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A Primer for Those Considering Expatriation

Thursday, March 22, 2012, 8:32 AM

A growing number of Americans are frustrated with the way in which their economy has been managed and are becoming increasingly concerned about future measures the governement may take to keep its coffers full.

A question that is arising with increasing frequency is: does expatraition offer a viable protection to those concerned about a more financially-intrusive US system?

The answer is 'yes', it does offer a completely legal solution for ending your obligation to pay US income, captial gains, and gift taxes on your worldwide income. But it is certainly not for everyone and should only be pursued after lengthy and diligent consideration.

And before you begin dreaming of a tax-free future, you should realize that the United States imposes taxes on a broader basis than any other country. The United States is one of two countries, and is the only major country, that imposes significant income, capital gains, gift, and estate taxes on its non-resident citizens.

In virtually all other countries, individuals end their liability to pay income tax after a sustained period of non-residence, generally one year or longer. But to legally and permanently end U.S. tax liability on their worldwide income, U.S. citizens must also give up their U.S. citizenship and passport. This process is called "expatriation."

Yes, it's a radical step. However, if you're a U.S. citizen, you can make nearly all of the preparations for a possible future expatriation without permanently leaving the United States. This is a four-step process: 

  • Phase 1. Relocate your assets from the United States to other jurisdictions, preferably where the assets won't be taxed.
  • Phase 2. Identify foreign countries where you would consider living,
  • Phase 3. Obtain a suitable second passport
  • Phase 4. Expatriate—give up your U.S. citizenship and passport

Once you've accomplished the first three phases, summarized here in Part I of this report, the final step—expatriation—is much easier than if you're starting from scratch. Part II of this report describes the expatriation process.

Are you a good candidate for expatriation? You are, if:

  • You are comfortable living outside the United States, or are already doing so
  • Your spouse and children are comfortable living outside the United States, or are already doing so; and
  • You have already or are capable of shifting the majority of your income and assets outside the United States.
Phase 1: Relocate Your Assets Outside the United States

With a few exceptions, the IRC imposes taxes on both U.S. source income and foreign source income of U.S. citizens. Non-resident, non-U.S. citizens (also known as "non-resident aliens") pay tax only on U.S. source income, although some U.S. sources of income (e.g., most capital gains) are tax-free.

To prepare for this more favorable tax treatment in anticipation of expatriation, begin moving liquid assets outside the United States to more tax-friendly jurisdictions. Begin selling assets that can't be relocated (e.g., real estate) so that you may reinvest the proceeds overseas.

Invest only in countries and investments with which you are comfortable. If you are accustomed to buying and selling U.S. securities, consider using offshore bank or brokerage accounts to target non-U.S. securities. If you are an experienced real estate investor, investigate real estate purchases outside the United States. Keep in mind that a targeted investment or real estate purchase may also qualify you for legal residence in some countries (Phase 2) or even a second passport (Phase 3). If you have substantial domestic investments in precious metals, consider moving the metals offshore.

The vast majority of foreign banks and brokerages now refuse to accept new U.S. citizen clients, especially U.S. citizens resident in the United States. However, banks and brokerages in a handful of countries still accept new U.S. citizen and resident clients and allow them to purchase non-U.S. securities. A few banks in Austria, the Bahamas, Hong Kong, Liechtenstein, Singapore, and Switzerland are suitable for this purpose. The minimum deposits in these banks start at $100,000. Minimum deposits in offshore brokerages start around $5,000. Fees are much higher for banking services and securities trading than in the United States.

Both the accounts you hold offshore and the income derived from them must be reported to U.S. authorities. The penalties for failing to make these disclosures are draconian. Consult with an expert familiar with the tax and reporting rules for international investments when you file your annual tax return.

Offshore real estate is a non-reportable asset for U.S. investors if owned individually or jointly with your spouse or other individuals. Income or gain from foreign real estate investment is reportable and taxable. Countries offering first-world infrastructure and where real estate is relatively affordable include Argentina, Australia, Canada, Chile, Ireland, Mexico, New Zealand, Panama, Spain, and Uruguay.

Numerous potential "land mines" exist in offshore real estate investments. Among them are the lack of a multiple listing service in many countries, difficulty in establishing good title, and legal provisions giving squatters the right to live on your property. Retain a knowledgeable real estate attorney in the country in which you purchase real estate to avoid problems.

You may transport precious metals you own in the United States to another country and store the metals in a safety deposit box, bank vault, or private vault. One option for doing so is to use a secure shipping service. Make certain the service not only promises secure transport but also assists with completing non-U.S. customs and tax declarations. Another option to transport precious metals out of the United States is a like-kind exchange under Sec. 1031 of the IRC. If you move the metals yourself, the best option can be to hire an import agent in the country to which you're taking them to handle the import formalities. You will generally post a bond through the agent covering taxes due (if any) plus the agent’s fee.

Phase 2: Identify Foreign Countries Where You Would Consider Living

Once you give up U.S. citizenship and passport, you no longer have the right to live in the United States. You may generally make brief visits, but in most cases, you won't be able to stay more than approximately four months annually without becoming subject to U.S. tax on your worldwide income based on the IRC's "deemed residence" rules discussed in Part II of this report. Finding another country to live in is therefore an essential part of any expatriation exit strategy.

Even if you have no plan currently to leave the United States permanently, finding a country that you may wish to relocate to in the future is a prudent safeguard. If economic or political conditions deteriorate in the United States and reach your personal breaking point, having legal residence in a suitable offshore jurisdiction provides a valuable "insurance policy."

If you merely want the right to live in another country in the form of a residence permit, but don't necessary want to be physically resident there, a number of countries can accommodate your needs. These include Belize, Costa Rica, Malta, Mexico, the Dutch Caribbean territories, and Panama. In most cases, you can qualify for residence (although not the right to work in the country) by either making an investment or demonstrating a minimum guaranteed pension payment. Residence rights may be purchased in some countries by making an investment of $80,000 or more in real estate or other assets. A guaranteed pension payment of $1,000 or more may also qualify you for residence. In other countries, you may need to qualify on a points system. Some countries have multiple programs to consider. 

