad Capitalist
💡Tax Optimization
💡Territorial Tax System
💡Residence Permit
💡Payroll Taxes
💡Tax Competition
Highlights
The speaker has legally paid very little in taxes, sometimes even zero, by strategically managing their tax liabilities.
The decision to minimize tax is based on the value received from the government in return for the taxes paid.
Non-dom systems, lumpsum systems, and territorial systems are explored as tax management strategies.
The speaker has been moving towards a lifestyle that allows for lower tax liabilities as a percentage of income.
For years, the speaker had no tax liability because no country claimed them as a tax resident.
The importance of balancing finance, freedom, and lifestyle when considering tax strategies is emphasized.
The speaker's preference for a nomadic lifestyle was a significant factor in their tax planning journey.
The concept of 'marbles' is used to illustrate the allocation of resources between finance, freedom, and lifestyle.
The speaker discusses the benefits of living in countries with territorial tax systems, where only local income is taxed.
The speaker's experience with the foreign income earned income exclusion as a US citizen is shared.
The use of foreign corporations and complex financial structures to minimize tax is discussed.
The speaker's decision to give up US citizenship for more control over their finances and tax situation is mentioned.
The idea of choosing a tax rate and lifestyle by selecting the country of residence is introduced.
The speaker explains how countries outside the Western world often have simpler tax codes based on the number of days spent in the country.
The contrast between the tax systems of Western and emerging countries is highlighted.
The speaker's personal preference for countries with a more straightforward and less adversarial tax authority is shared.
The benefits of living in tax-friendly countries and the impact on personal freedom and business opportunities are discussed.
The speaker's experience with the tax systems in Colombia and Malaysia is detailed, including the advantages of territorial tax systems.
The importance of understanding the tax implications of residing in a country, even temporarily, is emphasized.
The speaker outlines the services provided by Nomad Capitalist to help individuals navigate the complexities of international tax planning.
The concept of choosing your own tax rate by selecting the country of residence is reiterated as a form of competition among nations.
The speaker concludes by encouraging individuals to take control of their tax situation and lifestyle through informed decision-making.
Transcripts
I've legally paid very little in taxes
some years even zero but that wasn't
always my objective today I'm going to
tell you why I did it and then how I did
[Music]
it for me you want to approach the am of
tax you pay based on what you are
getting and so once you start to become
successful if you have a six figure
seven figure eight figure annual income
you start to ask yourself I'm not paying
$5,000 to support the roads the schools
anymore this is a much more serious
investment am I getting my money's worth
and I think that when we look at the
idea of there are countries out there
that have non-dom systems lumpsum
systems territorial systems there are
countries and I'm actually starting to
move in this direction myself where
you're paying a decent amount of tax
compared to other people but as a
percentage basis it's very low that's
one way you can go for years though I
had essentially no tax liability because
no country really wanted to tax and even
if I said here's my tax residence where
I'm legally tax resident that country
also said well but you're not here and
you don't have any qualifying income so
we're not going to tax you either the
three things we talk to our clients
about at no mist is finance freedom and
lifestyle I often ask them if you got a
100 marbles how many go in each bucket
some people finances lowering taxes
protecting their assets that's the
biggest part but we're seeing more and
more people who value freedom and
lifestyle and for me the lifestyle part
was actually what got me into this Nomad
calist Journey many many years ago and
for me what I could never do was decide
where I wanted to spend all of my time
years ago I listened to the subtle art
of not giving enough it's a book by Mark
Mark Manson he talked about how he had a
hard time picking where he wanted to
live but eventually he forced himself to
choose to live in New York he said it's
so much easier to live in one place for
me I've reduced the amount that I travel
I've been a bit more focused in the
places that I spend time in recent years
but for me I still like the idea of
going to Latin America every once in a
while I don't spend that much time there
but I enjoy the spirit I enjoy the soul
I just enjoy the the vibe of being there
and I get to learn some lessons of
what's working in that part of the world
for our business we do have clients that
come from Latin America I spend more
time in Asia koal andur in Malaysia has
been a base of mine for a long time and
I'm spending time you know in Europe and
so the bottom line is I was able to pay
zero tax because no country asked for it
due to my lifestyle when I was a US
citizen uh I qualified for the foreign
income earned income exclusion I used
foreign corporation I did not take money
out of that foreign corporation so I was
somewhat Limited in how I spent my money
uh to the extent that I was able to
reinvest some of that money it was
through a more convoluted structure
which is something that we certainly
help uh US citizens with in our business
at Nomad calist you can legally pay very
little if not still zero tax as a US
citizen and living overseas if you're an
entrepreneur but when I gave up my US
citizenship I had more control over what
I wanted to do with the money that's
when I started with the collection of
homes and and investing more in
different places around the world but
you know for me having multiple places
that I call home I was never spending
enough time in each place while I'm
getting a little bit back to higher
level places now for much of my life
overseas I wanted to be in Far F places
I wanted to see how emerging countries
were operating and what the
opportunities are and what the
investment opportunities business
opportunities I like seeing it progress
