# Non-Habitual Resident and stock trading



## BurdenedCanuck

Hi All,

I have read many many threads and links regarding the NHR but have yet to come across a discussion of frequent trading in non-Portuguese securities. I believe it should be non-taxed in Portugal but I would love to actually hear from someone doing it and not being taxed in any country. Above the exclusion amount I believe this would be impossible for a US citizen but for the rest of us, I'm hoping it's viable. 

TIA


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## BurdenedCanuck

Soon after posting the above, I came across the following passage from .belionpartners.com/portugals-non-habitual-resident-regime.<html> Capital gains deserve careful consideration. Under article 13, they are treated differently according to whether they originate from the disposal of immovable or movable property. While capital gains from the alienation of real estate may under the double taxation treaty be taxed in the country in which the property is located and will therefore be exempt in Portugal, capital gains from the alienation of other types of property (notably securities) are taxable only in the beneficiary's country of residence. As such, capital gains from the sale of securities will be subject to tax in Portugal, currently at a flat rate of 28%.".
It seems that Portugal doesn't allow for the possibility that another country "may" tax the capital gains if you are tax resident in Portugal and therefore the NHR doesn't help in this case.  x 1000000!
If this has changed/someone from a country such as Canada has actually not been liable for capital gains on securities, please let me know!-)


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## Transcend

This is a topic that interests me. I too have been trying to obtain an answer as to the taxation of CGT on share sale profits. So far I have been given conflicting views. The Bellion quote is taken from the DTAs which Portugal has with many countries. I have checked a few and this is the wording I found. However, others claim that CGT on non-Portuguese share sale profits can be obtained tax free. I have yet to discover the basis on which they make this claim.

There are a couple of points you may wish to consider:

Firstly, you mention "frequent trading". In this case the Portuguese tax authority may regard trading as being your occupation, and tax you as such. This happens in many countries where there is generally no CGT.

Secondly, the tax situation may be different if you were to trade CFDs. As you are no doubt aware, in the UK this is regarded as betting (indeed, the UK uses the term spreadbetting), and is not taxable. Perhaps the same is true of Portugal?

If you manage to find any more information on this subject, I would very much like to hear it.


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## RichardHenshall

Transcend said:


> ... Secondly, the tax situation may be different if you were to trade CFDs. As you are no doubt aware, in the UK this is regarded as betting (indeed, the UK uses the term spreadbetting), and is not taxable. ...


AFAIK trading CFDs is taxable (for a UK resident) in the UK as either income or capital gains, depending on circumstances.

Spread-betting is different and is deemed to be gambling and not normally taxable in the UK.


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## BurdenedCanuck

Thanks for the replies. Unfortunately I have not been able to find any more information. That this isn't discussed more shocks me as many retires will have stock portfolios as well as pensions. It is of CRITICAL importance for many who would consider Portugal as a possible retirement location.


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## Transcend

Like you, I have read widely in search of the answer to this question. I have initiated threads on both this forum and others, but like you, have failed to get an answer that gives me the confidence to proceed with a move to Portugal.

Because of the delay between arriving in Portugal and discovering the outcome of their NHR application, the applicant is running the risk of being liable for significant amounts of Portuguese tax if their NHR application is rejected.

Although I am still keen on Portugal, there are other countries in Europe where capital income from shares definitely is not taxed, and am beginning to wonder if one of these would be a safer choice for retirement.


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## BurdenedCanuck

Transcend said:


> This is a topic that interests me. I too have been trying to obtain an answer as to the taxation of CGT on share sale profits. So far I have been given conflicting views. The Bellion quote is taken from the DTAs which Portugal has with many countries. I have checked a few and this is the wording I found. However, others claim that CGT on non-Portuguese share sale profits can be obtained tax free. I have yet to discover the basis on which they make this claim.
> 
> There are a couple of points you may wish to consider:
> 
> Firstly, you mention "frequent trading". In this case the Portuguese tax authority may regard trading as being your occupation, and tax you as such. This happens in many countries where there is generally no CGT.
> 
> If you manage to find any more information on this subject, I would very much like to hear it.


 Thank-you very much for the reply. There is such a scarcity of information on such matters, unfortunately. Edit: Refreshed the page but didn't see your above post before writing this so didn't quote your last post instead.

Malaysia was very much a country I was considering due to it's not taxing foreign source income but my wife who grew up in a Muslim environment says no way in hell.
Even though they are far better than most Muslim countries (from what I've read), there's no convincing her.


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## BurdenedCanuck

Transcend said:


> Like you, I have read widely in search of the answer to this question. I have initiated threads on both this forum and others, but like you, have failed to get an answer that gives me the confidence to proceed with a move to Portugal.
> 
> Because of the delay between arriving in Portugal and discovering the outcome of their NHR application, the applicant is running the risk of being liable for significant amounts of Portuguese tax if their NHR application is rejected.
> 
> Although I am still keen on Portugal, there are other countries in Europe where capital income from shares definitely is not taxed, and am beginning to wonder if one of these would be a safer choice for retirement.