Phase 3: Obtain a Suitable Second Passport

To end your responsibility to comply with U.S. tax and reporting obligations, you must give up your U.S. citizenship and passport. Without a second nationality in place and passport in hand, however, giving up your U.S. passport would render you a "stateless person." Avoid this status, as it makes it difficult or impossible to legally live or travel internationally.

A second passport also conveys numerous other benefits:

  • It gives you the right to reside in the country that issued the passport, and possibly other countries. For instance, a passport from a member of the European Union conveys the right to live and work in any other EU country. 
  • It gives you a way to travel internationally if your primary passport is lost or stolen, or if the issuing government confiscates or refuses to renew it.
  • It provides you with the opportunity to travel to countries blacklisted by the government that issued your primary passport. For U.S. citizens, this includes countries such as Cuba, North Korea, etc.
  • It avoids disclosing your primary nationality, should you ever need to keep that a secret. This can be useful if you're ever confronted by militants who oppose the government that issued your primary passport.  

You may qualify for a second citizenship and passport by ancestry, marriage, religion, or extended residence in another country. If not, a handful of countries offer “instant” citizenship in return for an investment or contribution. The Commonwealth of Dominica and the Federation of St. Kitts & Nevis are the only countries with an official, legally mandated, economic citizenship. (Note: Dominica and the Dominican Republic are different countries.)

Dominica is the least expensive option. The nationality law of Dominica authorizes the government to waive the normal requirement of seven years of legal residence to acquire citizenship in exchange for a cash contribution. Total costs including all fees for a single applicant come to about $105,000. Add $25,000 for your spouse and up to two children under 18. The Dominican passport holders can travel without a visa, or obtain a visa upon entry, to nearly 90 countries and territories.

The Federation of St. Kitts & Nevis offers two options to obtain economic citizenship. One option is to make a direct contribution to a charitable foundation set up to support displaced sugar workers: the Sugar Industry Diversification Foundation (SIDF). Total costs including all fees for a single applicant under this option come to about $285,000 or $335,000 for an applicant with up to three dependents.

The second option is to purchase "qualifying property" with a minimum investment of $400,000. Fees and closing costs add a minimum of $100,000. Total costs for a single applicant come to at least $500,000 and close to $600,000 for a family of four. The St. Kitts & Nevis passport provides visa-free entry, or visa upon entry, to more than 120 countries, including nearly all of the 27 member countries of the European Union.

In all cases, applicants must pass a strict vetting process that includes a comprehensive criminal background check.

Bogus second citizenship offerings abound. In recent years, I have received offers to purchase passports from Costa Rica, Nicaragua, the Dominican Republic, Ireland, and Lithuania, among other countries. Some of these offers are outright scams. Others involve illegally purchased or stolen documents. Even if you succeed in obtaining a passport on this basis, it may be revoked at any time and you could be subject to arrest and/or deportation.

Conclusion

Once you've completed Phases 1, 2, and 3 of your four-step plan to disconnect from the United States, you're ready for Phase 4: expatriation. While you may never take the final step of giving up your U.S. citizenship and passport, taking the preparations summarized so far at least gives you that option.

In Part II: Important Consequences of Expatriation, we explore:

  • The nuts and bolts of expatriation, including the legal process of expatriation
  • The tax consequences of expatriation
  • The immigration consequences of expatriation
  • The pros and cons of U.S. investments once you expatriate
  • The tax consequences should you choose to spend more than a few months each year in the United States after expatriation

Click here to read Part II of this report (free executive summary; enrollment required to access).

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27 Comments

SingleSpeak's picture
SingleSpeak
Status: Platinum Member (Offline)
Joined: Nov 30 2008
Posts: 508
Kinda sad..

 

that things are changing so much and so fast with loss of liberties (NDAA) and potential theft of resources from private owners (National Defense Resources Preparedness) that many of the productive members of society are planning their exit strategy.

For those that haven't heard it yet, Erik covered this same topic yesterday on Financial Sense.

http://www.netcastdaily.com/broadcast/fsn2012-0321-1.mp3

SS

Full Moon's picture
Full Moon
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Posts: 1258
thank you SS

 He said these are the good old days ....  Enjoy them .   I have trouble with this .. I scrimp ,I save, I prep prep prep   until I am no fun at all .    I do not want any of my people to go hungry or do without  needs.  Everyone of my kids older than 16 work two jobs to  get ready and a big spend  is a movie date and popcorn . Our spare time is working on the farm to put in more planting .

  There is no way I am bugging out to another country and leaving any one of them  behind .

  I do not want to live with regrets either way .

  FM 

t.tanner's picture
t.tanner
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Leaving the U.S.

 I don't doubt the veracity of the information here, but if you're thinking about leaving the U.S. because of the taxes you pay, you need to reset your moral compass.  As Oliver Wendell Holmes once said, taxes are the price we pay for a civilized society.  If you bail out on your responsibilities as a U.S. citizen, you're lifting a giant middle finger to the rest of us.

Dogs_In_A_Pile's picture
Dogs_In_A_Pile
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One ping only Vasily.....

I know this is going to piss a lot of people off.....so be it.  I am only gong to make this one comment and I am done with this thread.  I will very likely not engage in further discussion on this topic.

I am of the opinion that Ex-pats are %&^*%$# cowards.

33 years ago, I took an Oath to support and defend the Constitution against all enemies, foreign and domestic.  Some will argue that the country that was framed in the Constitution that I took an oath to support no longer exists.

I disagree.....but I do agree that a clearer picture of what a "domestic enemy" is is coming into focus. 