I like the great sense of freedom of you
know being in places where nobody really
bothers you those countries generally
are different than the smaller Universe
of Western countries in that the
emerging countries have in many cases
only one test for whether you're a
taxpayer and that is did you spend a
requisite number of days here the most
common number is 183 now unlike Western
countries you'll often hear people say
oh as long as I don't spend 183 days in
Australia I don't have to pay tax well
that's not true because Australia has
like four different tests of whether
you're a taxpayer New Zealand is a
couple Germany is a couple I mean the UK
has a whole bunch of things I mean
Canada has like 60 some points of
primary and secondary ties there's
numerous ways to get sucked into the tax
nent of a Western Country and if you are
constantly in the go you never spend
much time in any country and then you go
to some you know Europe European country
and you spend four and a half months you
did not spend 183 days you did not fail
the days test but they still may say
well you know you have this tie you have
this tie this is your most substantial
this is that you know we think maybe you
should be taxed let you know you can you
can argue or maybe you can't but um
that's what we think so we'd like to
assess that you pay tax whereas many of
the countries outside of that Western
Universe the emerging world countries
just a well did you spend 183 days here
all the way down to here's a country
that people ask a lot of times why do
you live in Colombia sometimes why do
you have a home there because don't you
have to pay tax their taxes are crazy
actually Columbia's taxes are among the
lowest in the oecd I know they have more
of a left leaning president right now
and that may go up a little bit but they
were one of the lowest taxed countries
in this oecd which is a lobbying group
of high tax countries they were lower
than all the European countries and us
but in Colombia it's a pretty simple
days test I think it's 183 days and yet
there are some people that I've met with
who have temporary residence they're
working working towards permanent
residence but until they have permanent
residence they have to spend 180 days
there and so they thread that needle of
not spending 183 but spending 180
immigration and tax they're never really
connected so the tax people are like
well you don't know us anything and the
immigration people are thank you we're
satisfied now you can argue whether
that's good or not but you know those
people just following the law that's the
law that was created and and certainly
over time you've seen you know some of
these countries impose more barriers but
in a lot of countries the tax tax code
is much more simple than where I'm from
the United States perhaps where you're
from it's just here's the number of days
there are not the multiple tests that
Western countries have and so for me as
somebody who enjoyed spending a little
bit of time in Colombia enjoyed spending
the winter in Malaysia would go here
would go there I never crossed that
threshold to the extent that in any year
that I did for example I believe in 2020
I did in Malaysia Malaysia has a
territorial tax system and so they say
well you know we only tax money that was
earned here which to me actually makes a
lot of sense right if we if we create
the conditions that that a business uh
can hire you well you know that's worth
something if you you know invest in
stocks on our stock market you know
that's worth something if you buy our
real estate and sell it for a profit or
rent it out that's worth something like
we're we have a role to play in that but
if you go and invest in Cambodian real
estate like it's it's not our business
what about you living in Malaysia
specifically as a foreigner I mean like
what did we do for that or if you have a
business that operates out of the UAE I
mean like that's not our business
business uh and so you know there are
countries like that that you know very
rarely did I spend 6 months I think
maybe only in that one year did I spend
six months and so because I valued
lifestyle above everything else uh I
would have done that anyway actually
interesting that a number of the
countries that I have lived in over the
years that are tax friendly I think
there's a Vibe I think that for me
coming from the US where I think the
government is very heavy-handed uh where
I just feel like there's an adversarial
nature to dealing with most parts of the
government whether it's the police
whether it's the tax Authority you may
not believe that that's not the case in
other countries there's countries where
the tax Authority literally sends you I
I got one this year a Christmas card hey
you know thanks for thanks for your
contribution you know Merry Christmas
the tax man the IRS isn't do that so you
don't realize how some of these other
countries are much more uh friendly but
I think there's something in why I chose
some of the places where I live because
the government is less adversarial
because you can just feel it and if
you're living in a country where people
are on each other's throats and you and
the government are like enemies obvious
was I'm I'm a fan of smaller government
but the places where I live I don't feel
the hostility that I felt living in the
United States and so I think that
perhaps I felt that I didn't know
Malaysia was tax friendly many many many
years ago when I traveled and I spent
one month in every country in Southeast
Asia and I met Bank presidents and I met
you know this and that and entrepreneurs
at the end of it I'm like okay Asia is
my place where do I want to live I said
I kind I think Malaysia is the best
place it has the ice it's the best blend
of everything I said all right let me
look up is it immigration friendly yes
mm2 pretty straightforward is it uh tax
friendly you know what how do the taxes
work because at the time I was I was a
US citizen and I you know didn't want
two tax systems conflicting oh it's also
tax friendly and so there's a benefit if
you're living in a place where you're
kind of angry because the government is
sticking it to you the politicians are
sticking it to you going to a country
you can float above the system a little
bit and not have that to me is
incredibly valuable just for your life
so nobody ever asked me to pay taxes
because they set the terms and they said
we don't need a person like you to pay
