How to Pay Zero Taxes Forever (Legally)

Summary

The 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

00:00

💼 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.

05:01

🌍 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.

10:02

🏛️ 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.

Keywords

💡Tax Liability

Tax liability refers to the legal obligation of an individual or entity to pay taxes on income, property, or other transactions. In the video, the speaker discusses how they managed to have little to no tax liability in certain years by strategically choosing their tax residence and structuring their financial affairs. This concept is central to the video's theme of tax optimization and lifestyle freedom.

💡Non-Dom Systems

Non-dom systems refer to tax regimes where individuals are taxed only on income earned within a specific country, rather than on their worldwide income. The speaker mentions considering such systems as a way to pay taxes on a more limited scale, which is relevant to the video's exploration of tax minimization strategies.

💡Tax Residence

Tax residence is the concept of being considered a tax resident in a particular country, which determines the scope of one's tax obligations. The video discusses how the speaker's lack of tax liability was partly due to not being considered a tax resident in any country for a significant period, which is a key strategy in the narrative of tax planning.

💡Lifestyle

Lifestyle in this context refers to the personal choices and preferences regarding where and how one lives. The speaker emphasizes the importance of lifestyle in their decision-making process, including the desire to live in various countries and experience different cultures, which is a central theme in the video's message about aligning one's tax strategy with personal freedom and enjoyment.

💡Foreign Income Exclusion

The foreign income exclusion is a provision in U.S. tax law that allows certain taxpayers to exclude a portion of their foreign-earned income from U.S. taxation. The speaker mentions utilizing this exclusion while being a U.S. citizen, which is an example of how tax laws can be leveraged to reduce one's tax burden.

💡Nomad Capitalist

Nomad Capitalist refers to the speaker's philosophy and approach to living and working across borders while optimizing one's financial and lifestyle choices. The term is used throughout the video to describe the lifestyle and strategies the speaker advocates for, which include legal tax minimization and global mobility.

💡Tax Optimization

Tax optimization involves structuring one's financial affairs to minimize tax liabilities while remaining compliant with tax laws. The video's theme revolves around tax optimization strategies, such as using foreign corporations and choosing tax-friendly jurisdictions, which the speaker discusses as part of their personal journey.

💡Territorial Tax System

A territorial tax system is one where only income earned within a country's borders is subject to taxation. The speaker contrasts this with the worldwide taxation approach, where all income, regardless of source, is taxed. The video discusses the appeal of territorial tax systems for individuals seeking to minimize their tax obligations.

💡Residence Permit

A residence permit is a document or status that allows a non-citizen to live in a country for an extended period. The video touches on the process of obtaining residence permits as part of the broader strategy for establishing tax residency in a favorable jurisdiction.

💡Payroll Taxes

Payroll taxes are taxes withheld from employee wages and paid by employers to fund social programs like social security and healthcare. The speaker mentions that even in tax-advantaged jurisdictions, payroll taxes may still apply, which is an important consideration in the overall tax planning process.

💡Tax Competition

Tax competition refers to the practice of countries competing for residents and businesses by offering lower tax rates or more favorable tax policies. The video discusses how tax competition allows individuals to choose their tax rate and residence, which is a key aspect of the speaker's message about personal freedom and financial autonomy.

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]