 Once I thought Portugal was an option I was excited and put most of my effort into investigating that option and forgot a lot of what I had discovered regarding other countries before (I'll have to review my scattered notes ...). Next in line for me was Uruguay, but I've been reading a lot of negative things crime-wise about it lately (not that it's still not better than other South American countries with respect to that though). If Costa Rica is ok crime-wise in a city with good medical facilities (and coolish weather for the wife(so in the highlands)) then that might be a better option. It seems that the Netherlands might tax equities trading as income, instead of taxing it @ 1.2% I believe it is, and if so, then that is out. And, that sort of thing seems to be a problem in many countries - that they might declare you as trading for income (etc) and fully tax you. Singapore is another country that may tax you that way. I feel safest with countries that just don't tax foreign income period.


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## BurdenedCanuck

What?! From: .lowtax.net/information/monaco/monaco-residence-and-liability-for-taxation.html :
"if an individual is in business as a sole trader or on his own account, he will be taxed according to the principles of the Business Profits Tax " .


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## dstump

Depending on personal circumstances and value of potential CGT I would recommend you have a single session with one of the international tax/accountancy firms in Lisbon. Personally we used PWC, I can share contact details of the guys we spoke with in a PM if required. The guys we spoke with explained many of the points raised in the this thread. I'd like to say I fully understood all of it, but the salient points relating to us were covered.


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## BurdenedCanuck

dstump said:


> Depending on personal circumstances and value of potential CGT I would recommend you have a single session with one of the international tax/accountancy firms in Lisbon. Personally we used PWC, I can share contact details of the guys we spoke with in a PM if required. The guys we spoke with explained many of the points raised in the this thread. I'd like to say I fully understood all of it, but the salient points relating to us were covered.


 I would want to know it was a possibility before going through all that. Do you engage in 'high frequency' trading (@ least several times a week and occasionally+ buying and selling within the same day) and are not taxed on it? I didn't necessarily start out with the intention of trading all that frequently but with the current market I would have been many times safer if I had traded even more frequently ... .


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## advolex

There are several interesting questions buried in this thread:

1. Will PT tax gains from foreign investments? The answer is yes it will. 28 % was said in this thread also. If you're a resident in PT for whatever purpose you will have to pay tax here on any taxable income. Go find a tax agreement that PT is a party to where it says otherwise. You won't, as long as we're talking about income from tangibles.

2. But Monaco, you say or Malaysia. These countries don't tax foreign income at all, you say. I doubt that this is true, but for the sake of argument: Then you, as a resident of say Malaysia wouldn't have to pay any taxes on such foreign income. True, but if the income was earned in Malaysia and you were a resident of PT, then that income might well be taxed in both states. If no tax treaty would prohibit double taxation you would have to pay taxes in both countries, as a NHR only by 28 % in PT. For every income theoretically possible you would have to find the relevant tax treaties. There might well be several, for example a US citizen resident in Portugal with income from Malaysia would have to look up these tax agreements: US-PT, US-Malaysia, PT-Malaysia. If all three treaties were based on the OECD Agreement, then probably all three would say: PT has a right to tax this particular income based on residency. The domestic tax rule of Malaysia, wherein foreign income will not be taxed in Malaysia (exempt) would not be applicable as the income was not foreign but Malaysian. The basis of exemption in Malaysia would be another, Residency or lack thereof. Only the country of residence, here PT, would have to find a provision to tax this income if it were exempt from tax in the domestic tax law, which it isn't, and this provision must then be found in the tax treaty (with Malaysia).

3. What we, as residents of PT, need to find is a country among the many with whom Portugal has a tax treaty, where the applicable tax treaty says that the income in question which emanates from the source state shall be solely taxed in the source state. (PT has only waived the right to tax, based on residency, certain foreign pensions income.) And the internal tax law in the source state, here Malaysia, would not tax this income at all (since you're an alien or at least not a resident of Malaysia). Last but not least we would have to make sure that the applicable tax treaty (here: PT - Malaysia) does not enable the Resident State to tax double exemption income. And PT would tax it according to NHR-status, by 28 %.

For simplicity's sake I only use the term "Residency" (Resident etc.) and not Domicile or equivalent.

What a good international tax specialist could come up with would be a state like Peru, which had an interest to attract foreign capital by way of tax benefits. This Peruvian interest was acceptable to the Swedish negotiators so the tax treaty allowed it. But this particular specific tax haven is closed now, through a revision of the SE-Peru tax treaty, at the request of Sweden. Probably some other states haven't covered the open loop-hole yet. Something similar is what you're after. When you've found the place of your income go ahead and find the state to become a resident in, or put your tax subject in, which will accept tax exemption for this income based on the tax treaty with that source state. That's what these international tax specialists (PWC and similar houses most of them) should be good at. As a tax payer you only need to be good at reading the tax statutes of the tax jurisdiction that you're in. If there were such a universal tax haven (heaven?) I'm sure we would all go there and do exactly the same transactions.

4. Another question brought up here is that of foresee ability. But not every jurisdiction enables you to bargain over your tax situation before becoming a tax payer there. You should first pay your tax bill and then try to get something back. Most states have this restriction from what I hear. Maybe in certain cantons in Switzerland and maybe also in Monaco you can negociate before your tax bill is due. But I don't think it's worth a try if you think you'll get by without paying any tax at all. It would be interesting though to find out where it would be feasible.


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## BurdenedCanuck

Thanks for the reply Advolex, a lot to chew on. I had looked at tax treaties briefly and will probably again. 

