Secret Bitcoin billionaires to renounce their US citizenship before cashing in?(blogs.harvard.edu)
blogs.harvard.edu
Secret Bitcoin billionaires to renounce their US citizenship before cashing in?
http://blogs.harvard.edu/philg/2018/02/03/secret-bitcoin-billionaires-will-renounce-their-u-s-citizenship-before-cashing-in/
59 comments
Singapore is a western (like) country and has no capital gains tax. Though as some other commenters have noted, i don’t know if the IRS would consider it legal for a US citizen to bail and not pay the tax.
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You can't renounce citizenship for purely tax reasons, I believe.
The closet incident I could remember was when a Facebook co founder did this. Looks like he still had to pay a tax https://en.m.wikipedia.org/wiki/Eduardo_Saverin
Singapore is a tiny bubble that if you are rich you can live a luxurious life style without fearing (too much) for your safety but I would not call it western by any means.
Hmmmm. Your statement makes me think you don’t know much about Singapore.
It is a tiny city, but it has a massive role in Southeast Asia. I have lived there before and lived a great life without being rich by US or Singapore standards. The national language is English. They are by all means a capitalist country. It is a modern high tech society. Very western if you ask me.
The only way they aren’t that I can think of is that they are not a democracy.
It is a tiny city, but it has a massive role in Southeast Asia. I have lived there before and lived a great life without being rich by US or Singapore standards. The national language is English. They are by all means a capitalist country. It is a modern high tech society. Very western if you ask me.
The only way they aren’t that I can think of is that they are not a democracy.
I heard there's a law preventing you from getting a visa to the US if you surrender your US citizenship for tax reasons. Does that still apply if you became a citizen and resident of a higher taxing nation, but didn't want to be double taxed?
Technically, there is. It requires the Attorney General to issue a determination about your specific case. It's never been used (it's 20 years old); it could theoretically be applied, but it's unlikely to be.
Following countries allow you to cash out Bitcoin tax free, if you're an early holder: the UK, Ireland, Cyprus, Malta, Belgium, Netherlands, possibly Germany, Switzerland, Singapore, the UAE, Monaco, the Channel Islands, Andorra, Italy (if you pay a €100k levy), Portugal, Singapore, and I probably forgot another dozen countries. Pretty much half of Western Europe.
If you have the money, most of these countries offer great quality of life. If you're sitting on a $100m gain.. it's worth it. A change of scenery isn't always bad in life. Personally I would never voluntarily pay 20% on a massive gain if there is a legal way to avoid it.
I guess what this article is implying is, since the US treasury does not know of the existence of these Bitcoins, people can easily renounce (committing US tax fraud in the process) and cash in.
If you have the money, most of these countries offer great quality of life. If you're sitting on a $100m gain.. it's worth it. A change of scenery isn't always bad in life. Personally I would never voluntarily pay 20% on a massive gain if there is a legal way to avoid it.
I guess what this article is implying is, since the US treasury does not know of the existence of these Bitcoins, people can easily renounce (committing US tax fraud in the process) and cash in.
If I was sitting on a $100mm windfall, paying $20mm seems like a no brainer to be able to live in or at least visit the U.S., where presumably all of your friends and family live, without worrying about being arrested for tax fraud.
Not to mention the moral arguments in favor of paying the taxes you owe.
Not to mention the moral arguments in favor of paying the taxes you owe.
The only taxes you owe, are the ones you legally owe. Saving on taxes also doesn't mean you can't give back.
You can support promising artists, give grants to talented people, help people out who can't afford their medical bills, end up in a bad legal situation, etc.
You can support promising artists, give grants to talented people, help people out who can't afford their medical bills, end up in a bad legal situation, etc.
> moral arguments in favor of paying the taxes
alright
> moral arguments in favor of paying the taxes you owe.
woah, not so fast. There's no morality in blind obedience.
alright
> moral arguments in favor of paying the taxes you owe.
woah, not so fast. There's no morality in blind obedience.
Why the UK? I would expect the transaction to be liable to capital gain taxes. I think only betting or spreadbetting are tax free.
You need to be a non-dom to be make use of the remittance system and not be liable to tax upon the sale of your asset (in this case Bitcoin or other crypto).
