We always tell people that taxes should just be one element of what you consider when you look at your offshore strategy… the main purpose is to provide yourself with a great lifestyle overall.
That said, you can certainly end up paying more or less tax overseas, depending on where you choose to base yourself… for your personal income or your business… based on local rates of taxation.
You may not save on what you owe Uncle Sam… but if local rates of taxation are low, you will save overall because you can avail of the Foreign Earned Income Exclusion (FEIE) and you won’t be taxed in two countries, thanks to tax credits.
Your business can benefit too, thanks to local tax incentives…
On the other hand, choose a jurisdiction with higher overall taxes than the United States, and you could end up paying more taxes than you would back home…
So, location, location, location does matter for taxes…
What you want, ideally, is a country that only taxes income made in that country—your worldwide income from foreign dividends, pensions, Social Security, or even online work, is therefore not taxed locally.
Countries that practice this “jurisdictional” or “territorial” taxation policy are sometimes referred to as tax havens.
Before choosing where to live, invest, or do business, analyze all aspects of the “where” you’re considering. A country’s approach to taxation is an important consideration, but only one of many you should undertake.
As I’ve said, don’t choose a place to live or retire based solely on the jurisdiction’s approach to taxation. Living somewhere you’re not happy just to save on your tax bill isn’t worth it in the long run…
That said, if you’re looking for some of the best places in the world to potentially reduce your tax burden, take a look at this week’s video…