Before putting down a lot of $ with an international tax specialist, I would want to know that it actually is possible (especially if they could somehow guarantee it!). If not, then the best tax and safety-wise (but not weather-wise etc for many) location might be Andorra with it's 10% taxation level. If I knew such countries as Uruguay would definitely not tax foreign investments/trading even if traded from a computer within the country, then the options would be much greater. Not sure if I mentioned already in this thread, but countries such as Malta apparently will tax such investments. And no, I don't think a VPN would help. Only trading while on 'vacation' in a third country would circumvent this, but then you would be limited to just trading in that limited time period.


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## Transcend

BurdenedCanuck said:


> Before putting down a lot of $ with an international tax specialist, I would want to know that it actually is possible (especially if they could somehow guarantee it!).


There's no need to spend money; all the information you need is freely available on the internet. You just have to spend the time and do the research. But, please stick only to reputable sources of information. There are many forums advocating all sorts of wacky solutions. These should be ignored. Your case is actually quite simple, and you can devise your own strategy quite easily.



BurdenedCanuck said:


> If not, then the best tax and safety-wise (but not weather-wise etc for many) location might be Andorra with it's 10% taxation level.


The 10% tax in Andorra does not apply to all sources of income. This is in your favour. Please refer to the following web page:

Taxation Details in Andorra - how the law affects your tax status

Here is an excerpt from that page (with highlighting):

Please note the following cardinal points:
• *In any situation where you own less than 25% of the share capital of an entity, there is no Capital Gains Tax liability.* Thus, for example, when you sell shares in a quoted company at a profit, there is no liability for tax, unless of course you happen to own more than 25% of the shares of that company. In the event that this were the case, it is almost inconceivable that the person involved would not already have a structure in place for avoiding the tax anyway.
• *This exemption also neatly covers situations where you earn your "income" by means of short-term trading on the stock market.* Any gains that you make and in reality use as income are classed as gains under the Income Tax rules and given the 25% exemption rule, Capital Gains Tax, does not apply either, so there is a zero tax liability. (Day-trading in other investments such as options and commodities are not covered by the exemption).
• There is also a blanket exemption on gains made on any asset of any type held for more than 10 years.



BurdenedCanuck said:


> If I knew such countries as Uruguay would definitely not tax foreign investments/trading even if traded from a computer within the country, then the options would be much greater.


Uruguay will tax income generated within Uruguay. It matters not that you may be trading on the NYSE, the fact is that you are doing it from Uruguay.



BurdenedCanuck said:


> Not sure if I mentioned already in this thread, but countries such as Malta apparently will tax such investments.


Yes, because Malta applies the same rule as Uruguay. 



BurdenedCanuck said:


> And no, I don't think a VPN would help.


No, it would not. Tax authorities get information about tax residents' income from sources other than their internet traffic.



BurdenedCanuck said:


> Only trading while on 'vacation' in a third country would circumvent this, but then you would be limited to just trading in that limited time period.


No, this would not work. If you are tax resident in Portugal (for example), you would still be tax resident there even if you placed the trade while on holiday. You would be taxable in Portugal on your worldwide income.

As I see it, you have the following options:


Live in a country where there is no income tax.
Live in a country that, although there is income tax, you are able to take advantage of an exemption whereby your type/source of income falls outside the scope of the income tax.
Live long enough to become tax resident in 1. or 2., and live the rest of the year in a second country (taking care not become tax resident there).
Live in a country that, although there is income tax, turns a blind eye to foreigners generating income via the internet.
Set up an offshore entity/bank account, live wherever you like, and hope you do not get caught.
Trade using CFDs or spreadbets and live in a country where the income from these is tax free.
Stop frequent trading and adopt a LTBH strategy. This opens up several opportunities in European countries for receiving income tax free.

My advice would be to remember the old adage: "Don't let the tax tail wag the lifestyle dog". Consider how much net profit you expect to make from trading. Calculate your tax liability in countries you would *like* to live in. There's no point living somewhere you have chosen only because you will save a relatively small amount of tax. You need to be able to enjoy your life. I think this is especially true in retirement.


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## advolex

Transcend said:


> No, it would not. Tax authorities get information about tax residents' income from sources other than their internet traffic.
> 
> No, this would not work. If you are tax resident in Portugal (for example), you would still be tax resident there even if you placed the trade while on holiday. You would be taxable in Portugal on your worldwide income.
> 
> As I see it, you have the following options:
> 
> 
> Live in a country where there is no income tax.
> Live in a country that, although there is income tax, you are able to take advantage of an exemption whereby your type/source of income falls outside the scope of the income tax.
> Live long enough to become tax resident in 1. or 2., and live the rest of the year in a second country (taking care not become tax resident there).
> Live in a country that, although there is income tax, turns a blind eye to foreigners generating income via the internet.
> Set up an offshore entity/bank account, live wherever you like, and hope you do not get caught.
> Trade using CFDs or spreadbets and live in a country where the income from these is tax free.
> Stop frequent trading and adopt a LTBH strategy. This opens up several opportunities in European countries for receiving income tax free.
> 
> My advice would be to remember the old adage: "Don't let the tax tail wag the lifestyle dog". Consider how much net profit you expect to make from trading. Calculate your tax liability in countries you would *like* to live in. There's no point living somewhere you have chosen only because you will save a relatively small amount of tax. You need to be able to enjoy your life. I think this is especially true in retirement.


Invaluable piece of advice, for sure. If you really were to live by rule no. 5, I in your place, would definitively disregard the negative view on the benefits of a good VPN, considering that you thereby would eliminate one of the most effective ways to obtain information on your Internet activities. But even a good VPN won't help if the tax authority teams up with corrupt bankers who sell them your financial information on a CD-ROM.