Most former British colonies have a similar system (in particular, Ireland, Malta and Cyprus) and (if you have a British passport) could make use of the system there, as you do not have your domicile in those countries.
See http://www.telegraph.co.uk/finance/personalfinance/expat-mon...
Most former British colonies have a similar system (in particular, Ireland, Malta and Cyprus) and (if you have a British passport) could make use of the system there, as you do not have your domicile in those countries.
See http://www.telegraph.co.uk/finance/personalfinance/expat-mon...
Ok non-dom but it comes with some strings attached. I understand you must pay £30,000 per year and the proceeds of the sale of the btc must never be repatriated to the UK.
Fee does not apply in the first 7 years. You could move to the UK for one tax year, and then move to Sweden, taking your money with you. You would have booked your entire gain tax free since it was "taxed" in the UK.
Or you could move to Malta for a tax year, and then move to the UK. It would be tax free as well. In my view worth doing if it's a sizeable sum.
Or you could move to Malta for a tax year, and then move to the UK. It would be tax free as well. In my view worth doing if it's a sizeable sum.
Do you have a source on the UK having a lower tax rate for early Bitcoin holders?
Only for non doms. Gains will be exempt from CGT if held in a bank account outside of the UK, unless remitted to the UK. See answer above.
Bitcoin billionaires would just pay the taxes. $500 million and a lot of time is worth WAY more than $1 billion and time wasted dealing with crap. It's way more money than I would ever know what to do with, anyway. Life with $500 million and $1 billion would not be very different.
It's people with $100k of bitcoin that are more likely to want to go through troubles to not have to pay taxes. Because having $100k and $50k in the bank could be very different living situations.
It's people with $100k of bitcoin that are more likely to want to go through troubles to not have to pay taxes. Because having $100k and $50k in the bank could be very different living situations.
That $1 billion also quickly turned into $500 million anyway if they held off selling last year to deal with these tax issues.
> Life with $500 million and $1 billion would not be very different.
Except for one important detail: membership in the Three Comma Club :-). Purchasing power has long ceased to matter for these people: money is just a way to keep score in a game. It can be traded for equally pointless status symbols like bigger yachts, tropical islands, or (recently) Mars rockets. That bitcoin billionaire would much rather turn $500 million into dollar bills and set them on fire than let them be used to fix some of America's worn-out roads and bridges.
Except for one important detail: membership in the Three Comma Club :-). Purchasing power has long ceased to matter for these people: money is just a way to keep score in a game. It can be traded for equally pointless status symbols like bigger yachts, tropical islands, or (recently) Mars rockets. That bitcoin billionaire would much rather turn $500 million into dollar bills and set them on fire than let them be used to fix some of America's worn-out roads and bridges.
This is just incorrect. There are generally two types of people; some hate taxes, and the higher the gain the bigger the incentive is to move abroad (this generally does not apply to Americans, as they are taxed globally). And then you have people who don't care and would pay the tax either way -- whether it's set at 10% or 35%.
you're forgetting the ideology behind early participants. I wouldn't call it liberal, but that gets the point across.
Ironically it might make more sense to avoid taxes if the money is not for you. (For example, someone who takes effective altruism seriously.) But then again they could just donate the money anonymously.
I think the "Bitcoin billionaire" is more of mythical figure than real people.
To be a Bitcoin billionaire, even a multimillionaire you had not only buy thousands of Bitcoin early on, you had to also:
- Hold when it was valued at USD10 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD100 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD1000 (it was a milestone that generated a lot of buzz that it was a peak value)
- Not lost the password of a negleticble amount of money stored as virtual currency that no one quite understood in a virtual wallet you are not sure where to keep.
- Not be hacked in several ways, included in the biggest exchange of the early days
Is anyone guess how many people are left after all that. My guess is that I would count in one hand
To be a Bitcoin billionaire, even a multimillionaire you had not only buy thousands of Bitcoin early on, you had to also:
- Hold when it was valued at USD10 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD100 (it was a milestone that generated a lot of buzz that it was a peak value)
- Hold when it was valued at USD1000 (it was a milestone that generated a lot of buzz that it was a peak value)
- Not lost the password of a negleticble amount of money stored as virtual currency that no one quite understood in a virtual wallet you are not sure where to keep.
