While there are many reasons that an individual my chose to expatriate him or herself from their home country, one of the primary drivers remains the search for a more lenient tax regime.
While a lack of political stability, persecution, and lack of financial opportunity are motivators for emigrating during dangerous or hard times, during good times even safe secure countries experience a number of people leaving and seeking something else.
That “something else” can be as simple as wanderlust, or the search for a more agreeable climate. However, more often than not the final driver of the decision is an attempt to reduce the tax burden levied on the expatriate by his original home country.
In many cases the amount of taxes an expatriate is liable for in his birth country can be reduced to nearly zero. However, at the time of this writing, that is NOT the case with US citizens living abroad.
US citizens living abroad are reportedly one of only two countries citizens unlucky enough to be liable for taxes on worldwide income — even while living abroad. There is a loophole, or a set aside on the first $80,000 per anum on *earned income only* for US citizens. That means, a retiree or trader/investor living offshore will be liable to report ALL of his or her income to the IRS including dividends, interest income and capital gains.
In the pages on US citizen expat taxes we will discuss all the details and any legal strategies of tax avoidance that are functioning to shield expatriates from unnecessary taxation from their birth countries — while at the same time trying to minimize additional taxation from their “home” countries.
In addition, we will examine some of the tax treaties that have been signed ratified and are in effect between particular countries.