Q EXPERTS' BLOG
An Easy Way to Legally Avoid Taxes
As we often point out here at Q Wealth, there is really no need to engage in tax evasion – the illegal way to pay no taxes. Governments are getting desperate. The penalties for getting caught are just not worth it.
I was sitting in a cafe the other day, in a little tax haven country (Malta to be precise… check our article on residence in Malta: Malta, Little Known Tax Haven Within the EU), having just this conversation with another expat. Why on earth, we agreed, would anyone choose to remain in a high tax country and pay taxes against their will, when they could so easily move offshore or live internationally? The quality of life is better offshore, provided of course you do your research. There are countries that are great for business, countries that are great for kids, etc etc.
And you can still legally earn money in your home country, from your existing business, without paying any tax. How? By working from overseas. I found this example on Vernon Jacobs’ excellent Jacobs Report tax site.
QUESTION: Assume that a US citizen renounces citizenship and is now a sole citizen of the Federation of St. Kitts & Nevis. That person has an IBC in Belize through which he advises companies in the USA for a fee. However, that person does not physically need to be in the USA to perform the services and has no bank account in the USA. The Belize IBC doesn’t pay Belize taxes on the advisory income. If the Belize IBC pays a salary to the citizen of St. Kitts, the St. Kitts citizen doesn’t pay taxes in St. Kitts on the salary. Does the US government have any claim on this revenue stream?
ANSWER: No. An expatriate (one who has renounced US citizenship) is not subject to U.S. tax unless the income is deemed to be U.S. source income. Income from services is subject to tax in the country where the services are performed.
Therefore, provided the services are performed from offshore, the income is completely tax free.
The same principle applies in the UK, only UK citizens don’t need to renounce citizenship – they simply need to leave the UK and establish residence elsewhere. A UK Limited Company may have a full time employee, director etc working outside the UK. Provided that one is careful not to perform the job in the UK, then no tax is payable on the salary – which, of course, remains tax deductible in the UK company’s books.
With the ease of remote working by phone, over the internet, videoconferencing, Skype etc today – it is so easy to avoid taxes. Tax avoidance is completely legal and is good business practice.
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