That may be my fight, time will tell, and I know I won't be alone.

But if it is to be fought, it will be fought here............

telepierre12's picture
telepierre12
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Not so fast...

Just to reiterate/clarify

The term expatriate is usually associated to US citizens wich opt to live/work outside the US. It is usually not associated with the relinquishing of the US citizenship.

So as long as phase four is not reached a US citizen owes the IRS an annual form regardless of were he/she resides.

 

 

Farmer Brown's picture
Farmer Brown
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Done and done

Like Dogs, and in response to Dogs, I will post once only.

Picking up and leaving to live in a foreign land, without any guarantees, and to rely only on yourself without looking back.  Gee, isn't that what the people who originally founded the US of A did?  But now those who do it fleeing what is obviously and quickly becoming a totalitarian state that encroaches upon individual liberties on a daily basis are guilty of being cowards?  Sorry, but I don't buy that at all.

Instead of calling people names or becoming angry, the US and its loyal citizens such as Dogs should ask themselves how the country has become such a pain in some people's arses that they would choose the ultimate way out - renounce their citizenship.  Such a decision is extremely serious, and no one I know that has done it has done it easilly or without regrets.  However, at the end of the day, and after carefully weighing ones options, it is the only logical choice for some, and the regrets do not outweigh the benefits.  Also, many expats do not plan to renounce their citizenship at all.  They merely find, once they have lived overseas for some time, that the demands of their mother country are simply outrageous given they do not live there at all.  And I am not referring just to financial demands, but also to demands that are pure invasions of privacy and take a lot of time and effort to address according to the letter of the law.  

I support all declarations of individual liberty, including those that renounce citizenship of any country, and most especially those that renounce citizenship of the US.  The reason is because the US imposes more controls, including taxes, on its citizens living overseas, then any country in the world (the only one other than Eritea that taxes worldwide income), yet continuously touts itself as the freest and greatest. 

Why should I have to pay taxes on income I earn, spend, and invest outside the US?  I haven't even lived there in 8 years but I still have to file and pay taxes!  That doesn't even scratch the surface of the reasoms why.  Look up recent IRC since Obama came in and look at all the things that are now required of us "cowards" now that we don't live in the greatest country in the history of the universe.  In the article above, the word "draconian" when referring to failures to comply with recent new disclosure requirements, is no exageration, and I guarantee the new disclosure requirements will only serve to drive many many people to renounce their citizenship. 

For some, it is not even a matter of taxes, it is a matter of principal and a right to privacy and peace of mind. I do not know what new IRC will get passed next or if I will even be aware of it.  For all I know, I broke the law just by getting out of bed this morning, and quite frankly, I am sick of it.  I stopped investing in the US from abroad for exactly that reason - the absurdity of the documentation needed to report these investments was just rediculous.  If you saw my office a couple of years ago when I was filing my taxes you'd wonder if I was running a multi-million dollar hedge fund, when in fact it was just me with a very small savings account that I made the mistake of investing in the wrong place - the US.  

It is very sad, and incredibly arrogant on the part of the US government and it leaves most people without a choice. The new measures make us all criminals without even kowing it, with real jail time and hundreds of thousands of dollars in fines for failing to report something as rediculous as a bank account or any set of bank accounts with more than $10K in them collectively.  

Like water obeys gravity, capital and those who seek individual liberty will seek freer pastures when they see their own country turn against them.  Count me as one who will most likely be folding my tent and lifting a giant middle finger - not to you, Dogs, or anyone else, but most definitely to Washington DC and everything it now stands for - the oppressive vestige of an empire that is crumbling before our eyes, and quite frankly deserves to. I hope there will be people like Dogs around afterwards so that maybe whatever replaces it will be morally grounded and free, though I doubt any of us will be around by then.

Lastly, I know a lot of people who have fled persecution in their home countries, whether US or others, but I don't know any that are cowards. 

 

poorhardworker's picture
poorhardworker
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Just a question from a

Just a question from a non-"rich" single parent: Though I scrapped early on for every penny, I  live comfortably now.  I lived by the rules, paid taxes, saved, invested, worked for others (not long enough to have a pension). raised a daughter without child support (could have sued but didn't), made sure she did not have to take out a student loan to get through college,I have only my monthly CC debt that is wiped clean each month, been self-employed and never took a dime from the government, and paid into a TRUST fund that the government stole from and now considers an "entitlement" that is really bankrupt now and the stipend is subject to more cuts.    Here is the question:

Does the thought ever cross your mind that you may not have enough money to die in the country of your birth because of government intrusion (both personally and financially)?  What does that say about a country and it's tax/living laws?  Well, I may just have to wait to see if ObamaCare is constitutional and then let the government decide what quality of life I will have at the end--and that thought just sticks in my craw.

I never used to have that thought...until 2008.  Don't quite know how to solve that problem since I am too old (and cranky/opinionated) to be employable.  Guess I will just wait and see...and have a Kevorkian out when the time is right.

Travlin's picture
Travlin
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Good points

Bravo Dogs and Farmer Brown

 

Becoming an expat does not appeal to me, but I can understand why one would do it, for many reasons not related to taxes. It certainly requires courage to take a step that radical. But if we had risked our lives repeatedly as Dogs has, we too would understand that preserving liberty requires concrete actions, and a willingness to pay a price much higher than money. That is courage of a different order.

The current trends in the US are ominous. I’m acquiring a real appreciation for the bravery of our founders. I hope I never have to find out it I could measure up. But, I’m not going anywhere. And I’m not going quietly.

Travlin

 

SagerXX's picture
SagerXX
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I generally expect...

...that if the System is going to shake itself to pieces and we will not see (extended) martial law/Mad Max/civil war.  If things get that dire, central control and repression will IMO quickly become impossible as the support systems required for such will simply not function (for an extended period).

Travlin wrote:

Bravo Dogs and Farmer Brown

Second that.

