In my previous article, I wrote about how not only billionaires can take advantage of investing in foreign countries. Thanks to the increase of government sponsored programs anyone can do that.
It is that simple, you want a secure place to invest your money in and a foreign country needs your money to help stabilize their economy. The only detail that comes with this is that you should find a secure financial institution to work as a third part and a trusted American source to make this happen. That is where we come in.
Choosing a place to retire in is also a hard decision to make, especially if you have been working hard to save that money for all those years. Realizing that not only billionaires can retire overseas gives retirees a whole new thing to think about.
As long as you are not working or generating income in a foreign jurisdiction then you are obligated to pay the same taxes as any American should. Provided that you are sustaining yourself and your family using only your 401K and your life savings.
Americans who are working overseas or have an international business do have to pay worldwide income. Meaning that besides the taxes that you have to pay as an American you also have to pay a fee for your income earned overseas.
The IRS have set their eyes on these American citizen for years now and have made a strong point that they will not back down. Because of this reason many Americans are using one of the most important tools any Expat can have.
This may not seem familiar to you, but the Foreign Earned Income Inclusion has been a common practice for Americans owning international corporations or having a high paying job in an international territory.
The Foreign Earned Income Inclusion does have a number of requirements that need to be followed for it to come into action, but for the most part it is one of the greatest tax saving techniques that exist in international trade.
If you are an American and you can prove that you have been out of the country for 330 days of the fiscal year then you can earn up to $104,100 dollars of free US federal income tax for the year that you qualify in.
Same goes if you are operating a business in another country, except that there is an extra incentive that comes with this. You can include your spouse in the business and both of you can earn an amount of up to $208,200 dollars tax free.
The same condition of staying out of the US for the 330 days is applicable to your wife. It is extremely important to follow this guideline and to not ignore it as if you exceed the limit for even one day you have to pay worldwide income and you are not eligible for the Foreign Earned Income Inclusion.
You could be anywhere in the world, open your business in whatever continent you please just don’t enter the United States for a longer period than you should and you will be fine. It would be also wise to eliminate as many ties as you can with the United States.
Besides the number of days that you are allowed to stay in the United States there are also other requirements that you must follow. For example, you must stay in the foreign country for a full calendar year. This must be proven with bank statements, utility bills, travel documents, articles of incorporation, etc.
As I mentioned before, while you are eliminating ties with the United States you should be creating new ones in the international country you have chosen to open your business in. Being in the process of obtaining a residency is highly recommended.
Americans working overseas with the equivalent of a H-1B or a work visa cannot benefit from the Foreign Earned Income Inclusion. Same goes for Americans with a student visa, business visa, research visa, or any kind of temporary visa. The visa that you are using to live in the foreign country needs to be dual intent, meaning that it needs to lead to a residency and an eventual citizenship.
Even though you must cut ties with the United States, you must not cut ties with the IRS. You must present your tax returns for the year even if you are overseas. If you avoid to do this you will lose all of the benefits associated with the Foreign Earned Income Inclusion.
This applies to any business owner, even if you have a business that only earned an amount greater than $400 dollars a month. There are ways to avoid paying a high amount of taxes, but there is not a way to avoid the IRS.
I hope you’ve found this article on investing like a billionaire to be helpful. For more information, or for assistance on investing using your IRA, please contact us below by filling out the form. We’ll be happy to assist you to move your retirement account offshore or to connect you with an IRA custodian who can form a self directed account.