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## BurdenedCanuck

Awesome stuff Transcend, TY.

Andorra's looking even better then (and I don't think I would like that country any less than my current one, not even taking taxes into account). I'm a bit sceptical based on other countries that seemed similarly promising but then turned out not to be so clear cut (eg. The Netherlands) but it would be good to know that the worst that would happen (barring penalties) would be a fall-back to 10%.



Transcend said:


> There's no need to spend money; all the information you need is freely available on the internet. You just have to spend the time and do the research. But, please stick only to reputable sources of information. There are many forums advocating all sorts of wacky solutions. These should be ignored. Your case is actually quite simple, and you can devise your own strategy quite easily.


 I continue to search ... . Unless I double the totality of my funds once or twice again this year (_before tax_), I wouldn't be moving in '16. For one thing I'd have to pay back a lot of money from an old corporation I was forced to have open when I used to consult .. from that experience I have an enormous aversion to lessening the tax burden through a corporation -> I am pretty much only considering non-corporation options.



> Uruguay will tax income generated within Uruguay. It matters not that you may be trading on the NYSE, the fact is that you are doing it from Uruguay.
> 
> Yes, because Malta applies the same rule as Uruguay.


 This makes me quite sad. And not just for myself. Trading though a foreign brokerage, in foreign equities but it being considered local seems absurd to me. The country would still be getting all of your sales tax, import duties etc etc. and so will still be making a nice profit off of you and if they drive people like that off, it is to their deficit.



> No, this would not work. If you are tax resident in Portugal (for example), you would still be tax resident there even if you placed the trade while on holiday. You would be taxable in Portugal on your worldwide income.


 It's a moot point for me as this would not align with my pattern of investing, but I meant a case such as being a resident of a country like Canada where they will not tax you if you are not a tax resident and are resident of a country such as Uruguay which doesn't tax what they deem as totally foreign income. In theory you could vacation in Canada but even though < 183 days in the year, this will be an item that the crown will count against you in court. I have read most of the Canadian court cases regarding residency that I could find and I can state with some confidence that the taxman is extremely trigger-happy in claiming people as tax residents (in some cases for people who have never even set foot within the country).



> As I see it, you have the following options:
> 
> 
> Live in a country where there is no income tax.
> Live in a country that, although there is income tax, you are able to take advantage of an exemption whereby your type/source of income falls outside the scope of the income tax.
> Live long enough to become tax resident in 1. or 2., and live the rest of the year in a second country (taking care not become tax resident there).
> Live in a country that, although there is income tax, turns a blind eye to foreigners generating income via the internet.
> Set up an offshore entity/bank account, live wherever you like, and hope you do not get caught.
> Trade using CFDs or spreadbets and live in a country where the income from these is tax free.
> Stop frequent trading and adopt a LTBH strategy. This opens up several opportunities in European countries for receiving income tax free.


 I'm not going to touch #5 and I wouldn't recommend it for anyone even if simply because in today's world I don't believe it would be feasible (Advolex giving one example as to why). 

For #4, I have heard that Thailand is such a country. I would be too paranoid that this wouldn't fly long-term, however.

For #1, I wouldn't want to live in any of the countries I'm aware of where this is the case. Additionally, such countries seem to be red-flagged and tax authorities will more aggressively pursue you (in the case of Canada, trying to claim you are still tax-resident).

For #6, if you are referring to the UK, and betting not being taxable, I have come across several people disputing that various forms of equity/derivative speculation would really fall under that category.

For #7, the investing I'm currently engaged in would be too risky to hold onto for longer than say a month (and often less) and I do not yet have enough capital for a more conservative amount of return to be adequate. Perhaps in 5 years or so this could be an option, but even then I probably would not mind increasing my rate of returns ... . Something to still consider for much further off. Another consideration, however, is if I actually do want to get Andorra citizenship, it takes a _long_ time so I'd have to stick around ... .


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## MCguy

Wanted to chime in this thread as it came up in my research for the Portugal Non-Habitual residence search. There are some fantastic questions brought up by BurdenedCanuck and fantastic points made by Transcend in the thread.

Being Canadian as well and living in Monaco, I can tell you that if you are investing your own funds, there is no income tax or capital gains here. The cost of living is high and living standard is lower (imo) compared to other Western countries. There is significant withholding tax applied by most countries that have liquid exchanges to trade (ie US 30%, CA 25%) unless you trade shares on the LSE. 

I was also considering Portugal but sadly, the application of the non-Habitual residence limbo and the capital gains tax of 28% makes it a very risky proposition.

If you want pure zero tax that's liveable: Monaco, Dubai, Cayman, Turks & Caicos, Bahamas.
Remittance / Territorial: UK Non-Domicile, Cyprus (new non-dom rules from 2015), Malta, Thailand, Hong Kong, Costa Rica
Low tax: Andorra, Several Eastern European countries such as Czech, Hungary have 15% tax, Singapore

In some of the above countries, if you trade frequently you might be considered to be operating a business and have income instead of capital gains on your trades.

FYI, starting with 2016 most banks, brokers and financial institutions globally are required by law to verify your residence and send your account information to the tax authority of the country you reside in. This is called the OECD Common Reporting Standard.