Travlin wrote:

The current trends in the US are ominous. I’m acquiring a real appreciation for the bravery of our founders. I hope I never have to find out it I could measure up. But, I’m not going anywhere.

Yep.

Dogs_In_A_Pile wrote:

That may be my fight, time will tell, and I know I won't be alone.

But if it is to be fought, it will be fought here............

I'm a lover, not a fighter.  But I imagine love is a fine motivator when a fight is necessary.  Like Trav said, I hope I never have to find out.  

"The world is a fine place, and worth the fighting for."

Viva -- Sager

redcloud's picture
redcloud
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Posts: 31
Things may change

I think people who leave the US may find that things don't work out that well in their chosen country if the situation in the US becomes really bad.  There are three large economic areas in the world: the US, the EU, and China/Japan/South Korea.  The EU is in big trouble already.  If the US goes into steep economic decline many, many countries around the world will lose their largest trading partner.  For small countries this could be a death blow to their economy.  They may no longer be able to export their goods to the US, nor buy the goods the US manufactures.  Tourism may dry up.  Foreign aid may be reduced.  What will that do to their economies?  Bad economies lead to crime, civil unrest, governmental repression.  I'd hate to be a 'rich' foreigner in a country experiencing those issues, especially if they also hate Americans.

Just something to think about.  Things in 10 years may be a lot different than they are now.  Of course, it doesn't hurt to have thought the issues through and gotten somewhat prepared.

BTW, a good book to read related to this subject is Collapse by Jared Diamond.  It pays to think about things like how climate change and environmental damage in your target country may change its livability; how will changes in the friendliness, or lack thereof with neighboring countries change things.  Also consider that foreigners are frequently the target of anger when things go bad: Jews in Europe, Chinese in Indonesia and the Phillipines; Middle Easterners in the US and Europe.

I think things will have to get a whole lot worse in the US before I'd consider this option.

 

nickbert's picture
nickbert
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Like telepierre12,

Like telepierre12, I usually hear the terms expat or expatriate as one who merely lives and/or works someplace other than one's own country.  Whereas the term expatriation seems to refer more to someone who has either voluntarily relinquished their citizenship or had it forcibly taken away.

So using those definitions, I would be an expat.  We are working and living (most of the year) overseas, and will likely be doing so for a long time.  For us it has more to do with what's out there (opportunities and experiences) than anything to do with the US, and we do want to hold onto our US citizenship.  HOWEVER.... that being said, through the course of this new experiment of ours I am starting to gain an appreciation for why some would choose to relinquish US citizenship.  The bull**** of being taxed by the US on non-US income when one does not live or work or invest in the US is annoying enough, but new things coming down the pipe that Farmer Brown described is designed to be very difficult to comply with AND extremely punishing if you slip up.  Combine with the negative stereotype being pushed on most people/businesses investing and doing business outside the country ("unpatriotic fatcat!" "wealthy tax cheat!"), overseas US citizens might as well have a bullseye on our chests.  Sure there are tax evaders out there, but their approach is like killing houseflies with a flamethrower.  They are about invading privacy, setting traps for the unwary to grab more money for the state, and using bullying regulatory tactics to discourage anyone from daring to take their savings or labor outside the US more than any notion of justice.  Put plainly, the best explanation that I see is that TPTB wish to prevent the rank-and-file from voting with their feet.

So I can see where someone afraid they will no longer effectively be able to do business outside the US and/or has an aversion to running afoul of the ever-increasing traps might see relinquishment of their citizenship as a smart business or personal decision.  As it is now, I can still run a business and invest outside the country, even though at a disadvantage.  But IF it ever comes down to where complying with all the US regulations (even though not working or being resident in the US) prevents me from living my life the way I think I should, well I think renunciation is a logical choice.  The other options.... either giving in to a bully and resigning myself to being a serf, or endangering my family by being a wanted criminal.... I find lacking.  I'm just starting to get to explore more of this interesting world of ours, and I really am not keen on being confined or having my options taken away from me.  

That said though, my expectation is that it won't come to that, for which I'm glad because America is still originally home for me and my son.  Given the current course, it seems probable that long term the US government is just hastening its decline and weakening its influence overseas through the heavy-handed FATCA regulations (not to mention all the other short-sighted stuff it's doing) to where it will no longer be able to dictate terms outside its borders, or maybe even inside its borders either.  I'm banking on it being a matter of patience and perseverance.  Thus, I think this Nestmann article is full of good information and advice regarding Phases 1 thru 3, but for the majority of us the last step, actual relinquishment of citizenship, is probably unnecessary. 

But hey, it never hurts to know what your options are, right? 

 

- Nick

RJE's picture
RJE
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Like some here I will state

Like some here I will state this once. I am going nowhere. I will work within any system to make it better, and I do not fear anything or anyone. I do not agree with Erik T (I listened to his interview over at Financial Sense and shook my head at his lack of character). and his ilk at all when he says he will participate from abroad to correct our internals from some lap top somewhere. I was born an American, and with pride will die an America, Crazy thinking are my thoughts. Good riddance to those who leave, and hopefully anyone who chooses to leave must leave their bounties that were made while benefiting from the American way of life. What pansies.

BOB

Quercus bicolor's picture
Quercus bicolor
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Stay and fight or leave?
robert essian wrote:

Like some here I will state this once. I am going nowhere. I will work within any system to make it better, and I do not fear anything or anyone. I do not agree with Erik T (I listened to his interview over at Financial Sense and shook my head at his lack of character). and his ilk at all when he says he will participate from abroad to correct our internals from some lap top somewhere. I was born an American, and with pride will die an America, Crazy thinking are my thoughts. Good riddance to those who leave, and hopefully anyone who chooses to leave must leave their bounties that were made while benefiting from the American way of life. What pansies.

