Nomad Capitalism & Cryptocurrency - How to legally pay zero tax on Crypto gains

12 days ago
3 Min Read
603 Words

I've been reading a very interesting book called Nomad Capitalist: How to Reclaim Your Freedom with Offshore Bank Accounts, Dual Citizenship, Foreign Companies, and Overseas Investments.

It has really opened my eyes to the numerous legal options for increasing freedom and reducing or eliminating tax, particularly on investment gains. It is by a guy called Andrew Henderson who also has a website and videos with lots of very useful free information.

Despite the similar name to my own (and look to my younger self) he is not related to me.

While he is not a big crypto advocate, many of the strategies he promotes are highly relevant to crypto investors, especially now that people have made large gains that they may one day want to crystalize.

In particular, one of the strategies he advocates is becoming resident or citizen of jurisdictions that have low or no taxes and encourage entrepreneurship.

I was surprised how many countries offer citizenship or residency by investment programs and have low tax rates. Not just tiny island tax havens but many smaller interesting 1st and 2nd world countries in Eurasia including Malta, Cyprus, Montengro, Portugal, Armenia and Georgia.

There is an important feature of cryptocurrency which means that you don't need to find a no tax jurisdiction (which are fewer and often problematic for other reasons), only one which doesn't tax capital gains - of which there are many.

Because cryptocurrency is global in nature, the gains from selling BTC or ETH or HIVE which you acquired years ago are capital in nature and will generally have no particular national source.

Also, you generally have a choice as to when you sell your cryptocurrency and crystalize those gains for tax purposes.

This means that if you plan it right and obtain residency or citizenship in a jurisdiction that does not tax capital gains you can then move there for a period long enough to lose tax residency in the high tax jurisdiction you currently live in. This is not applicable to US citizens who have to renounce their US citizenship to get away from high taxing Uncle Sam.

Once you have taken steps to no longer be tax resident in a high tax country (Canada, Australia, UK and most of western Europe) you can then sell cryptocurrency to take large profits which are not subject to tax because there is no capital gains tax in the country you are tax resident of.

Often the cost of living in these countries is much lower, so these untaxed crypto profits will allow you to live like a King or Queen in places that often have great beaches and beautiful landscapes. Sometimes great skiing too.

Because these places are entrepreneur friendly and are often fast growing, there are good opportunities to diversify your investment portfolio into real businesses and cheap real estate. This is particularly important if you asset base have become very heavily skewed to crypto by the very large gains over the years.

I am surprised that this is not a more common topic in crypto circles because crypto profits are well suited to this strategy, unlike many other investments (ie real estate, stocks, bonds) that are inherently tied to one country and may be taxable there even if you are not resident there.

Obviously this is not legal advice and everyone will need to seek their own tax and legal advice about their particular situation.

But is it an outline of a good strategy for crypto investors.

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