Best Country for Trading (Tax efficiency)

[benwm]

Quote from Maverick2608:

2) Scrap all the answers pointing to countries offering tax-exemption for foreign-sourced income. Trading income is generated at the location where you’re physically present. If you’re physically located in London trading US securities through a US online broker, the trading income is generated in London and taxed in the UK. I paid for legal advice and the tax lawyer assured me that he had seen a legal opinion on this in the UK and that in all likelihood it would be the same in Malta.[/B]

Getting into a "debate" with tax authorities as to whether income derived from trading on a foreign exchange is foreign sourced or not is a position I'd not be comfortable with. That's sailing a little close to the wind for the sake of saving 10% tax or similar per annum.

GoC seemed to receive different advice, and I can imagine you would get advice indicating otherwise because it's not a wholly indefensible claim. But would GoC feel 100% comfortable in a court of law defending such a position? I wouldn't.

 

[luisHK]

Quote from benwm:

Getting into a "debate" with tax authorities as to whether income derived from trading on a foreign exchange is foreign sourced or not is a position I'd not be comfortable with. That's sailing a little close to the wind for the sake of saving 10% tax or similar per annum.

Another way to do it is trade through an offshore (foreign) company without auditing requirement, and just declare the profits of this company as foreign based income. It works in some countries.

Maverick's claim we should scrap the countries offering "no capital gains " because the cap gains will be taxed as income for active traders is only applicable to some countries, like Switzerland or Belgium (and it's not clear on how inquisitive are the belgium tax authorities on the matter). It doesn't apply to HK for instance, and I don't think it does to Singapore among others.

I'm going through a bureaucratic nightmare with my HK corporation btw so avoid it if you don't need it. But trading in HK through your personal name or BVI/Belize etc... corporations is quite easy.

I'm not a US citizen btw, it seems everything gets even more complicated to americans when they relocate overseas, although they have better tax opportunities locally than I have in my native country

 

[benwm]

Quote from Mvector:

Any thoughts on South Africa or Brazil?

South Africa has amazing potential and is a beatuiful country. From a lifestyle perspective I'd be tempted.

Politically it's a risk. Best case you've got a left leaning ANC government that turns a blind eye to foreign traders because of the spending potential they bring. Perhaps their one party system will bring some stability and the government can focus on policies and not populism. However, note their recent support for a Global Tobin Tax - that's one risk that traders face for starters...

Worst case you lose everything a few years down the line in a land grab similar to the one seen in Zimbabwe under Mugabe.

I don't expect that to happen but many whites living in South Africa are not too sure.

 

[luisHK]

As of cramped cities, they also offer much more to do, and usually better educational opportunities for kids. But 100sqm for even 750l 1mil USD has unfortunately become little short to live in the better areas of the world leading megalopoles.

 

[Maverick2608]

For the common good I will contact the Maltese tax authorities and ask them whether trading online through a foreign broker on a foreign exchange is considered foreign sourced income, which in this case would mean 0% tax.

My guess is: no (since otherwise there's nothing in it for them except attracting people with money).

 

[benwm]

Quote from luisHK:

Another way to do it is trade through an offshore (foreign) company without auditing requirement, and just declare the profits of this company as foreign based income. It works in some countries.

Which countries?

Does this boil down to the where the "management and control" of the offshore company reside? So if you appoint some nominee directors in the offshore location then maybe it wouldn't matter where the head trader was located?

 

[Maverick2608]

"Does this boil down to the where the "management and control" of the offshore company reside? So if you appoint some nominee directors in the offshore location then maybe it wouldn't matter where the head trader was located?"

You can appoint a nominee director, but if you can't convince the tax authorities that the nominee director effectively manage the company, all your efforts will be lost (and you're likely to be fined as well.)

But look into the Maltese solution, it is legal and there's no need of nominee directors.

 

[luisHK]

I'm mostly familiar with HK and it works there, but even trading under your personal name as a HK resident your trading profits won't be taxable. Not so familiar with Singapore but it seems to work the same as Singapore is competing with HK and trying to attract wealthy foreigners - it's the only place I travelled where I found in the hotel room (high end place) a government backed booklet promoting immigration.

Those countries are trying to attract employing entrepreneurs to get a more active economy but also high net worth individuals who they won't tax, in exchange of them spending money locally and hopefully also invest locally.

Those are 1st world countries and quite happening - i prefer Singapore but it's an island a little lost among developping countries. Quality of life is great if you don't mind the heat (these days I prefer the much colder climates) and it doesn't feel nearly as cramped as Hong Kong.

I started looking into Gibraltar as it's much closer to Europe and it should work there as well, at least when trading through your own name. It seems much more boring though.

GoC mentionned UK, but i don't know the system there.

Other names have been mentionned, I suspect most places not taxing offshore income would work with the proper set up (which can be very easy).

 

[Maverick2608]

"Dear Inland Revenue,

I understand that non-domiciled foreign holders of a permanent residency permit in Malta are taxable on a remittance basis only.

Question: Is trading income from trading US equities through a US broker considered foreign-sourced income?

Qualifications:
The exchanges, the securities, the broker and the gains are located abroad
The person doing the trading is located in Malta

Your help is greatly appreciated.

Thank you."

I received the following reply:

"Dear Sir,

Any trading income that is made while one is residing physically in Malta is considered as income arising in Malta and taxable in Malta."

Consequently, I consider the simple setup in Malta as dead.

Dozens of advisors in Malta promote a corporate setup consisting of two Maltese trading companies coupled with an offshore (Belize) mother company which should result in an effective tax rate of 5-8%.

I may forward a question to the Inland Revenue Department to confirm whether this setup is indeed legal.

However, I prefer a simple setup in order to lower the risk of getting caught by legal fine print/details and to avoid too much dependence on legal advisors.

For that reason at the moment I prefer Andorra or Dubai as these locations involve no income tax and thus present a clean and simple setup.

(I am a Scandinavian citizen. I realize that this does not apply to US citizens as I understand you are taxed on a global basis irrepective of where you reside.)

 

[Ghost of Cutten]

Quote from benwm:

Getting into a "debate" with tax authorities as to whether income derived from trading on a foreign exchange is foreign sourced or not is a position I'd not be comfortable with. That's sailing a little close to the wind for the sake of saving 10% tax or similar per annum.

GoC seemed to receive different advice, and I can imagine you would get advice indicating otherwise because it's not a wholly indefensible claim. But would GoC feel 100% comfortable in a court of law defending such a position? I wouldn't.

If one of the top law firms in the country gives a position backed by the law and by test cases, and say it is definite, and it agrees with the law itself (as properly translated) then it is pretty clear. You can also ask the tax authorities themselves, to clarify it.