BOB

I appreciate your commitment and fearlessness Bob.  I have some of the same thoughts too.  However, I think the line needs to be drawn somewhere.  My dad's uncles (and probably other more distant relatives I don't know of) perished in the Holocaust because they didn't try to leave until it was too late.  I know the possibility of something on the order of the Holocaust is not out of the question in the coming decades here in America.  Yes, if I got stuck in something like that I would choose to fight as did the brave souls in the Warsaw Ghetto, hide if I could, or resist internally as did Victor Frankl.  But I would hope I had enough sense to see it coming and get out.

That said, from what I've read in this thread, leaving is much harder if one lacks a certain amount of wealth.  Those of us who are Jewish have an open invitation to emigrate to Israel.  On the one hand Israelis know what it means to sacrifice and live in an uncertain and dangerous world than Americans.  Their accomplishments show it.  On the other hand, it's a small, resource poor country with a population that has doubled to nearly 8 million since 1980.  There is a growing divide between secular and religious Jews.  The biggest negative, however, is that in the determination to live by the motto of "never again" (referring to the Holocaust), they have been quite repressive against the Palestinians and in doing so have made enemies of most of the Arab would (population hundreds of millions).  If American power fades in the coming decades, they will be alone in a highly volatile region filled with many enemies.

ckessel's picture
ckessel
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Some like it here!

Bob,

When I read your comment it set me to thinking about my own choices over the past  years and some thoughts about the subject of this thread.

Bob stated:   "Like some here I will state this once. I am going nowhere. I will work within any system to make it better, and I do not fear anything or anyone."

While in college studying architecture I had the good fortune to have a very forward thinking professor named Don Koberg. He was something of a legend at Cal Poly and fit in well with the Dean of the School of Architecture as being very out of the box in his approach to education. He was also very interested in his students. At the time I was doing my senior project and  M. King Hubbert (father of the peak oil theory) was a professor at Stanford (3 hours drive from my University) and I became acquainted with the concept and it of course ended up shaping the future of how I chose to adopt that data into my own future as an architect ...... designing and building solar and energy efficient structures. 

For me that was taking a stand and making a committment to work within our system and figure out how to make it better and that is what triggered my thoughts this morning.

But something very interesting happened along the way.  For me, trying to convince people about the advantages and necessities of using our energy more efficiently had it's ebbs and flows and I would have points of vigorous activity and times when I would think "what the F&^k  am I doing beating my head against the wall of a never ending supply of cheap oil?   I had periods where I questioned what was true for me and what I had learned from M.King Hubbert back in the 70s.  Over a 30+ year career I have hand many wonderful clients and great projects but I also had doubts about my fundamental ideas on growth, energy and our future. In a way that is what the subject of expatriation represents for me. A king of giving up on the current scene and finding a better one. (I understand that it would not hold true for everyone)

But when the going gets tough one of the obvious solutions is to go somewhere else where it is better. This solution has worked for several thousands of years past and in general when one went  West he encountered new virgin territory with plenty of unspoiled resources to harvest. That is the road we have traveled on and perhaps we think it will continue that way into the future. I personally don't think so.

It is now time to figure out those problems that we as a civilization have not had to confront so long as we had new territory to conquer.

When I studied the Crash Course in the Fall of 2008 a crucial piece of data dropped into place which allowed me to realign my other life goals in a personally meaningful way.  I really had not up to that time understood the relationship of the economy (a man made thing) and our energy sources (a gift from our environment from the past).  Once I had the AH HA moment it allowed me to rekindle many of those purposes I had earlier in my career. One of the key activities of my senior project was to design and teach a class called "Environmental Awareness" in the Spring Quarter of my graduating year to the University.  How I was able to get it approved as an 'architectural'  project is another story!

So after studying Chris' work I immediately began to offer the Crash Course in my home town and of course it is often received in a not dissimilar fashion to the concept of solar energy and so on. Because  I was very used to the guffaw that goes along with such a subject  the problem of deaning with denial, anger, etc. did not bother me. Which is the segway here into Bobs comment regarding fear.

When we experience fear whether it be for our present or future security or due to some real or imagined concern for how we may be perceived because of what we say or stand for  it does have an affect on our actions. Thoughts of "I'm getting outta here" or "no way am I going to say that in public" could have a lot to do with why we are in the predicament we are. IMHO we have to be willing to act without fear.

So I appreciate Bob's stand and face the truth without fear approach. We have run  out of new territory to expand into, what you see is what you have .... deal with it is my take away.  Whether or not he meant it exactly the way it came across for me is really less the point . I appreciate  the opportunity to share my thoughts with you all on this site.

Coop

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Quercus bicolor
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The nuances of stay vs. leave.
ckessel wrote:

But when the going gets tough one of the obvious solutions is to go somewhere else where it is better. This solution has worked for several thousands of years past and in general when one went  West he encountered new virgin territory with plenty of unspoiled resources to harvest. That is the road we have traveled on and perhaps we think it will continue that way into the future. I personally don't think so.

Coop,

I agree that we have run out of territory to expand into given our current way of living and population levels.  That certainly pushes things in the direction of staying in place and making the best of it.  Looking at it from another perspective, situations and populations (of humans, animals, plants) have always ebbed and flowed.  For as long as there has been mobile creatures on this planet (and even trees are mobile on a 5000 year time scale), leaving in search of greener pastures has always been an option.  It might not have happened at the scale it happens today, but it happened. This brings to mind the drought we had a few years ago when many mammals got hit on the roads as they moved long distances searching for a place where food was available.  In the end, the decision to stay put or move on is a personal one that must account for both the larger scale situation and one's unique circumstances.

With that said, I'm totally committed to staying in put unless circumstances beyond my ability to manage or avoid present a grave danger to myself and my family.  I say this as someone who has built a deep connection to the particular patch of earth I live on, the animals, plants, waters and soils I share it with and the community that surrounds me.