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## Transcend

MCguy said:


> Wanted to chime in this thread as it came up in my research for the Portugal Non-Habitual residence search. There are some fantastic questions brought up by BurdenedCanuck and fantastic points made by Transcend in the thread.
> 
> Being Canadian as well and living in Monaco, I can tell you that if you are investing your own funds, there is no income tax or capital gains here. The cost of living is high and living standard is lower (imo) compared to other Western countries. There is significant withholding tax applied by most countries that have liquid exchanges to trade (ie US 30%, CA 25%) unless you trade shares on the LSE.


Welcome to the thread. It's nice to have another person who is interested in this topic. For me, the first problem with Monaco is the high cost of housing. Presumably you feel it's worthwhile, but is it somewhere you would recommend for retirement?



MCguy said:


> I was also considering Portugal but sadly, the application of the non-Habitual residence limbo and the capital gains tax of 28% makes it a very risky proposition.


Agreed. I am now of the opinion that the NHR scheme offers no attraction to either traders or investors. Traders will be taxed at normal income tax rates and investors will be subject to the 28% CGT rate.



MCguy said:


> In some of the above countries, if you trade frequently you might be considered to be operating a business and have income instead of capital gains on your trades.


This is a big issue for traders. I am an investor, and so my choice of suitable countries is far wider than yours. I spent two years in Malaysia (another territorial country). No tax for me, but those trading would be subject to income tax. I'm currently in Malta. For me it's good tax-wise, but from a lifestyle perspective, it's not that attractive. A trader would be taxed at income tax rates.

The other issue is obtaining a residence visa. I have tried without success to obtain a residence visa for Singapore and Hong Kong. I imagine I would face similar problems with Cayman, Turks & Caicos and Bahamas.



MCguy said:


> FYI, starting with 2016 most banks, brokers and financial institutions globally are required by law to verify your residence and send your account information to the tax authority of the country you reside in. This is called the OECD Common Reporting Standard.


This is something that we all need to bear in mind. In fact, exchange of information has been in place between many countries for several years. The initiative you mention is a beefing-up of this. I think a lot of people may be caught out. There are many traders who believe if they keep a low profile (and use a VPN) they are safe. They are not, and certainly won't be in the future.

Thanks for reminding me about Cyprus. I might head there shortly and take a close look. For those unfamiliar with the new non-dom rules, tax residents who are not domiciled in Cyprus can now receive "passive income" from dividends, interest and rental income tax-free. There is already an exemption from tax for capital gains realised on the disposal of securities (shares, bonds etc.). Therefore an investor should be able to receive all income tax-free.


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## BurdenedCanuck

MCguy said:


> Wanted to chime in this thread as it came up in my research for the Portugal Non-Habitual residence search. There are some fantastic questions brought up by BurdenedCanuck and fantastic points made by Transcend in the thread.
> 
> Being Canadian as well and living in Monaco, I can tell you that if you are investing your own funds, there is no income tax or capital gains here. The cost of living is high and living standard is lower (imo) compared to other Western countries. There is significant withholding tax applied by most countries that have liquid exchanges to trade (ie US 30%, CA 25%) unless you trade shares on the LSE.
> 
> I was also considering Portugal but sadly, the application of the non-Habitual residence limbo and the capital gains tax of 28% makes it a very risky proposition.
> 
> If you want pure zero tax that's liveable: Monaco, Dubai, Cayman, Turks & Caicos, Bahamas.
> Remittance / Territorial: UK Non-Domicile, Cyprus (new non-dom rules from 2015), Malta, Thailand, Hong Kong, Costa Rica
> Low tax: Andorra, Several Eastern European countries such as Czech, Hungary have 15% tax, Singapore
> 
> In some of the above countries, if you trade frequently you might be considered to be operating a business and have income instead of capital gains on your trades.
> 
> FYI, starting with 2016 most banks, brokers and financial institutions globally are required by law to verify your residence and send your account information to the tax authority of the country you reside in. This is called the OECD Common Reporting Standard.


 Thanks for your input MCguy. Monaco will be out of my reach financially for the time being (especially as to obtain residence I had read that a very expensive real estate purchase was required) but I am curious as to why you consider the standard of living not so great. I would assume that is due to what you get for what you pay for in housing. 

Also, is the source, as reported on in my posting #9 incorrect? ->
"What?! From: .lowtax.net/information/monaco/monaco-residence-and-liability-for-taxation.html :
"if an individual is in business as a sole trader or on his own account, he will be taxed according to the principles of the Business Profits Tax " . "

Perhaps @ least if they deem you a 'trader', you are screwed. And, just because someone hasn't been taxed yet doesn't mean they won't come back later ... . Do you make frequent trades?

Thanks also to Transend for his continuing contributions. I'd add that it's more than just OECD .. as Snowden et al revealed .. in the name of anti... (etc) none of your data is completely safe, particularly when there are government (or corporate) financial interests at stake.


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## BurdenedCanuck

Hi Transcend,

Hope you got my replies to PM .. I'm not sure as it lists me as having zero sent messages.



Transcend said:


> Thanks for reminding me about Cyprus. I might head there shortly and take a close look. For those unfamiliar with the new non-dom rules, tax residents who are not domiciled in Cyprus can now receive "passive income" from dividends, interest and rental income tax-free. There is already an exemption from tax for capital gains realised on the disposal of securities (shares, bonds etc.). Therefore an investor should be able to receive all income tax-free.


