Quote: (01-24-2012 05:10 PM)durangotang Wrote:
I am going to go against the grain a bit here Big Nilla. I don't think ex-patriating is a wise choice.
First, what do you possibly gain?
Lower taxes. That's about it. Well, you don't have to expatriate to achieve that. None of the preeminent expats I listen to advocate it either - guys like Jim Rogers or Doug Casey come to mind. Forget about dedication to principle here. It's all about options. In principle I am against socialism, welfare, warfare, and the concept of taxes taken by force for bureaucrats and politicians to reallocate. Yet, unfortunately, this situation exists everywhere in the world to one degree or another. I can assure you that you will find a laundry list of things that annoy you politically in any country to which you relocate. Welcome to Earth. So why remove the option of your United States passport? It isn't the same world like it was when half my family emigrated from Lithuania in the early 20th century; with jet travel and Internet access it is now a global world so to speak.
In the spirit of keeping maximum options on the table, a United States passport is very valuable.
So, how do you go about achieving lower taxes and political diversification? Political diversification is easy with the Dominican economic citizenship route. So do it, and now you are politically diversified and can leave the United States with your family anytime you want if things get bad. As for lower taxes, there are quite a few options. If you no longer desire to live in the United States, you open a bank account and mailing address in a state with no state income tax. They are Alaska, New Hampshire, Tennessee, Florida, South Dakota, Washington, Nevada, Texas, and Wyoming. You have eliminated personal state income tax.
Now it's time to eliminate Federal income tax. If you have residency abroad and remain there for six months of the year, or if you are outside the country for the entire year, and you are subject to another tax jurisdiction, then you qualify for an annual $91,400 federal tax exemption - adjusted for inflation from 2009 (I believe it is over $96,000 now). If you are married, that amount doubles. Panama does not tax world wide income either if memory serves correct, so as long as your income is derived outside of Panama and the United States you can effectively pay yourself almost $200,000 in personal income, tax free.
Since I presume your business is online, make sure that it is incorporated as an IBC (International Business Corporation) in a tax friendly jurisdiction. You could do the Caymans, BVI, Bahamas, Belize, or whatever you choose. Personal shares for that corporation are held in a Cook Island trust, which has a two year statue of limitations against the trust. In other words if someone wanted to sue you, say in America or Panama, they would have to initiate legal actions in that jurisdiction. If for some reason they won that suit, they would then have to fly to the Cook Islands and attempt legal action against the trust. The whole process, from beginning to end, must be under two years - which isn't going to happen. I have heard that the Cook Islands even denied the federal government of the United States in a suit against a trust. Sounds like nice protection to me.
So your income flows into the IBC tax free. You can pay yourself personally up to $200,000 tax free. The only requirement is that any foreign bank account exceeding $10,000 must be reported to the IRS - including a CFC (Controlled Foreign Corporation) - which what the IRS considers your IBC. There are harsh penalties for failing to report, but that's it. There is zero action otherwise. Essentially you'd be paying no tax, and anything you wanted to spend over $200,000 would be a corporate expense and tax free - so long as you don't repatriate the money. Excess capital could be put into other IBC's and trusts in different jurisdictions if so desired.
Hell, if you wanted, I am sure it's a grey area, but you could undergo a name change in Dominica and open foreign accounts with a different identity. Shady, yes. Effective, probably.
In any case, you have kept all your options on the table by keeping your U.S. passport. Besides if you need to leave, do you really want to be in Dominica? If your children want access to capital, there are vast pools in the United States. Also consider that a Dominica passport does not get you visa free travel to the United States. Do you really want to apply for a U.S. visa every time you want to come home?
Finally, two other points to consider:
First, I don't consider a Panamanian Foundation, based upon the Liechtenstein Foundation, to be good protection. I am sure that you have heard of it, but the IRS simply does not recognize it - it will either be considered a corporation or a trust. I would stay away from it.
Second, is the Coriolis effect. Aside from deep ocean currents like the Gulf Stream, wind and ocean currents stay in their respective hemispheres. 90% of the world's population, and 95% of the worlds pollution are in the northern hemisphere. You want clean water, fish, rain? Go south! Imagine all of the nuclear plants, literally over one thousand, are almost exclusively in the northern hemisphere. Almost all wars are in the northern hemisphere. Nuclear radiation, from meltdowns or war will predominantly stay in the north - along with all of the industrial pollution. To be in the southern hemisphere, forget Costa Rica, Panama, Colombia (sorry guys) - it's Ecuador south. Your viable options are basically Ecuador, Chile, Brazil, Argentina, Paraguay, and Uruguay. If you don't like earthquakes, stay away from Chile and Ecuador to build property. So you now have the Mercosur countries with easy travel between them. I call it the golden triangle, southern Brazil, Uruguay, Argentina - there's no hurricane's, earthquakes, tornados and it's mostly European descendants, it has good weather, world class beaches and a nice climate.
If it were me, I'd have state residency in Florida and choose Uruguay for my permanent residency. Uruguay also doesn't tax worldwide income. It is stable, allegedly more safe than Argentina and Brazil, and has easy access to permanent residency. Just open a bank account and stay in Punta Del Este for at least 6 months per year until you get your residency. Then you'd have United States citizenship, Dominican citizenship, and permanent residency in Uruguay (and essentially permanent access to all of north and south America). You'd also pay almost zero taxes. In fact, that is my plan.
It was my understanding that the AMT would kick in if you were resident in a no tax or low tax jurisdiction. This would prevent you from having a $200K tax free income even if all your income was derived from abroad and you were resident outside the US.