Steve

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think outside the box

BOB-

Like Steve I also appreciate your and Dogs' commitment to trying to fix the country.  But doesn't it make sense that there is more than one way to do so? 

Now I think some here feel differently than I do, but IMO the government no longer represents the people and has broken its social contract with a majority of its citizens, including myself.  So if that's one's assessment and you don't have connections or influence within the government already at this point, what are your chances of changing it from within?  That makes your only option to change it from outside the government and political system, and if that's the case how much does it really matter if one is inside or outside the country, especially in the electronic age?  As this site shows, communities are developing without location and close proximity being essential, and forming communities outside the government and political system is going to be the most important thing in changing the country's direction (again, in my opinion).

Of course there are still disadvantages to being outside the country.  For example it was impossible for me to participate and lend my voice during the Occupy protests, where I think more voices were needed to specifically challenge the fraud and the incestuous relationship between government and high finance.  But on the other hand, living outside the US makes it much easier to cut off the government from their "allowance" (at least if using the Foreign Earned Income Exclusion) and my participation in the national economy, and hit them where it really hurts... the checkbook.  I think starving the beast is probably second in importance behind forming community outside the system.

Lastly, if you've never tried living in a foreign land and trying to adapt to a new language & culture and different ways of doing business, you might not be so quick to throw around the word "pansy".  For me it's been one of the more difficult and rewarding things I've done.  Just keep in mind there are reasons for leaving the country that don't involve fear.

 

Steve-

It certainly is harder to live abroad (with of some degree of security and comfort) without some significant wealth, it's quite doable.  Our net wealth is probably pretty meager by  (we couldn't even buy house in a half-decent neighborhood in most cities), but the fact that it is for the most part very liquid makes a big difference.  What makes an even bigger difference is having contacts, friends, or family at your new location to help acclimate.  It would be much harder for us to do what we're doing without knowing anyone.

 

Coop-

While I disagree that we have to work within the system to get the future we want (my opinion is that the system is hopelessly dysfunctional and needs a reboot of sorts), I agree with you on what you wrote about fear-based decisions.  Fear is usually a terrible mindset to have when taking action, and I think it's a bad reason for leaving the country except in the more extreme circumstances like Steve mentioned (and I don't think we're close to that yet).  Ideally, there should be something attracting one to go to a different country or place (whether business or new experiences or personal goals or whatever), not just something driving one AWAY from where one is at.

 

- Nick

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typo

oops.  In my previous post, I meant "probably pretty meager by most expat standards".  That's what I get for being in a rush to leave the house.

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Some Random Thoughts...

No, people who leave are not 'cowards'.  Those hiding behind their Bibles and refusing to think coherently and rationally are the cowards, intellectual cowards.  They are the ones who refuse to consider AGW as a possibility even though the signs are all around them, love their NASCAR-fuel burning games and call trained killers 'heroes' when they come back from whatever war the corporate slime that own Congress have non-declared this decade.  They are the ones who still see things in black and white and 'librul' and 'conservative' although what exactly they want to conserve I've never been able to parse out. 

In the end, the only thing that will save the human race, plenty of other species on the planet, and the planet itself as a zone of livability, is if we all start telling the truth, the whole truth, and nothing but the truth pretty damn fast and soon.   This will fly in the face of tradition and the pulpit but so be it.  Time is short.

To the people who don't want to leave, find a place to hide in plain sight inside the country in an area where the weather is unlikely to change too much in the coming however-many-years-you-have-left.  I picked the Pacific NW in a rural area, I would also recommend checking into the more rural areas of Hawaii, a still-sane state due to its native influences.

To the people who live overseas and rip their hair out trying to obey every new law that comes into some lawmaker's pointy head, ignore them.  You can't abide by them all anyways, why try?  I've noticed they don't have their computer systems connected, they can barely answer their phones and if they send you a letter and you ignore it, they don't notice.  It's a game and we'll last a tiny bit longer then COG will, don't you see? 

Here in rural Oregon, I'm  not 'allowed' to build a house less than 200 SF (or so, I haven't bothered to look at the regulations, being a passive aggressive anarchist); I guess if they catch me not doing the legal thing, they will 'fine' me, but I don't have any money.  Maybe their only recourse then is to throw me in a jail cell (substantially less than 200 SF, by the way) to teach me a lesson.   This would come with free food, free medical care, free edumacation, and a well paid guard or twenty to watch me to make sure I don't break any more laws that I don't know about and don't care about.   I am also told in this scion of freedom we call the United States that I can't grow certain (god-given?) plants, because I might change my consciousness temporarily with them, or cure my own cancer, or something in between.

In the end, somewhere around the year 1, we went horribly astray and the momentum is now a thundering snowball careening down the mountainslope.  Billions of years of exquisite life in all its glory and diversity, now threatened by climate change and pollution.  Good going, Humans.  Find a place to cringe until the end, it won't be long now. 

Hey Chris!  How do we ex-pat off the planet? 

*Next time, no Planet Earth, no matter what the brochures say....*

 

 

 

 

 

 

 

 

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Don't rush to give up your blue passport

Although the US taxes its citizens on world-wide income, it generally isn't onerous.

You are able to claim taxes paid to another country as a tax credit, and so, worse case, you pay the taxes of the higher country and do twice the paperwork -- hardly anything like being taxed twice.

Also, the US has an exclusion ceiling when you reach a certain level of non-residence. It seems to me it was 548 days out of the country and $75,000 when I took advantage of it. In other words, if you were out of the US for a year and a half, anything you made over $75k was exempt from US taxation. But that was many years ago, and things have undoubtedly changed.

Not that I have anything to hide, nor am I encouraging anything illegal, but as a practical matter, the US Government's reach is severely restricted once you are living as a citizen in another country.

