www.CostaRicaTicas.com

Retirement is a few years down the road for me but I am attempting to plan some strategy while I am not in a hurry to execute. I am planning to move somewhere south of the US but have not yet settled on a country.

I will be able to collect a "modest" pension when I retire but I will most likely need to suppliment that with income generated from investments. It continues to chap my hide that I will have to pay US Income Tax on my pension. And to top that, I will continue to be required to pay tax on interest & dividend income.

Do any of you savvy financial types know of a way for a person to move a few to several hundred grand to somewhere offshore, out of the reach of the IRS & collect income from the investment? As usual, high return & low risk are goals!

Thanks.

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Women are like beers. I've never had one that I didn't like. Just some that I like more than others! --Western

If you move and retire to grand cayman you can invest your money in an account/corp down there . Any investment income while you live down there and have a cayman account and corp will be taxed at their rates, which is zero, however you pay a sales tax on everything you buy there. You will always have to pay income tax on your pension that is the law, no way around it, because you EARNED that in the US so you are stuck there. However investment income is a different animal since you already have been taxed on that money you earned once, so if you choose to invest and LIVE in another country then you will pay said country's tax rate. Taxing investment income is double taxation since you were taxed on it when you earned your wage and many countries do not double tax (capital gains tax) since they view it as ethically wrong and they want to encourage capital investment in the economy, we are in the minority for double taxation on capital investment.

Surf, That's not true, if you're a U.S. citizen. Your taxable income is based on your worldwide income, regardless of where you live. The only potential exemption is from a limited amount of income you receive from performing services abroad. If it's investment income, you pay tax regardless of whether you live in the Cayman Islands, Costa Rica, etc., and regardless of where the investment income is sourced.

I must concur. This is what I've been told by both my attorney and my accontant. Uncle Sam wants a piece of you, no matter where you're making your $$$ !

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You ALWAYS have an option ....... "NEXT" !!!

Not to get in a pissing match but yes it is here it is from the irs.gov

"To claim the foreign earned income exclusion, the foreign housing exclusion, or the foreign housing deduction, you must have foreign earned income, your tax home must be in a foreign country, and you must be one of the following:

* A U.S. citizen who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year,
* A U.S. resident alien who is a citizen or national of a country with which the United States has an income tax treaty with a nondiscrimination article in effect and who is a bona fide resident of a foreign country or countries for an uninterrupted period that includes an entire tax year, or
* A U.S. citizen or a U.S. resident alien who is physically present in a foreign country or countries for at least 330 full days during any period of 12 consecutive months.

U.S. tax law does not specifically require a foreign resident visa or work visa for this purpose, but you should comply with the other country's laws. "

He has to form a corporation (800 bucks) and he can also then deduct all expenses he has from running his investment company travel etc. The key is he really has to live in said country and have a permanent residence otherwise it is viewed as a evasive tax shelter.

This is why so many insurance companies and investment companies are in Bermuda and grand Cayman. The government wants to change this but the insurance lobby is to powerful.

ST, Thanks for the input but I think that the residency requirements & cost of living in the Caymans are a bit too steep for my budget. I would prefer to reduce my expenses when I retire so am considering CR, Panama, Mexico, etc. Even though prices are rising all over Latin America, especially in CR & Panama, I think that there is good value to be found there.

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Women are like beers. I've never had one that I didn't like. Just some that I like more than others! --Western

Islands are typically much more expensive to live on...and have fewer women . I do think you'd find the Panama rules to be similar and some ways more beneficial than Caymans these days. As always, pursue your own professional and sound advice based on your personal objectives.

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All that a man achieves and all that he fails to achieve is the direct result of his own thoughts...

There are still tons of ways to hide money down here. Good attorney and accountant needed.

I think you might be mixing a few different tax things here.

U.S. citizens no matter where they are located are subject to U.S tax on their world wide earnings. Double taxation is prevented by the use of a credit against U.S. tax for any tax paid to a foreign jurisdiction. Separate from that there is a foreign EARNED income exclusion and a foreign housing exclusion. A qualifying individual who is WORKING abroad can elect to exclude from his gross income (87,600 for 2008) foreign EARNED income that is attributable to his residence in a foreign country. Key in all this is that it has to be EARNED income which very definitely would not include investment income. Earned income is basically income you earn by your own labor.

Think about the schemes that would exist if people could just move their investments off shore and not pay any tax on them. There is even “anti abuse” regulations in the foreign tax credit regulations that requires basketing the foreign tax credits so that a credit earned on active income could not be used against a tax on income from a passive source. Also if you think about it investment earnings haven’t previously been taxed it’s the underlying cash or other principle asset that has been taxed. You can always take your capital back tax free and spend it but once you earn investment income that is always going to be taxable to a U.S. citizen no matter where its earned, subject to the availability of a foreign tax credit.

Generally as a U.S. citizen the only legal way to not have your worldwide income subject to U.S. tax is to renounce your citizenship. On the less than legal side there are countries who don’t cooperate with the U.S. as far as sharing information and if your willing to set something up in one of those countries theoretically you could keep it hidden. When you sign your U.S. tax return you are definitely swearing that you have included ALL your income so your in major !@#$ if you get caught.

As far as a Cayman corporation goes you may be able to get a temporary deferral of your earnings as long as you keep it in the corporation but the second you dividend it or pay yourself a salary or make it available to yourself in any practical way you are subject to U.S. tax. Lots of really smart people have thought up lots of ideas but I honestly doubt too many of them would really work.

This is what I've been led to believe by multiple attorneys and CPA's...

And people wonder why I never have wanted to be a US Citizen...

Can anyone tell me an advantage to being one?

So far, what I can figure out is:
You pay taxes to the US for the rest of your life,
You're eligible for the draft
You get to vote in a rigged election
You have to serve Jury Duty (Ok, most of you don't, but at least I never get the stupid paper asking me to).

I can't think of one reason to go through all the headaches...

Linkman and QuickBlueFox, You're spot on. However, QBF, if your income or assets surpass a certain threshold and you expatriate, the Attorney General may bar you from ever entering the United States again. So if you ever want to visit friends or family, get medical care in the U.S., etc., you might have to kiss that goodbye. Also if you stay in U.S. over 30 days per year, you're subject to U.S. income tax.

I lived and worked in Germany for seven years. I was taxed in Germany, paid into thier social security and health care system and was required to file a US tax return but never had to pay any tax. I could be wrong but I think the US has worked out agreements with certain countries in regards to this.

For instance, had I left Germany earlier than 60 months I could have gotten a refund of my contributed portion of the payroll tax. This was a deal that was struck between the USA and the FRG. I stayed 7 years and will now get abot 330 Euros when I turn 67 if thier system hasn't gone belly up in the next 14 years....and it might. If it doesn't, the Euro income might offset our currently crappy Greenback's value.

If I wanted to hide investment income the only way that I could have done it would have been to take capital earned from in Germany and invest it with a bank in Switzerland or Luxumburg. By the way, I have no cash over there except for a small insurance policy and that's why I don't mind posting on the subject, nothing to hide.

QBF,

Did they reinstate the draft in the USA?

No wonder everyone is concerned about the war now.

Western,

I read some info on municiple bonds being tax free averaging a 5+% return. If you are in a 28% tax bracket the return is like 7.5% in a taxable investment. It would be worth not having to do the paperwork and they claimed municiple bonds are low risk investments. I do not have any experience with this type of investment, except what I have read which I am sharing now.