 I couldn't find any reference to non-dom. It seems that being solely tax-resident in Cyprus, regardless of previous domicile status(may not be wording that well), is all it takes to not have to pay trading taxes. Eg. .kpmg.com/CY/en/IssuesAndInsights/ArticlesAndPublications/Pages/Cyprus-Tax-Card-2015-ENG.aspx


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## MCguy

@Transcend - Monaco is too expensive these days. Cyprus seems like a great options for investors and traders. I'm not too sure about the quality of life over there, but it's worth looking into. Turks & Cayman seem ideal if wanting to purchase a property and want the island lifestyle.

@BurdenedCanuck - I don't trade, I invest long term but either way that wording 'sole trader' I believe refers to someone engaging in active business such as a sole proprietor providing a service to third parties.For Cyprus, non-dom is much easier than UK. Investment and share income is essentially tax free, even if remitted, for non-domiciles.


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## Transcend

BurdenedCanuck said:


> I couldn't find any reference to non-dom. It seems that being solely tax-resident in Cyprus, regardless of previous domicile status(may not be wording that well), is all it takes to not have to pay trading taxes. Eg. .kpmg.com/CY/en/IssuesAndInsights/ArticlesAndPublications/Pages/Cyprus-Tax-Card-2015-ENG.aspx


There are two separate issues here.


You are correct to say that a tax resident who engages in share trading or investing would not have any tax liability for any capital gains generated from that trading. That has always been the rule.

The new non-dom rule applies to "passive income" (dividends from shares, bank account interest and rental income). Previously, a "Special Defence Contribution" (a tax in all but name) was applied to this form of income. This Special Defence Contribution no longer applies, and so for a trader or investor, dividends and interest can be received tax free.

So, in summary, all CGT from share trading or investing, dividends received and any interest can be received without any tax. In makes no difference whether this income is remitted or not.

You can read about the non-dom changes at the following link:

https://www.world.tax/articles/cypr...-the-place-hotter-q-a-on-how-to-get-there.php


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## BurdenedCanuck

Transcend said:


> There are two separate issues here.
> 
> 
> You are correct to say that a tax resident who engages in share trading or investing would not have any tax liability for any capital gains generated from that trading. That has always been the rule.
> 
> The new non-dom rule applies to "passive income" (dividends from shares, bank account interest and rental income). Previously, a "Special Defence Contribution" (a tax in all but name) was applied to this form of income. This Special Defence Contribution no longer applies, and so for a trader or investor, dividends and interest can be received tax free.
> 
> So, in summary, all CGT from share trading or investing, dividends received and any interest can be received without any tax. In makes no difference whether this income is remitted or not.
> 
> You can read about the non-dom changes at the following link:
> 
> https://www.world.tax/articles/cypr...-the-place-hotter-q-a-on-how-to-get-there.php


 Sounds good. I'm not sure if withholding taxes wouldn't come into play still though. Current as of Jn'15, according to a KPMG doc, Cyprus has a treaty with Canada specifying a 15% tax for dividends, interest and pensions, and 25% for annuities. 

I presume that if using dividends as a source of income for resident purposes (I believe I read Cyprus accepts that), it is acceptable if they are not in Euros.


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## MCguy

BurdenedCanuck said:


> Sounds good. I'm not sure if withholding taxes wouldn't come into play still though. Current as of Jn'15, according to a KPMG doc, Cyprus has a treaty with Canada specifying a 15% tax for dividends, interest and pensions, and 25% for annuities.
> 
> I presume that if using dividends as a source of income for resident purposes (I believe I read Cyprus accepts that), it is acceptable if they are not in Euros.


Withholding taxes always come into play. If you move to a non-treaty country (ie Cayman, Dubai etc.) the rate is 25% for Canadian source dividends and 30% for US source dividends. There is really no escape from the withholding even if you live in a high tax country. In such case the withholding usually gets credited against the local income/dividend tax payable.

Even if you buy iShare ETFs on the LSE, while there is no withholding on the dividend paid by the ETF, internally the fund is subject to the 15%. Irish bond funds listed on the LSE have no withholding however.


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## BurdenedCanuck

MCguy;9587786 @BurdenedCanuck - I don't trade said:


> From: .lowtax.net/information/monaco/monaco-residence-and-liability-for-taxation.html (same source as cited earlier) : "if an individual is in business as a sole trader or on his own account, he will be taxed according to the principles of the the Business Profits Tax ". So, it seems like 'traders' will get dinged/can be at any future date.


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## advolex

*OECD Global standard (of automatic exchange of info.)*



Transcend said:


> This is something that we all need to bear in mind. In fact, exchange of information has been in place between many countries for several years. The initiative you mention is a beefing-up of this. I think a lot of people may be caught out. There are many traders who believe if they keep a low profile (and use a VPN) they are safe. They are not, and certainly won't be in the future.