- Not be hacked in several ways, included in the biggest exchange of the early days
Is anyone guess how many people are left after all that. My guess is that I would count in one hand
I got bit by your #4 scenario, and I know I'm not the only one!
As the link in the post says, there is an exit tax in place to prevent just this. One of the qualifying prongs to be subject to the tax is "Individuals with a net worth of US$2 million or more as of the expatriation date." That's not liquid net worth, or realized net worth, it's just plain old net worth. If you are subject to the tax, all your assets are deemed sold as of the date of expatriation as income tax on the phantom gains are owed.
Of course someone could hope to stay off the radar or move to a non-extradition country and try to thumb their nose at the USG, but there's a big difference between a loophole existing and the fact that enforcement isn't always perfect.
Of course someone could hope to stay off the radar or move to a non-extradition country and try to thumb their nose at the USG, but there's a big difference between a loophole existing and the fact that enforcement isn't always perfect.
This is illusionary, as billions worth of bitcoin couldn't be cashed out at once. How do they take the potential for crash into account.
Also, is intellectual property also taxed, like all the mssing
This tax provision is not designed to be friendly. It's designed to deter what the US considers bad behavior. You can disagree that it's bad behavior, you can call the law is unfair, immoral, unreasonable, illogical -- whatever. Arguing against those positions is not the point of the post I made.
My point was to point out that there isn't any loophole in U.S. that would allow a cryto billionaire to avoid capital gains taxes via the expedient of renouncing citizenship. People can try anyway and see what happens, but there's a non-zero risk that they'll be chased to the ends of the earth by the IRS and DOJ.
My point was to point out that there isn't any loophole in U.S. that would allow a cryto billionaire to avoid capital gains taxes via the expedient of renouncing citizenship. People can try anyway and see what happens, but there's a non-zero risk that they'll be chased to the ends of the earth by the IRS and DOJ.
Well, at least they can't come later and claim the price increased twofold in the meantime.
Does there need to be even more documentation of tax avoidance and money laundering schemes for us to realize that no one is going to renounce their citizenship over taxes?
It will depend on what the IRS considers to be the capital gain event.
Also, this:
> His or her wealth is on a Post-It and nobody else knows about it. So the person who was clever enough to buy bitcoin in 2010 renounces in 2018, becomes a citizen of a country without income tax or one that doesn’t tax foreign holdings, and then starts cashing in without the U.S. government ever becoming aware.
Is pretty much a description of tax evasion. Crimes don't get canceled when you renounce citizenship. And the evidence of this crime is public and immutable.
If you're in this position, congratulations! Now just suck it up and pay the capital gains, since 80% of Lots Of Money is better than 0% of Lots Of Money. Life as a free-and-clear gazillionaire is going to be better than life as a fugitive from a powerful, spiteful tax agency.
Also, this:
> His or her wealth is on a Post-It and nobody else knows about it. So the person who was clever enough to buy bitcoin in 2010 renounces in 2018, becomes a citizen of a country without income tax or one that doesn’t tax foreign holdings, and then starts cashing in without the U.S. government ever becoming aware.
Is pretty much a description of tax evasion. Crimes don't get canceled when you renounce citizenship. And the evidence of this crime is public and immutable.
If you're in this position, congratulations! Now just suck it up and pay the capital gains, since 80% of Lots Of Money is better than 0% of Lots Of Money. Life as a free-and-clear gazillionaire is going to be better than life as a fugitive from a powerful, spiteful tax agency.
I am not a lawyer; I have no idea what the tax law says.
But if the tax law says the gain event is selling the asset, then there is absolutely nothing morally wrong with exploiting this tax loophole.
It's a travesty that it exists in the first place (as it was when Apple exploits Irish law), but the laws are written by the government that no individual can control. If the laws create a loophole, it's legal (obviously) and ethical to step through it.
But if the tax law says the gain event is selling the asset, then there is absolutely nothing morally wrong with exploiting this tax loophole.
It's a travesty that it exists in the first place (as it was when Apple exploits Irish law), but the laws are written by the government that no individual can control. If the laws create a loophole, it's legal (obviously) and ethical to step through it.
