First of all, you don’t have to start a company offshore to save on taxes. If you’re an American, just moving out of the US is a terrific first step.
As a US expat, about $100,000 in overseas income is tax exempt, meaning that if you live outside the US you don’t have to pay any taxes at all on the first $100,000 or so of foreign sourced income (you still have to file your tax report though).
However, the real tax advantage from running an offshore company as a US citizen doesn’t come from direct tax savings.
It comes from tax deferment, meaning you postpone the payment of taxes into the future. If you run a business overseas and reinvest profits within the company you can defer taxes indefinitely.
Let’s say you have a profitable company overseas. Now imagine that instead of paying taxes on your profits every year you can reinvest that capital in your offshore company every year for 30 years, and only pay taxes if you decide to sell the company after 30 years.
Being able to reinvest your capital tax-free combined with the power of compound interest makes this a truly exceptional opportunity
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