Yes, it's been around for a couple of years already, since 2012. The new Global standard comes into effect 2017 and means the income state notifies the residency state automatically, without being asked: "Under this system, Member States collect data on income earned in their territory by nonresident individuals. They then automatically transmit this data to the authorities where the individual resides, so that it can be taxed in line with the Member State of residence's rules."
This expanded information collecting is detrimental to us expats from states where the tax authorities desperately try to cling to "their" tax base, by brutally saying "we don't care that you have moved abroad altogether a long time ago, we will tax you nonetheless". If they get the information they will tax you.
And there is a long list of states who have signed the treaty. It seems the pressure was tremendous. So, today Andorra and Monaco and Switzerland are in. As is the EU and the OECD states. So Cyprus, mentionned favourably here, is in. But there remains a few "outsiders" still, but they will be in also one day. Most certainly. Uruguay was mentionned, is out. Most of the Balkans as well as the Middle east, including Lebanon and the UAE. But Saudi Arabia is in. Brazil and Mexico are the exceptions in South America, they are in.:juggle:


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## advolex

*'Resident but not domiciled'*



Transcend said:


> Thanks for reminding me about Cyprus. I might head there shortly and take a close look. For those unfamiliar with the new non-dom rules, tax residents who are not domiciled in Cyprus can now receive "passive income" from dividends, interest and rental income tax-free. There is already an exemption from tax for capital gains realised on the disposal of securities (shares, bonds etc.). Therefore an investor should be able to receive all income tax-free.


Maybe it's difficult to follow for us non native English speakers. With tax residents (of Cyprus) who are not domiciled in Cyprus, are you saying the same thing as in the following example: "‘Resident but not domiciled’ is a tax status that can be applied to a person who is living in the UK, but was not born in the UK. 
If you attain the status of ‘resident but not domiciled’ you can achieve tax exemption in the UK on income earned outside the UK.

Investing in Switzerland or Luxembourg

Many people who move to the UK invest their capital in places such as Switzerland or Luxembourg. This makes it possible to avoid UK tax on interest income, dividends and profits as long as the income is not brought into the UK.":fingerscrossed:


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## BurdenedCanuck

advolex said:


> Maybe it's difficult to follow for us non native English speakers. With tax residents (of Cyprus) who are not domiciled in Cyprus, are you saying the same thing as in the following example: "‘Resident but not domiciled’ is a tax status that can be applied to a person who is living in the UK, but was not born in the UK.
> If you attain the status of ‘resident but not domiciled’ you can achieve tax exemption in the UK on income earned outside the UK.


Coming back to this thread I was wondering that myself, in particular, if you become a citizen, are you still exempt? I think that everyone is exempt from profits on trading securities (from KPMG and PWC: CYPRUS-TAX-2015-ENG.pdf (.kpmg.com/CY/en/IssuesAndInsights/ArticlesAndPublications/Documents/2015-documents/CYPRUS-TAX-2015-ENG.pdf), tax-facts-figures-english-2015.pdf (.pwc.com.cy/.../assets/tax-facts-figures-english-2015.pdf )). Looking at those documents, I don't think becoming a citizen would matter, and I see no mention of domicile status.



> Investing in Switzerland or Luxembourg
> 
> Many people who move to the UK invest their capital in places such as Switzerland or Luxembourg. This makes it possible to avoid UK tax on interest income, dividends and profits as long as the income is not brought into the UK.":fingerscrossed:


 I thought that that was being discontinued, or the amount 'sheltered' being diminished or something - can't remember. In any case, it all comes back to th UK being able to declare $ earned out of country with the instructions to do so executed while in the UK being able to be declared as local UK income if they so choose (as with the other countries with territorial taxation).


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## advolex

*The importance of dependable tax advice*



BurdenedCanuck said:


> Coming back to this thread I was wondering that myself, in particular, if you become a citizen, are you still exempt? I think that everyone is exempt from profits on trading securities (from KPMG and PWC: CYPRUS-TAX-2015-ENG.pdf (.kpmg.com/CY/en/IssuesAndInsights/ArticlesAndPublications/Documents/2015-documents/CYPRUS-TAX-2015-ENG.pdf), tax-facts-figures-english-2015.pdf (.pwc.com.cy/.../assets/tax-facts-figures-english-2015.pdf )). Looking at those documents, I don't think becoming a citizen would matter, and I see no mention of domicile status.
> 
> I thought that that was being discontinued, or the amount 'sheltered' being diminished or something - can't remember. In any case, it all comes back to th UK being able to declare $ earned out of country with the instructions to do so executed while in the UK being able to be declared as local UK income if they so choose (as with the other countries with territorial taxation).


I agree, nationality (whether you're a British or other citizen, either native or naturalized) hardly ever matters in tax laws. What matters is instead that you must be a non-native (non-domiciled or not-by-birth) resident to be entitled to the particular tax status. At least that's my understanding. The Portuguese "Non Habitual" Resident (RNH) status is something to that effect.

I can't say whether the info in the quotation is still valid for UK tax purposes (or if it ever was), but here is a link: Inwema - What is ‘Resident but not domiciled’?

I included the quotation (both paragraphs) because I wanted to give an example to facilitate the correct understanding of what you just discussed. I also found the example mindblowing, as it explained what I had wondered for years, why do wealthy Swedes who want to settle in London often spend a few years in (Belgium,) Switzerland or Luxemburg first? I think they have access to clever tax consultants who advise just that. Maybe the clever tax consultants provide other solutions today, who knows?:confused2:


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## advolex

*OECD Global Standard*

Austria remains to adhere by 2017, the other participating states have started the automatic transfer already, Sweden as of 1 Jan. 2015.:boxing:


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## BurdenedCanuck

Opps, sorry, a non-dom link was provided by Transcend above, I had forgotten about that. Due to withholding taxes and perhaps what MCguy wrote above, it won't help most people. Something like rent in Cyprus is exempt though I think (not going to re-open the above link yet again to confirm that though!-).


