Successful traders: why don't you move to a 0% capital gains tax country?

[jk90029]

People post here about opening a fund in Luxemburg. I did some time ago research to open a fund (SIF) in Luxemburg. I wanted to reside in Belgium because they don't tax gains on shares.

My findings:

1. minimum capital is 1.250.000 euro.
2. startup will cost between 10.000 and 50.000 euro
3. you need a licence ( in my case from the FSMA) which is for non bankers almost impossible to get. They also ask you a lot of questions about experience, education, management system, protection of investors.....
4. yearly audit by Ernst&Young
5. you need a depositary bank
6. you need a fund administrator
7. yearly cost 50.000 to 100.000 euro
8. there are limitations about what you can trade and how much of the total capital can be commited in 1 market
9. in most cases minimum investment per investor is 125,000 euro

Conclusion:

1. too much starting capital for most people here
2. too expensive cost for most people here
3. impossible to get a licence for most people here (i used my contacts in the banking world but was nevertheless refused)
4. if Belgium can prove that the fund is managed for inside Belgium (which is the case if your domicile is there) you will pay about 50% taxes on all the profits from the fund. they will also ask you to proof that you are at least 183 days a year in Belgium. so keep dreaming about using Belgium and still living in the US. and yes they will check your internetactivities.

I understand that any CapGain from equity with the above condition is NOT taxed, am I right?

But would you find out their bokerage fee in Luxembourg, and more info on yearly cost of 50K Euro of 100K Euro?

The 183 days is same as a requirement of living at lease half in Luxembourg territory.
So at least should pay rent and pay sales tax for food. Do they speak German or Dutch or any other?

 

[dealmaker]

People post here about opening a fund in Luxemburg. I did some time ago research to open a fund (SIF) in Luxemburg. I wanted to reside in Belgium because they don't tax gains on shares.

My findings:

1. minimum capital is 1.250.000 euro.
2. startup will cost between 10.000 and 50.000 euro
3. you need a licence ( in my case from the FSMA) which is for non bankers almost impossible to get. They also ask you a lot of questions about experience, education, management system, protection of investors.....
4. yearly audit by Ernst&Young
5. you need a depositary bank
6. you need a fund administrator
7. yearly cost 50.000 to 100.000 euro
8. there are limitations about what you can trade and how much of the total capital can be commited in 1 market
9. in most cases minimum investment per investor is 125,000 euro

Conclusion:

1. too much starting capital for most people here
2. too expensive cost for most people here
3. impossible to get a licence for most people here (i used my contacts in the banking world but was nevertheless refused)
4. if Belgium can prove that the fund is managed for inside Belgium (which is the case if your domicile is there) you will pay about 50% taxes on all the profits from the fund. they will also ask you to proof that you are at least 183 days a year in Belgium. so keep dreaming about using Belgium and still living in the US. and yes they will check your internetactivities.

I wonder what the rules are for Jersey or Isle of Man, tax free places, can you shed a light on that?

 

[i am nobody]

I understand that any CapGain from equity with the above condition is NOT taxed, am I right?

There are no taxes on buying or selling stocks if you do this as a "good housefather". Interpretation depends on what tax people think you do. So it is not very clear. But If you sell every year some of your stocks in the fund, they cannot tax you. Frequency of trading, products traded and equipment or software used can be decisive for wether you are professional or good housefather. Be careful, if they can proof that you place the orders for the fund, all profits will be taxes at about 50%. They check who places orders, who signed contract with broker, who is communicating with broker, emails can be checked too. So you should put up a real and complete functioning construction.

But would you find out their bokerage fee in Luxembourg, and more info on yearly cost of 50K Euro of 100K Euro?

Try to find a depositary bank and the will give you all the info you need, at least if the want you as client.
For a 5 million fund costs are about 75.000 euro and cover following expenses: setting up the fund, domiciliation adress, administrative cost, yearly reports, depositary bank, trustee fees, audits (E&Y), taxes, transfer agent. This is for full service of a leading bank in Luxemburg.

The 183 days is same as a requirement of living at lease half in Luxembourg territory.
So at least should pay rent and pay sales tax for food. Do they speak German or Dutch or any other?

You should have an official adress in Belgium. Because you cannot trade your fund yourself (or you will be taxed on all profits), you should make a management contract with the fund that you will trade for. But the fund should pay you a CORRECT salary for that. Correct means it should be realistic for the amount of money that you trade. On this salary you will pay about 50% taxes and on top of that around 35% of social security in Belgium.

So total cost, assuming that you are lucky enough to find a bank that wants to work with you and that you will get a licence from the FSMA, consists of setup(10K), yearly cost of managing fund(65K), and salary + expenses in Belgium(+100k). This is for a fund with 5 mio euro capital.
In most banks they speak German, French and Dutch.

This construction is too expensive for 95% of ET posters. And don't forget: this is only how Belgium will see your taxes, but depending on your nationality the story can become very complecated. Will the US accept this construction for american citizens? Or will they tax on worldwide income?

 

[i am nobody]

I wonder what the rules are for Jersey or Isle of Man, tax free places, can you shed a light on that?

I asked information in Jersey and Guernsey too. I don't know why, but I never received any response, even not after a reminder.
I read every day about experts who tell you where you should go, but many of these experts know nothing about the reality. I know people who live in Monaco; what they tell is completely different from the stories you read on internet.
If things would be so easy or cheap, everybody would live in the same place called "fiscal paradise".
Most constructions are only possible if you have at least profits exceeding a few mio a year. If not expenses are too high.