Something being legal or allowable because of a legal loophole doesn't make it ethical.
Something being illegal doesn't make it unethical.
We're talking about deliberately hiding wealth to avoid taxation. This is hardly loophole territory.
I'm Australian. I've lived in the US long enough now that I am treated as a US tax resident -- worldwide income, foreign assets, the whole shebang. I have to report and pay capital gains tax on my compulsory retirement savings in Australia, which I cannot transfer here or withdraw, because of an oversight in the US-Australia tax treaty.
Yes, it's absurd. But even in the matter of a few hundred bucks it is not worth messing with the IRS. There is too much to lose.
You have to pick your battles. Trying to sneak past capital gains tax illegally is bitpenny wise and pound foolish. If you don't like the tax laws, do what everyone else has to do and get elbow-deep into the messy, uncomfortable and morally challenging world of representative democracy.
I'm Australian. I've lived in the US long enough now that I am treated as a US tax resident -- worldwide income, foreign assets, the whole shebang. I have to report and pay capital gains tax on my compulsory retirement savings in Australia, which I cannot transfer here or withdraw, because of an oversight in the US-Australia tax treaty.
Yes, it's absurd. But even in the matter of a few hundred bucks it is not worth messing with the IRS. There is too much to lose.
You have to pick your battles. Trying to sneak past capital gains tax illegally is bitpenny wise and pound foolish. If you don't like the tax laws, do what everyone else has to do and get elbow-deep into the messy, uncomfortable and morally challenging world of representative democracy.
Actually as part of tax reform, US is moving to territorial system instead of world. It's probably the single biggest improvement and fix to come out of that bill.
That is an improvement, I missed it in the hubbub about tax rates. But I expect it means I still have to report for the last tax year.
Either way, I'll report and pay whatever my agent says is correct.
Either way, I'll report and pay whatever my agent says is correct.
Eh, if you're a US citizen in this situation I'd simply move to Puerto Rico and pay 4% all-in without any worries at all since it's 100% legal. Best of both worlds if that 20% bugs you so much.
I still find it a little disconcerting I could renounce my citizenship and still owe taxes on things I sell years later. I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff. I feel it's enough "punishment" to lose the benefits of being a US citizen and holding a US passport. If the world ever goes to shit, those folks will have no place to turn for even basic human needs and protection. They will quickly find out what most of the world feels about carpetbaggers.
I still find it a little disconcerting I could renounce my citizenship and still owe taxes on things I sell years later. I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff. I feel it's enough "punishment" to lose the benefits of being a US citizen and holding a US passport. If the world ever goes to shit, those folks will have no place to turn for even basic human needs and protection. They will quickly find out what most of the world feels about carpetbaggers.
> I still find it a little disconcerting I could renounce my citizenship and still owe taxes on things I sell years later.
You owed tax at the time, is the point here.
> I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff.
FATCA in particular has probably done more harm than good.
But if you want to live in the US, if you want to spend significant time in NYC or SF or Dyersville, Iowa, then federal, state and city taxes are the price of admission. If you don't, then sure: consult a lawyer about your options. He or she will probably counsel to not commit tax evasion.
You owed tax at the time, is the point here.
> I get why (and in this case I feel it's largely moral), but that's quickly getting into big brother new world order level stuff.
FATCA in particular has probably done more harm than good.
But if you want to live in the US, if you want to spend significant time in NYC or SF or Dyersville, Iowa, then federal, state and city taxes are the price of admission. If you don't, then sure: consult a lawyer about your options. He or she will probably counsel to not commit tax evasion.
I would definitely make maximum use of the charitable donation deduction though.
You have to not only acquire a visa to reside in a low tax jurisdiction but you also have to obtain citizenship in it first. You can't become stateless.
Some citizenships can be bought for around €100k.
Much less actually. Paraguay is currently the cheapest with $5,200.
See the list with no or low taxes at https://flagtheory.com/tax-free-countries/
See the list with no or low taxes at https://flagtheory.com/tax-free-countries/
I’m not saying you are wrong, but something really annoys me when I here you can’t become stateless. It's like saying you can’t not have an owner.