I don't know of any country that includes "tax evasion" in their extradition agreements with the US, and the US cannot enforce reporting via W-2 forms, etc. when you earn your income abroad.

Of course, your US income from US sources will still be reported, unless you cash them out and physically re-deposit the cash in an account you open with your new passport. This can be viewed as simply a practical matter, rather than evasion. I make too little to pay taxes, but I resent having that fact automagically reported via my SSN, for example. Having an account in the US without a SSN is not illegal if you don't live in the US, but tax evasion is.

Finally, this article seems to be rather "status quo," in that it recommends you find places that don't tax you too much.

My search was driven by different parameters: I was seeking a country that supported simple living and that was a net energy exporter, thinking that such a country's fortunes would inevitably be above some backwater, low-tax country that had no energy of its own and was still inextricably tied into the global capitalist system.

In fact, it might be said that so-called "tax havens" may fare quite poorly in an energy-poor future. If everyone puts their money there, but there's nothing to buy...

We chose Canada for its energy and natural resource wealth, and for how it largely stays out of the lives of people making very little money. Although an expensive place by conventional measure, if you live in a part of Canada where you can grow a lot of your food, you can live here for very little. The income level at which you are subject to taxes is about 40% more than in the US, but the level at which you can avoid bureaucracy is far higher -- to be self-employed in the US, your first dollar is subject to any number of taxes, but you get a $30,000 pass on sales and services taxes here.

Anyone want to jump in and get their hands dirty? http://www.EcoReality.org .

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Boiling Frogs
lkline wrote:

I think things will have to get a whole lot worse in the US before I'd consider this option.

As the ship sinks, it's easy to say, "At least there's this little patch of air I can still breathe."

For your sake, I hope I'm wrong, but this sounds like "boiling frog" talk. The time to leave a sinking ship is well before the water reaches your eyeballs, but most people can't see that far.

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Maybe just a fluff piece,

Maybe just a fluff piece, but something to consider.  I submitted this to the DD:

http://www.ajc.com/news/nation-world/view-from-abroad-us-1397423.html

Aloha, Steve.

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Australia affordable? - I think not.

I'd love to hear where you got this from:

Countries offering first-world infrastructure and where real estate is relatively affordable include Argentina, Australia..

Look at any real estate index - the EIU, for example - and you'll find that real estate in Australia is anything but affordable, and at the heights of a rather big bubble. 

 

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inflict change
Travlin wrote:

Bravo Dogs and Farmer Brown

 

Becoming an expat does not appeal to me, but I can understand why one would do it, for many reasons not related to taxes. It certainly requires courage to take a step that radical. But if we had risked our lives repeatedly as Dogs has, we too would understand that preserving liberty requires concrete actions, and a willingness to pay a price much higher than money. That is courage of a different order.

The current trends in the US are ominous. I’m acquiring a real appreciation for the bravery of our founders. I hope I never have to find out it I could measure up. But, I’m not going anywhere. And I’m not going quietly.

Travlin

Well stated Travlin.

I sympathize with both these points of views.  Most of us have ancestors who came here to have a better life.  Leaving the comfort and familiarity of a native land to come to an entirely new land rarely is an act of cowardice.  It usually takes a certain type of courage to do that.  But sometimes fear drives this action as well.  They are no longer around for me to ask but my paternal grandparents left Russia at the time of the revolution (and wisely so since those in their village who didn't were slaughtered to the last man, woman, and child) while my maternal grandparents left Germany a decade before Hitler took power.  From what I've gathered, they all saw the handwriting on the wall and, in retrospect, would have been powerless to stop what occurred. 

It is sad that the expatriation rate in this country is climbing and unfortunately, we're losing more of the very citizens that it would be better not to lose.  But the fact that intelligent people are increasingly choosing to do so is telling and their actions are understandable.  Something's rotten in the US or should I say, with our leaders, with our government, with its policies, and with how the average citizen is being affected.

While long ago, I learned that losing one's fear of dying was the key to living, I'm not quite like "balls of steel" Bob.  I do have certain fears (and if he were honest with himself, so does Bob obviously, which is why he was posturing).  Even more so, I fear for my children.  I might, in fact, even encourage them to live elsewhere, if necessary and if they'd choose.  But on the other hand, I resent being made to fear.  And even more so, I resent being put under pressure to even consider leaving my country.   Quite frankly, I don't see us stopping what is occurring until things are played out to the bitter end.  But for myself, no one's going to push me to leave my country.  I look at the situation as being akin to being on a ship and a plague of rats are causing us to want to abandon ship and leave it to the rats.  It's the rats that need to go overboard, not us. 

I found it interesting to read the book, Strong on Defense.  In it, Sanford Strong describes what happens and what to do when one is confronted by violent crime.  One incapacitating factor of these confrontations is the victims' fear of getting injured or killed.  It prevents them from doing what needs to be done.  And interestingly enough, it's this very fear that often results in the victims ultimately getting ... severely injured (both physically and psychologically) or killed.  One needs to assume that, if they defend themselves, they will likely get hurt but, if they don't act, they may very well die.  Right know, everyone is afraid of getting hurt (on an individual basis and on a national basis) so they're not acting.  Unfortunately, time almost always works against the victims.  The longer they wait, the more difficult and dangerous it becomes to extract themselves from the situation until eventually, there is no way out.  How long are we going to wait?

I'm reminded of George Patton: "No bastard ever won a war by dying for his country. He won it by making the other poor dumb bastard die for his country."  Right now, TPTB aren't being made to feel any pain or pay a price.  Why should they change their actions if there are no painful consequences or costs?

And although expatriation may provide some short-term relief, for those who are leaving or have left, I have news for you ... it's going global and there will be no place to hide.    
 

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Australia affordable? - that depends...
sim wrote:

I'd love to hear where you got this from:

Countries offering first-world infrastructure and where real estate is relatively affordable include Argentina, Australia..

