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High-Tax Country Resident Planning To Go Offshore:
US
Because
the US taxes its citizens on the basis
of their nationality and not on the basis
of their residence, the concept of 'offshore'
is not very useful to a US national from
a residence point of view. There is an
income tax concession available during
non-residence, but beyond that the only
real option for a US citizen is to change
nationality. In all other respects the
international tax situation of an individual
citizen is about the same whether they
are in or out of the US (see below).
Individuals
who have significant 'active' business
income may be able to make use of offshore
corporate tax shelters, including the
foreign sales corporation (now banned
by the WTO). www.lowtax.net
contains details of the offshore business
sectors of 35 jurisdictions, and their
taxation.
Non-Residence
US
expatriates who meet the Physical Presence
Test (you spend more than 330 days in
a foreign country in a given year) or
meet the Bona Fide Resident Test (you
are a bona fide resident of a foreign
country or countries for an uninterrupted
period that includes at least a whole
tax year) get a deduction on foreign earned
income, and possibly some deductions related
to housing costs. If you pay foreign taxes,
it may be possible to offset these against
US taxes if there is a double tax treaty
with the country in which you are resident.
NB:
The suggestions given above do not constitute
investment advice. They are intended only
to assist individuals in finding appropriate
professional advice, which is essential
for anyone planning offshore investment.
For
relatively well-off US citizens, the Heroes
Earnings Assistance and Relief Tax Act
of 2008 (The 'HEART Act') significantly
reduced the benefits to be gained from
ceasing to be resident in the US.
Under
its provisions, wealthy individuals leaving
the country are treated as if they sold
all of their property for its fair market
value on the day before they expatriate
or terminate their residence.
The gain is recognized to the extent that
it exceeds USD600,000 (which will be adjusted
for cost of living in the future).
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