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Hi everyone,.
Glad to find this site.
We’re thinking about moving down to Costa Rica and of course have many, many questions about how to make it happen.
We own a business in the US and want to unplug from the MATRIX and try to settle down in some place like CR.
I have no idea in how this will effect the taxes in the USA.
I own the building and lease it to the business Incorporated where my wife and I are the sole Stockholders in it.
We are also in a State that requires State income taxes.
Have any of you had experiences in what is required as to still owning the business and recieving money fom the Business on a Consulting basis.
I know that this will really be a question for attornies on this side, but thought that I could get a heads up from someone here that has experienced it firsthand.
Thanks for any input,..
ChariotdriverYou’re American – You can NOT unplug yourself from that IRS “Matrix”
As an American you will pay income taxes on any income obtained from any part of the world and it does not matter whether you are living in Nigeria, China or Costa Rica – You are required to pay taxes on your world-wide income.
And you’re right about the advice, you will need expert tax advice from people in the US.
I was told that in order to avoid US taxes, you must become a legal resident of Costa Rica, and you can have no businesses, addresses (properties), bank accounts, driver’s licenses or anything else in your name in the USA. If you have any of the above, you are still liable for state income taxes, as well as federal.
I do NOT believe that you are getting the correct information.
Again, please consult with a qualified tax professional but I do not believe that you can avoid federal taxes – period.
Scott
You also have to renounce your citizenship. After 10 years, you will be free from the IRS. And then only if the IRS has determined you did not do it for tax purposes.
Thanks Mac539
Five years ago, I wrote a book called ‘Costa Rica’s Guide To Making Money Offshore’ which you can see at and as a Wall Street trained international investment advisor for the past 20+ years, I was accustomed to (please note past tense) working with a few of the most knowledgeable US tax experts for international affairs and for the most part, US citizens can not invest offshore any more.
There are a few international newsletters that ‘sell’ the idea that US citizens can invest offshore and achieve ‘financial privacy’ and have access to funds that they don’t have access to in the US but, it’s only true “if” you have a LOT of money to invest and significant monies to structure your affairs.
Out of the nearly 1,000 offshore investment funds my clients have access to.., guess how many of those funds will do business with US citizens?
Zero! None of them! Not one!
So much for freedom…
Scott – Founder
WeLoveCostaRica.comI am not a tax expert by any means. From my own research before making our move to Costa Rica I found simply that there is an expemption to a certain amount of money earned outside the US while you are living in a foreign country. That expemtion does not apply to monies earned from any source within the US, whether your primary residence is there or not.
Also, you must make sure you are moving from a state that offers the same exemption as the IRS does for federal income tax. We moved from California and the expemption is the same there. However, we have friends that moved to England from Massachusettes. They did not realize that Massachusettes offers no expemption from State income tax, no matter where you are living. Since Mass. was thier last known residence in the US, they have had to pay Mass. state tax on every penny earned while living in the UK. They have not lived in Mass. for 13 years. AS Scott and others have said, be sure and consult a tax expert. Ask questions of the tax person as well…..we found many tax preparers have no experience dealing with tax issues of someone living outside the US>
OK, First thing you need to do is go to the IRS documentation OR a tax lawyer. However, here is what I know and found on the IRS web site.
You are exempt from US taxes UP TO $80,000 income earned anywhere after one year IF you live outside the United States for a full year as defined by the IRS (330 days during any 12 consecutive months). You still must file but this exemption applies. See IRS publication 54.
http://www.irs.gov/pub/irs-pdf/p54.pdf
“. . .These benefits are called the foreign earned income exclusion and the foreign housing deduction and exclusion.”
SO. . . You may visit the US for up to 35 days in any 12 month period and still meet the living outside the US rule. Your income must also be earned outside the US. That does not mean the income does not come from the US, it means you did the work to earn it outside the US. Your business model may be critical to how this works. Your “tax home” must be outside the US (place of abode, workplace, personal bank accounts).
This is a significant exemption. Besides this you are also not lible for Costa Rican income taxes if all your income comes from outside Costa Rica. However, there are rumblings that this may change.
Once you achieve this exemption for the first year it is supposed to be easier in following years. However, as long as you are a US citizen the IRS is part of your life.
State taxes are a different matter. . .
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