Being stateless means that you are not allowed to reside anywhere without permission. While there are some drawbacks to having citizenship (depending on the country), there are no countries where it is worth your while to withdraw citizenship without having another to fall back on. All of the legal rights that most people take for granted disappear when you are not a citizen. And if you are arrested for any reason (or even no reason), nobody will come to your aide if you are stateless.
Having lived a good percentage of my adult life in countries where I do not have citizenship, it's something that I keep in mind -- I do not have the rights of a citizen. I only live here as a guest on the good graces of my host. Only international agreements with the country that I come from guarantees any due process of law in the case that there is trouble.
Having said that, I completely agree with you: it would be wonderful if countries would guarantee rights of people no matter their origin or political affiliations. We don't live in that kind of world, unfortunately.
Having lived a good percentage of my adult life in countries where I do not have citizenship, it's something that I keep in mind -- I do not have the rights of a citizen. I only live here as a guest on the good graces of my host. Only international agreements with the country that I come from guarantees any due process of law in the case that there is trouble.
Having said that, I completely agree with you: it would be wonderful if countries would guarantee rights of people no matter their origin or political affiliations. We don't live in that kind of world, unfortunately.
I totally understand. It actually sounds a lot better when you say "you are not allowed to reside anywhere without permission."
It would be nice to be able to travel around the world without restrictions.
It would be nice to be able to travel around the world without restrictions.
Good luck protecting yourself against a state, even if you are a billionaire. You have to sleep somewhere and protect your assets somehow.
Being stateless is an awful thing — the rohinga are effectively stateless, for example.
I think you can be stateless, but then you're not allowed to be anywhere civilized
Pretty much every country has a way to grant right-of-residence visas (or even instant citizenship) to people in a position to invest a large sum of money.
I believe Cyprus is a such country
Money buys many things. Fastests/cheapest: https://ctrustglobal.com/citizenship-by-investment/
You can really go ~anywhere, example NL: https://ind.nl/en/other/Pages/Investing-in-the-Netherlands.a...
You can really go ~anywhere, example NL: https://ind.nl/en/other/Pages/Investing-in-the-Netherlands.a...
Malta and Cyprus pretty much sell passports. I believe €750,000 gets you a Maltese passport, without requiring you to spend any time in the country.
Actually, you can. By choice, even. The US allows it: For example, you can renounce your citizenship while living on tribal land. Some countries require it before they give you their citizenship. Though it seems most folks are stateless through discrimination of different sorts or by the circumstances of their birth.
https://en.wikipedia.org/wiki/Statelessness
https://en.wikipedia.org/wiki/Statelessness
our plan is the MM2H Visa: http://www.mm2h.gov.my/index.php/en/
It requires a large initial deposit and proof of funds, but all foreign-sourced income is tax free.
Malaysia is very centrally located in SEA, has great weather year round, very modern, great food.
It requires a large initial deposit and proof of funds, but all foreign-sourced income is tax free.
Malaysia is very centrally located in SEA, has great weather year round, very modern, great food.
I was considering it a few years back myself, but then I went and spent some time in Malaysia and couldn't fall in love with it. I ended up in Thailand and much prefer it here. I recommend spending some time in Malaysia before you take up the MM2H program.
We actually did Thailand first and are just about to leave Chiang Mai after spending a total of 2 years here. We have been to KL twice and Penang twice. We will be spending a couple months in Penang this summer and then a few months in Kuching to narrow down where we want to settle. So far have not found any deal breakers, and the Durian/fruit situation makes it VERY enticing.
Chiang Mai was top of the list for a while (we have done most of the rest of Thailand), but considering the Thai Elite Visa does not give good ROI and burning season makes the North awful for 3-4 months of the year, Thailand is no longer a top pick. Also we have kind of outgrown it at this point.
Chiang Mai was top of the list for a while (we have done most of the rest of Thailand), but considering the Thai Elite Visa does not give good ROI and burning season makes the North awful for 3-4 months of the year, Thailand is no longer a top pick. Also we have kind of outgrown it at this point.
Are there still Bitcoin billionaires after the 50%+ drop?
Most people surrendering citizenship aren’t doing so to avoid taxes. They are doing so to avoid double taxation.
A Bitcoin billionaire is either paying the US 15-20% capital gains tax or France, for example, 45-50%. Either way, Caesar still gets his due.