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Legal 0 percent taxes due to the move

Legal 0 percent tax due to relocation: non-dom status and tax optimization

Introduction to non-dom status

Non-domiciled status is a special tax status that is used in countries such as the United Kingdom, Malta and the United Kingdom. Ireland is available. It applies to people who live in the respective country but are not considered to be permanently established there. This status allows residents to pay tax on their foreign income only if it is remitted to their country of residence.

Advantages of non-dom status

The main advantage of non-dom status is tax optimization. Foreign income only has to be taxed if it is transferred to the country of residence (remittance basis). This opens up numerous opportunities to manage international income legally and efficiently.

Who can obtain non-dom status?

Non-dom status is open to persons who:

  • Moving to the respective country from abroad
  • Do not have citizenship of the country
  • In Great Britain: People whose father was not born in Great Britain

Not permanently rooted: meaning and implications

In the context of non-dom status, "not permanently rooted":

  • No intention to remain permanently in the country of residence
  • The country of residence is not considered a permanent home
  • No deeper historical or family connection to the country of residence

This definition is crucial as it forms the basis for non-dom status.

Specific regulations in different countries

Malta

  • Offers an attractive "Residence Program" for non-doms
  • Foreign income is only taxed if it is transferred to Malta
  • Possibility of a flat-rate tax for wealthy individuals

Ireland

  • "Remittance basis of taxation" for non-doms
  • Foreign income is only taxed if it is remitted to Ireland
  • No time limit on non-dom status as in the UK

Great Britain

  • Foreign income and capital gains only have to be taxed if they are transferred to the UK
  • After 7 years of residence: An annual lump sum tax to retain non-dom status
  • After 15 years within the last 20 years: loss of preferential tax status

Practical implementation of the 0% tax strategy

To actually achieve 0% taxes, non-doms can take the following steps:

  • Establishment of a US LLC to manage all foreign income
  • Opening of bank accounts for the LLC outside the country of residence
  • Reinvestment of all profits via the LLC, without transfers to the country of residence
  • Use of credit cards that are issued to foreign Accounts are bound for expenditure in the country of residence
  • Careful documentation of all transactions to distinguish between taxed and untaxed funds

This strategy means that income can effectively remain untaxed as long as it is not transferred to the country of residence.

The role of the US LLC in tax optimization

A US LLC (Limited Liability Company) offers flexibility and tax benefits that can be advantageous for non-doms. The income of the LLC can be taxed in the USA and reinvested without having to pay tax on them in their country of residence. This is particularly useful for entrepreneurs and freelancers who conduct international business.

Case studies for illustration

Anna: Software developer in Great Britain

  • Pulls from Germany to London
  • Founds a US LLC for her freelance work
  • Earns USD 100,000 per year through the LLC
  • Does not have to pay tax on this income in the UK as long as she does not transfer the money to the UK
  • Leaves the money in a US bank account and continues to invest it from there

Michael: Investor in Malta

  • Moves from Germany to Malta
  • Establishes a US LLC to manage its international equity portfolio
  • Generates USD 500,000 annually in dividends and capital gains
  • Does not have to pay tax on this income in Malta as long as he does not transfer it to Malta
  • Reinvests profits in other international investments via its US LLC

Sarah: Online entrepreneur in Ireland

  • Moves from the USA to Ireland
  • Operates her e-commerce business via a US LLC
  • Generates USD 300,000 annually from the sale of digital products
  • Does not have to pay tax on this income in Ireland as long as she does not transfer the money to Ireland
  • Uses a large part of the income for reinvestment in her business

Temporal aspects and restrictions of non-dom status

The non-dom status is usually limited in time:

  • In Great Britain:
    • After 7 years: Annual flat-rate tax for retention of benefits
    • After 15 years within the last 20 years: loss of preferential tax status

Legal considerations

Although these strategies are legal, the following points should be considered:

  • Potential future legislative changes
  • Possible impact on access to local social benefits

Conclusion

The combination of non-dom status and US LLC offers a legal opportunity for significant tax reduction up to 0% for foreign income. However, this strategy requires careful planning, professional advice and consideration of long-term consequences.


FAQs

What does "not permanently rooted" mean?

In the context of non-dom status, "not permanently rooted":

  • No intention to remain permanently in the country of residence
  • The country of residence is not considered a permanent home
  • No deeper historical or family connection to the country of residence

This definition is important as it forms the basis for non-dom status.

What are the advantages of non-dom status in the UK?

In the UK, non-doms can leave foreign income and capital gains untaxed as long as they are not remitted to the UK. However, after 7 years of residence, an annual lump sum tax must be paid in order to retain the status.

How does the taxation of foreign income in Ireland work for non-doms?

Ireland only taxes foreign income when it is remitted to Ireland. There is no time limit for non-dom status in Ireland, which facilitates long-term tax planning.

Can a US LLC really help to save taxes?

Yes, a US LLC can help save taxes by managing and reinvesting income in the US without having to pay tax on it in the non-dom's country of residence.

What are the ethical considerations when using the non-dom status?

There are ethical considerations regarding tax avoidance and the use of public services in the country of residence. It is important to consider the long-term social and economic impact.

What are the country-specific differences in non-dom status?

Malta offers a residency program with lump sum tax options, Ireland has no time limit on non-dom status, and the UK has specific rules for taxation after 7 and 15 years of residence.

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Disclaimer: Please note that the above dates, tax rates and regulations may change over time. Do not make any independent decisions without first consulting an expert for your individual situation. It is in your interest to always receive individual information from an experienced expert who knows your situation. This information is for informational purposes only and does not promote illegal activities, including tax evasion.

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