Look at any real estate index - the EIU, for example - and you'll find that real estate in Australia is anything but affordable, and at the heights of a rather big bubble. 

 

I'll second that emotion......  of course if you come loaded with money able to stay out of debt, and you stay out of Sydney/Melbourne/Brisbane/Perth, AND you're prepared to not consider your living accomodation "an investment" (ie you can afford to take a hit), you'd be hard put to find a better place........

We'll be selling soon for anyone who enjoys warm weather... ;-)

Mike

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signalfire-I'm going to

signalfire-

I'm going to refrain touching your first paragraph as it'll just derail the thread.  However with respect to ignoring US laws and compliance rules when overseas, I have to disagree, at least as the situation stands now.  As it is now, compliance is intrusive and a big burden (in terms of time and money), but it is still possible to be compliant.  My personal advice for expats and US businesspeople overseas is, whenever possible, to comply with all the rules for now if at all possible. 

To explain my reasoning, let's be generous and make the assumption that one can dodge any direct incarceration or fines by the US.  First problem... while US influence is diminishing in general, it currently does have a lot of clout in the banking world and can make life difficult for you.  Perhaps not take your money, but very possibly convince your foreign bank to dump you as a client.  Second, ignoring those laws and rules has the potential to keep you from renewing your US passport, and if you don't have a second citizenship then you're SOL come passport expiration time.  Third, and maybe most important for an expat or overseas businessperson, is that it can create a mark on your criminal record, and THAT can prevent you from getting residency visas or citizenship in other countries.  Many if not most countries require criminal or police background checks for long term visas or naturalization (they want to make sure you're on the up and up before taking you in), and if your home country flags you as a tax evader or criminal you probably won't make the cut.  Even a small and relatively under-the-radar country like Mongolia requires an apostilled criminal/police background check from one's home country for any long term or residency visas.  So even if a country doesn't have a tax treaty or extradition treaty with the US, it doesn't mean squat if they don't let you in in the first place.

Yes it's intrusive, yes it's an unnecessary burden, and yes it's mostly bull****.... but life isn't fair and sometimes you have to pick the least crappy option.  There very well may be a point where compliance truly does become impossible and then a choice has to be made, but that point hasn't come yet.  Hypothetically speaking, my odds of getting away with non-compliance would probably be pretty good (being a small fish money-wise and Mongolia having no tax treaty or formal cooperation with the IRS), but I'm still doing everything I can to keep compliant.  I am not a "follow the rules no matter what" kind of person by any stretch, but I have to say ignoring these particular rules are NOT worth the risk at this stage in the game. 

 

Bytesmiths-

The tax on overseas income is bull****, but that's not my big issue even though I'm not eligible for tax credits (because no tax treaty).  My biggest concern is the gotcha traps that the US is putting in place for me and the scarlett letter they are effectively painting on US citizens in the eyes of the international business community.  Though I don't see it as highly likely, it is possible they can eventually make it impossible for me to live and run a business abroad.

 

- Nick

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  Decent enough article on

 

Decent enough article on CNBC of all places (not where I normally quote anything from since it's mostly packed with idiots) on recent trends and reasons for renunciation of citizenship. Gotta love the part on women expats and American women's groups abroad (page 2). Yeah, those evil American women's clubs abroad I tell ya, boy are they  unpatriotic and traitorous! (ok, sarcasm off now)

http://www.cnbc.com/id/47064295

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Farmer Brown
Farmer Brown wrote:

 

Decent enough article on CNBC of all places (not where I normally quote anything from since it's mostly packed with idiots) on recent trends and reasons for renunciation of citizenship. Gotta love the part on women expats and American women's groups abroad (page 2). Yeah, those evil American women's clubs abroad I tell ya, boy are they  unpatriotic and traitorous! (ok, sarcasm off now)

http://www.cnbc.com/id/47064295

Yeah, I'm actually a little surprised at the relatively balanced treatment they give the subject.  And while renouncing is not an option for us (we are actually going the other way... my wife will become a naturalized US citizen this year), some of the comments in the article match our own feelings.  While I feel the US taxing of foreign income earned while living out of the country is utter BS, with the Foreign Earned Income Exclusion that is a tolerable nuisance (though if it gets axed or the US experiences major decline in the $ then it'll hurt a lot).  It's all the compliance and reporting rules and the possibility of being locked out of being able to bank or do business outside the US (due to new FATCA requirements) that are pissing me off.  When it comes to these, honest mistakes are just as potentially detrimental as intentional non-compliance or falsification.  I'll say it again, it really does look like they're more interested in creating "gotcha!" traps to snare and make criminals out of innocent people so as to grab more money for the state and create disincentives for those US persons who might dare to leave the system.  In my last post I said it is still possible to be compliant with all the reporting requirements, but the more I've been reading of all the reporting requirements, the more unsure I am of that statement.  2012 is going to be our first tax year with substantial foreign activity, and I'm very nervous that come next April I will miss some minutiae or detail in all the reporting and get the full smackdown treatment from Uncle Sam.  For example, the civil penalties for non-willful violation of the FBAR reporting is up to $10,000 for each non-willful violation, and the penalties for failing to include something on the FATCA 8938 form starts at $10,000...... WTF?!?

Not only that, but very soon I'll be opening a business bank account here, and I have to wonder if next year or the year after they'll change their mind and kick me to the curb to save themselves potential trouble.  It'll be hard to operate even a small-sized business if we are locked out of the banking system.  I would either be forced to remove myself from the business and hope I can find a job in the US, operate in a under-the-table way that would technically be illegal as far as US reporting and compliance is concerned, or expatriate and relinquish citizenship.  When stuck with those choices, expatriation doesn't sound that absurd.  For all I know that Peter Dunn guy in the article might be smarter than I am by simply expatriating not taking a chance with running afoul of current and future reporting traps...er... I mean "rules".

- Nick

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