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## BurdenedCanuck

Estonia: .marketwatch.com/story/this-tiny-country-is-the-most-technologically-advanced-in-the-world-2016-05-05?siteid=bigcharts&dist=bigcharts 
Interesting because: 1) seems only pay income tax (and capital gains are treated as such) when 'withdraw' the $ (@ the very least from a corporation) (and the rate is no higher than 20% when do so)
and 2) since they have it together administratively, I suspect the question of whether or not gains made abroad through a computer in Estonia can be answered more definitively.


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## BurdenedCanuck

Darn, according 2: .lowtax.net/features/Estonias-Advantages-571583.html , for both corporations and individuals, if you're resident, you pay tax on worldwide income :-( .


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## johnwat

oK not an expert but also very interested in obtaining long term income that is free of tax, that is gained from speculating on the markets, both using long and short strategies. From my understanding owning a life assurance fund in Luxembourg that is indexed would allow one to choose some investments and gains and looses be wrapped inside the said fund, and as long only dividends were drawn there would be no tax. but fees would apply and they could be expensive, and restrictions on what to buy would be limited by the funds that you choose. To get more control would be possible for professional investors who have >2m5 to invest, they could put this into a company in Luxembourg and that could pay out in dividends. Correct/false? let me know thoughts and experiences.


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## johnwat

There is an opinion given here under TOP ACCOUNTANTS EXPOSED OVER PORTUGUESE NHR IGNORANCE!

Non Habitual Tax Resident Status in Portugal


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## 979156

Transcend said:


> There's no need to spend money; all the information you need is freely available on the internet. You just have to spend the time and do the research. But, please stick only to reputable sources of information. There are many forums advocating all sorts of wacky solutions. These should be ignored. Your case is actually quite simple, and you can devise your own strategy quite easily.
> 
> 
> 
> The 10% tax in Andorra does not apply to all sources of income. This is in your favour. Please refer to the following web page:
> 
> Taxation Details in Andorra - how the law affects your tax status
> 
> Here is an excerpt from that page (with highlighting):
> 
> Please note the following cardinal points:
> • *In any situation where you own less than 25% of the share capital of an entity, there is no Capital Gains Tax liability.* Thus, for example, when you sell shares in a quoted company at a profit, there is no liability for tax, unless of course you happen to own more than 25% of the shares of that company. In the event that this were the case, it is almost inconceivable that the person involved would not already have a structure in place for avoiding the tax anyway.
> • *This exemption also neatly covers situations where you earn your "income" by means of short-term trading on the stock market.* Any gains that you make and in reality use as income are classed as gains under the Income Tax rules and given the 25% exemption rule, Capital Gains Tax, does not apply either, so there is a zero tax liability. (Day-trading in other investments such as options and commodities are not covered by the exemption).
> • There is also a blanket exemption on gains made on any asset of any type held for more than 10 years.
> 
> 
> 
> Uruguay will tax income generated within Uruguay. It matters not that you may be trading on the NYSE, the fact is that you are doing it from Uruguay.
> 
> 
> 
> Yes, because Malta applies the same rule as Uruguay.
> 
> 
> 
> No, it would not. Tax authorities get information about tax residents' income from sources other than their internet traffic.
> 
> 
> 
> No, this would not work. If you are tax resident in Portugal (for example), you would still be tax resident there even if you placed the trade while on holiday. You would be taxable in Portugal on your worldwide income.
> 
> As I see it, you have the following options:
> 
> 
> Live in a country where there is no income tax.
> Live in a country that, although there is income tax, you are able to take advantage of an exemption whereby your type/source of income falls outside the scope of the income tax.
> Live long enough to become tax resident in 1. or 2., and live the rest of the year in a second country (taking care not become tax resident there).
> Live in a country that, although there is income tax, turns a blind eye to foreigners generating income via the internet.
> Set up an offshore entity/bank account, live wherever you like, and hope you do not get caught.
> Trade using CFDs or spreadbets and live in a country where the income from these is tax free.
> Stop frequent trading and adopt a LTBH strategy. This opens up several opportunities in European countries for receiving income tax free.
> 
> My advice would be to remember the old adage: "Don't let the tax tail wag the lifestyle dog". Consider how much net profit you expect to make from trading. Calculate your tax liability in countries you would *like* to live in. There's no point living somewhere you have chosen only because you will save a relatively small amount of tax. You need to be able to enjoy your life. I think this is especially true in retirement.


Excellent post! What is the case if I relocate to Malta as a non domiciled resident but I spend only the weekends in Malta? So I take a flight on Sunday to another European country and I trade there in my hotel room then I fly back to Malta on Friday evening/Saturday morning.

I think Malta could not tax my trading income from forex as my income is not arising in Malta and they could impose taxes only those money I spend in Malta or remit to Malta. The big question is however what if they'd report my trading gains to those countries where I've traded? Obviously I would never spend more than 3 months per year in any EU country and I would go to another each week but still, they could report to every single country where I've made trades as a tourist so they could decide whether they want to tax the income I made while I was there or not.

What do you think?

Btw the question is the same if you're a resident in Monaco, Cayman Islands, Malaysia, etc. because if you're traveling to another country and you're trading there as a tourist then I guess you could be subject to taxes. Am I wrong?

I think what makes it more dangerous in the case of Malta is the remittance basis taxation because they'd try to tax my trading income however they couldn't as I wasn't in the country when I've placed and closed the trades but they could still report to those countries where I've been.

Am I wrong?


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