taxes and so that's the system that I
adapted to and that's the system that
we' then I've learned from many years of
experience that we help people with a
nomad capitalist if you're in a country
where they want you to pay a lot of
taxes there are places where you can go
and be happier social opportunities are
better uh you're going to see the world
emerging you're going to develop a sense
of self awareness and improve who you
are I believe as an investor or as an
entrepreneur and you're just going to
save a bunch of money and we help people
do that how do you get out of your
country how do you get into another
country how do you get a resident permit
into to be able to get into that other
country's tax system are you working
towards citizenship like there's a whole
bunch of things taxes residence
citizenship asset protection banking
some cases if you leave your country
you've got to move your bank account
others you don't uh we help people
figure out the entire holistic puzzle
not just in one jurisdiction but in all
the jurisdiction we've got real estate
experts and attorneys and tax
professionals and all these different
places and we make sure the puzzle works
together in a way that I don't know that
really anybody else does lots of people
sell you their one little solution they
sell it to everybody oh yeah mve to
Dubai oh you don't know how to solve
your problems over there ah sorry we
can't help you so from my experience of
building a lifestyle that I wanted
feeling more freedom I ended up being
able to keep more of my own money the
reality is you can set up your company
in a jurisdiction that has zero tax
however if you're going to eventually
employ people in many cases not all of
them but in many cases especially at
more entry level and the jobs they're
going to want to be on a formal payroll
you're going to pay payroll taxes and so
maybe your company my company's in a
place where there's no corporate tax but
then you have other Affiliated companies
that are part of the or chart where
those companies May pay a little bit of
tax when the headquarters moves money
down to the local company and then the
local company pays out and then you pay
a payroll tax you're paying taxes
obviously there's everyday taxes you
know when I live in Malaysia I spend
more money in sales tax than the average
person pays an income tax and I'm not
even there the full year so I think some
of these countries understand hey if we
can bring in people to go out and spend
money and create jobs and we're going to
collect some money on sales tax and
maybe you know maybe they buy some
alcohol and they pay Duty on it I mean I
pay more taxes in Malaysia than uh the
average person working at the average
paying job in Malaysia doesn't bother me
what I think bothers a lot of people
that we talk to is they pay a lot of
money they get no thanks for it it's
like that's your job and they're not uh
taking advantage of competition you can
start further along the track than I
started where again I was always
frustrated uh paying such high taxes I
didn't think 43% in the US was what I
what I topped out at didn't think I was
getting much for it didn't think what
they spent on was very valuable but for
me I would have moved regardless you now
can move and you can work with Nomad
capitalist and you can start off from
hey I'm going to go from 43% down to you
know zero or 1 or two or 5% you get to
choose your tax rate and so that's the
power of competition every country gets
to set their own Vision the fact that a
territorial tax country whether it's
Panama whether it's Georgia whether it's
Malaysia Thailand now to a little bit
lesser extent that they get to say hey
you know what whatever you do somewhere
else that's your business why shouldn't
they get to set that policy why
shouldn't that get to choose what's best
for them versus a country in the
European Union that has a residential
tax system if you live in France any
money you make anywhere in the world
Canada Australia any of those countries
any money you make anywhere in the world
hey it's because you're living here you
should pay Hey listen they can do that I
don't appreciate that those countries
try and go out and squeeze the smaller
countries but every country gets to
choose their own tax system whether it's
zero tax territorial lumpsum non-dom
what you want to avoid is a residential
system or a citizen based Tex system and
so for me going through this has been
incredibly helpful to go from being that
you know libertarian kid I hear a lot of
Libertarians taxation is theft sure do
something about it you can sit at home
and whne and be angry for me I don't
know why you want to spend so much time
worrying about politics and hoping that
the right gu is going to get in it's
incredibly draining emotionally it takes
years off your life not to mention you
know takes money away from time you
could be running a business and so if
you put yourself in the the position
that I did where you figure out how many
different countries would I like to live
in maybe it's one okay now I can choose
how much I'm willing to pay you come to
Nomad cist I want to pay zero all right
there's a handful of countries I'm
willing to pay up to five okay how much
money do you make you know I make $2
million a year okay so no more than
100,000 here's your list of countries
where you can pay 5% or no more than
100,000 I mean all the way down there's
countries that you don't think are tax
friendly that actually are Ireland the
UK Malta Cyprus Switzerland Italy Greece
just among them including countries
outside of Europe as well and so just
because you see headline tax rates in
one country doesn't mean that's what
you'll pay in your country very simply
one country two countries three
countries what do those countries look
like there's so many places to choose
from you can choose your own tax rate
you can choose your own Lifestyle by
choosing your own lifestyle you build
Freedom uh that's what we do I spent
many many years learning this if you
want to go to Nomad capitals.com you'll
learn how we can help you do that you
choose where your marbles Go finance
Freedom or lifestyle but that's the
story of how by living in different
countries and in part by chance and just
enjoying life I was able to pay either
zero or now very little in tax by
following the laws of other countries
[Music]
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