Nomad Capitalism & Cryptocurrency - How to legally pay zero tax on Crypto gains

in LeoFinance10 days ago (edited)

I've been reading a very interesting book called Nomad Capitalist: How to Reclaim Your Freedom with Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments.

It has really opened my eyes to the numerous legal options for increasing freedom and reducing or eliminating tax, particularly on investment gains. It is by a guy called Andrew Henderson who also has a website and videos with lots of very useful free information. https://nomadcapitalist.com/

Despite the similar name to my own (and look to my younger self) he is not related to me.

While he is not a big crypto advocate, many of the strategies he promotes are highly relevant to crypto investors, especially now that people have made large gains that they may one day want to crystalize.

In particular, one of the strategies he advocates is becoming resident or citizen of jurisdictions that have low or no taxes and encourage entrepreneurship.

I was surprised how many countries offer citizenship or residency by investment programs and have low tax rates. Not just tiny island tax havens but many smaller interesting 1st and 2nd world countries in Eurasia including Malta, Cyprus, Montengro, Portugal, Armenia and Georgia.

There is an important feature of cryptocurrency which means that you don't need to find a no tax jurisdiction (which are fewer and often problematic for other reasons), only one which doesn't tax capital gains - of which there are many.

Because cryptocurrency is global in nature, the gains from selling BTC or ETH or HIVE which you acquired years ago are capital in nature and will generally have no particular national source.

Also, you generally have a choice as to when you sell your cryptocurrency and crystalize those gains for tax purposes.

This means that if you plan it right and obtain residency or citizenship in a jurisdiction that does not tax capital gains you can then move there for a period long enough to lose tax residency in the high tax jurisdiction you currently live in. This is not applicable to US citizens who have to renounce their US citizenship to get away from high taxing Uncle Sam.

Once you have taken steps to no longer be tax resident in a high tax country (Canada, Australia, UK and most of western Europe) you can then sell cryptocurrency to take large profits which are not subject to tax because there is no capital gains tax in the country you are tax resident of.

Often the cost of living in these countries is much lower, so these untaxed crypto profits will allow you to live like a King or Queen in places that often have great beaches and beautiful landscapes. Sometimes great skiing too.

Because these places are entrepreneur friendly and are often fast growing, there are good opportunities to diversify your investment portfolio into real businesses and cheap real estate. This is particularly important if you asset base have become very heavily skewed to crypto by the very large gains over the years.

I am surprised that this is not a more common topic in crypto circles because crypto profits are well suited to this strategy, unlike many other investments (ie real estate, stocks, bonds) that are inherently tied to one country and may be taxable there even if you are not resident there.

Obviously this is not legal advice and everyone will need to seek their own tax and legal advice about their particular situation.

But is it an outline of a good strategy for crypto investors.

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Makes me wonder by what rationale they claim to charge the taxes. If the property isn't physically situated in their jurisdiction, and isn't guarded by their policemen; what are they contributing to this imaginary social contract exactly?
If a tourist and a resident each hold the same amount of the same crypto, and the tourist isn't liable to pay tax on it, then at some point they're going to have to admit that citizenship is a liability.

Great minds think a like and have also been looking at loop holes. Malta is interesting as they offer citizenship and quite rightly all they ask is you aren't a burden on them so private medical is a must. I need to read this as have other ideas to take this a step further.

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Yes, Malta and Cyprus are good options if you want EU citizenship. They are quite pricey. Montengro is another option which is musch cheaper - they are joining EU.

....or maybe do not be a resident anywhere...just be a 'visitor' - everywhere. (if you have no family/ties).

It no longer applies to me, but I lived like that for nearly 3 decades, (pre crypto), and was never chased for money off the robber governments...

That's also an option, but I have 5 kids and lots of family ties all over the world.

I also considered living on a yacht so as to be resident nowhere, but my wife is not the nautical type.

Buy a dinghy ! lol...and live ashore! lol

There are several countries in the Caribbean with zero taxes. Raoul Pal lives in the Cayman Islands.

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Yes, but most Caribbean Island citizenship programs require donations or investment in specific overpriced things.
Also they sometimes are not well regarded citizenships by other nations.
Useful if you are American an don't want to go to far away.

I know Australia creates a taxable event for all gains on capital assets when you cease to be a tax resident there (they consider it the same as if you sell them to have become a non-resident).

Oh this is a great finding!

I'm new to crypto but that's something that crossed my mind more than once! I will definitely look closely into it.

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I don't understand how all the so called 'freedom lovers' here in the US don't seem to mind the government taxing everything from property (no one really owns anything here) to crypto. Who allowed taxing crypto gains to become a law? Do the people even have any say in what becomes law in this country? (or any for that matter)

It's basically impossible to do microtransactions with crypto in this country without creating an absolute tax nightmare.

wow, nice shearing.

I'm seriously thinking of becoming Portuguese. I'm sure the natives will hate me though because I will NEVER stop trying to speak Spanish to them.