 

[luisHK]

I'mnobody, thanks for your feedback on Luxembourg investment funds. When i checked the licensing seemed to be the main issue.
I'm aware of the Good house father rule in Belgium but are u sure it has anything to do with this situation ?
From memory Luxembourg taxes 0.1% of the fund´s capital yearly and some of its profit can be redeemed tax free to a belgium residents via selling shares of the fund.
Does it ring a Bell to you ?
I kindda just signed for a couple of years more in the far east so is not an emergency situation but was considering this set up as a possible one upon coming back to Europe, especially that the most speculative of Luxembourg funds can hold diverse assets, not only financial products.
I don't want to name the poster as he may not want to get involved in this thread but Switzerland seems to offer a quite decent set up, offering one a nice trade off between moderate taxes and a great quality of life

 

[i am nobody]

I'mnobody, thanks for your feedback on Luxembourg investment funds. When i checked the licensing seemed to be the main issue.

Correct, when I stumbled into this problem I stopped my application and took another (even more favorable and cheaper) solution. I left Belgium. I was happy they did not give me a licence. If you manage less than 100 million euro you can qualify for registration instead of licencing, which is more easy.

I'm aware of the Good house father rule in Belgium but are u sure it has anything to do with this situation ?
From memory Luxembourg taxes 0.1% of the fund´s capital yearly and some of its profit can be redeemed tax free to a belgium residents via selling shares of the fund.
Does it ring a Bell to you ?

From revenues 2013 on everybody who lives in Belgium should give following information when filing tax papers:

1. All accounts held in banks, with brokers or any other financial institution
2. All juridical (fiscal) constructions (so also funds) in which he or his family is founder or benificiant. And also full details about these persons (founder or beneficiant).

So if it is considered as a fiscal construction you will pay income taxes which are at 50% when income is above 36.300 euro a year. That's why I wrote that you cannot manage this fund yourself or should make it an economical construction by asking a salary for managing the fund.
Situation is not clear so it is best to ask a fiscal ruling. Otherwise you can pay taxes between 0% and 50% depending on the mood of the inspector. I can already predict now that it will be 50%.
By not making clear rules people can always be taxed in the most favorable way for Belgium government. If they would say it is clearly income, then people can also deduct all losses and costs to generate this income. The final result would be that taxes would turn out negative because most people lose money in the long run. By using arbitrainess they can tax profits and refuse losses. Like real gangsters. They can also check your income and if they don't agree they can tax you heavily retroactive on your income of the last 3 or 5 years, even if they agreed earlier with your declarations. And then they send the social security to you and you pay again 35% extra plus all fines and intrests. So like I said: real gangsters.
YOU SHOULD ALWAYS ASK A FISCAL RULING BEFORE STARTING ANYTHING. Only then you are save for a few years. I have a fiscal ruling where I live now (not in Belgium) for 5 years. I know that my construction is accepted and I know exactly what taxregime I will pay the next 5 years. And this fiscal ruling can UNDER NO CIRCUMSTANCES be changed without the permission of both parties. Taxpeople can also not go to court to try to change the fiscal ruling. So rocksolid.

 

[dealmaker]

I asked information in Jersey and Guernsey too. I don't know why, but I never received any response, even not after a reminder.
I read every day about experts who tell you where you should go, but many of these experts know nothing about the reality. I know people who live in Monaco; what they tell is completely different from the stories you read on internet.
If things would be so easy or cheap, everybody would live in the same place called "fiscal paradise".
Most constructions are only possible if you have at least profits exceeding a few mio a year. If not expenses are too high.

Of-course living in Jersey and Monaco are expensive they are tiny everything has to be imported but I think its much cheaper in Jersey then Monaco. However if its cheap enough and one's account is large enough it may be worth it....
My question to you is, is the situation in Jersey as tax free as advertised?

 

[i am nobody]

Of-course living in Jersey and Monaco are expensive they are tiny everything has to be imported but I think its much cheaper in Jersey then Monaco. However if its cheap enough and one's account is large enough it may be worth it....
My question to you is, is the situation in Jersey as tax free as advertised?

I don't know because I never received any trustable information. Besides of that there are many aspects that can influence the level of taxation in Jersey but also in the country where you live. If you have American nationality it is possible that the construction you want is free of taxes in Jersey but will be taxed in the US because they might reject this construction.
You should first clearly describe what you exactly want and then go to local advisors.

I needed about 18 months of continuous communication and searching before I had a solution. I contacted very specialised and big lawyers companies, but starting a fund is unknow area for most of these companies as I experienced. Finally I went with my project to the fiscal administration and asked about the actual taxation rules for this construction. It was trial and error.

Another posibility is Bulgaria. Flat tax rate 10% for companies but also for personal income. Receiving a licence is again almost impossible, but you can open a regular company and trade the money from your company. Question is what will happen if you take money out of your company? You will pay again 5% taxes in Bulgaria, but if you don't live there you might receive an additional taxation from the country where you live. In Europe there is fiscal transparancy so free exchange of information between European countries.

 

[londonkid]

I'Latviall time trader since 2001 and in 2011 I moved from Norway to Latvia. The main reason is because of my Latvian girlfriend, but other considerations were lower taxes and substantial lower living costs (about 1/3 of Norways). Besides, Latvia is just a cheap 90 mins flight away from friends and familiy.

I'm very happy I made this choice. Latvia is very poor compared to Norway, but I still enjoy it. Nice experience to live abroad. Right now it seems unlikely I will move back.

If you have the chance, go for it!

You forgot to mention that Latvia is full of hot babes! Riga rocks

 

[i am nobody]

Hahahaha. Have you ever been to Bulgaria? I have and I would rather eat a plate of shit than move there.

People can go to Bulgaria for two possible reasons :

1. they want to do business with low taxes
2. they have no money for a decent holiday

You can eat good food and live in a excellent flat or house in Sofia. If you can afford it.