Here is a good setup for day traders who are on the move?

[alabama]

I have come across several discussions on this topic, and it seems that there is a lot of confusion due to the constantly changing regulations imposed by governments. Older posts are not very helpful, and it would be beneficial to archive them. Newer discussions tend to focus on countries like Bahrain and Dubai, suggesting that paying taxes and managing finances can become more complicated.

The following advice is intended for non-US citizens who earn income from trading stocks, forex, options, and similar activities.
Let's imagine that you are a citizen of a hypothetical country called X and have been residing in a high-tax jurisdiction like Sweden. Here are some steps that some individuals have suggested to minimize their tax obligations:

1. Relocate from your high-tax jurisdiction, spending at least 190 days outside of the European Union.
2. Establish a company in the Cayman Islands, known for its zero-tax policy, financial privacy, and suitability for finance-related businesses. You would be the sole owner and shareholder of this company, eliminating the need to involve third-party nominees who may take advantage of the situation.
3. Open a bank account in the Cayman Islands or in another jurisdiction that allows accounts for Cayman Islands-based companies.
4. Create an account with a platform like IBKR for your trading operations, using your Cayman Islands company as the entity conducting the trades
5. Enjoy the freedom to travel around the world using your company's credit card, while minimizing your tax liabilities (not staying in any location for more than 170 days)

I would appreciate it if someone could provide evidence-based arguments to challenge or improve the above strategy. I am also open to suggestions that may offer better alternatives or enhancements.

 

[bubbledouble]

2. Establish a company in the Cayman Islands, known for its zero-tax policy, financial privacy, and suitability for finance-related businesses. You would be the sole owner and shareholder of this company, eliminating the need to involve third-party nominees who may take advantage of the situation.

my name shows up public right ?

3. Open a bank account in the Cayman Islands or in another jurisdiction that allows accounts for Cayman Islands-based companies.

Suggestions for banks outside of Cayman's open accounts for such entity?

5. Enjoy the freedom to travel around the world using your company's credit card, while minimizing your tax liabilities (not staying in any location for more than 170 days)

can be tricky for a family to do.

 

[SoNewToAllShit]

Can you answer the questions from @bubbledouble I'm interested in this setup if possible.

 

[alabama]

@bubbledouble,
"my name shows up public right ?" Do you mean that my name will be publicly visible? Well, let's not forget that the topic of this discussion is not about hiding or avoiding debt collectors, but rather about maximizing tax optimization for day traders. Are you aware of any locations, preferably English-speaking, that are on par with the Cayman Islands in terms of meeting the focus of this discussion?

"Suggestions for banks outside of Cayman's open accounts for such entity?" Do you have any suggestions for banks outside of the Cayman Islands that are willing to open accounts for entities like this? If not, I cannot provide a direct link, but a quick Google search will show that there are several places where anyone can open a bank account without being a resident. One option you may consider is using WISE.

"can be tricky for a family to do." I agree that it can be challenging for a family to navigate such situations. However, this is true for almost any other scenario as well.

 

[khinkali]

@alabama regarding 190 days and 170 days this really depends on the jurisdiction. Quite a lot do have a 180 (or 183) day rule, but for example you could be tax resident in the UK from as little as 16 days in the tax year (though at just 16 days that would require very unusual circumstances). Also there can be some quite long lasting obligations after leaving a country, in some cases additionally if you return within some number of years.

With your Cayman Islands approach, have you looked into the KYC requirements for the trading platform and the bank? Being a PT is a lot harder nowadays if you want to interact with the legacy financial system as it's not easy for people to do their diligence on you (as UBO of your trading company) and be sure that you aren't a tax resident somewhere.

Some countries let you trade tax free in stocks, forex, options, crypto while being tax resident which can make life much easier due to local bank statements, utility bills, tax bill, etc. to use when signing up for services.

 

[alabama]

@khinkali, your insights are appreciated! Regarding the UK example, it's a bit off-topic for this thread, which aims to stay focused on its context—unlike many other posts. Assuming you're not dealing with assets or family ties there, or you've resolved any such issues by relocating with your family, let's delve into the main discussion.

Most brokers should have no issue with a Cayman Islands-based company. For instance, IBKR readily accepts Cayman companies, requesting only relevant company-related information. If they approve of this, why would they pose obstacles regarding funds originating from a Cayman bank? Similarly, why should they be concerned about your place of residence? After all, it's a corporate account, not a personal one.

While tax-free countries like Andorra, the Bahamas, or the Cayman Islands might seem appealing, they may not offer the best quality of life indefinitely. Also, why live in one place forever? Plus, obtaining residency in such locales often involves considerable expense and time. What countries do you suggest that offer a low-cost path to residency, are favorable for KYC purposes, and don't require physical presence?

 

[khinkali]

@alabama my question was whether you've looked into KYC requirements as that is likely to drive your solution. Depending on the provider, diligence can involve UBO and place of management and/or control, not just where some corporation is registered. I remember someone on OCT saying they'd been asked for a tax return from a tradfi broker. I don't deal with that myself but am aware of how different the KYC/AML requirements can be across crypto brokers (e.g. tax return and government issued photo id from residence jurisdiction in one case, which is bizarre).

What countries do you suggest that offer a low-cost path to residency, are favorable for KYC purposes, and don't require physical presence?

I don't think there is a one size fits all answer. People have pointed out on OCT that the non-present or limited presence tax residencies are not always accepted.

It depends on the exact services you want to use, where they are and how you establish. Many people find that UAE legal residence (without spending enough time to be tax resident) is fine for their needs. The right Georgian bank account and a local address can satisfy a lot of places, without spending time here, which is as low cost option as I can think of. For some people, being a PT with an offshore company will satisfy their needs, but this seems to be getting harder as KYC/AML requirements get stricter. For other needs, you need a stronger presence such as a utility bill, tax records and drivers licence.

(We clearly disagree about the issues regarding former residence country but I appreciate you wish to avoid this topic and we don't know your jurisdiction anyway. Readers should be very wary about concepts such as "not staying in any location for more than 170 days" which are specific to particular jurisdictions.)

 

[alabama]

@khinkali, Several valid points have been raised. Regarding the UBO issue within the KYC investigation process, I'm uncertain as to why or under what conditions a broker would independently inquire about a company owner's tax records, unless responding to a request from a government authority. Even if asked to provide such records, one could respectfully respond that as a citizen of XYZ currently in transit, taxation obligations do not presently exist given their non-resident status.

Should a broker insist upon receiving tax documentation despite this response, your example unfortunately suggests that establishing residency may become necessary. The two options you presented for fulfilling residency requirements do come with substantive financial and time commitments of at least $100,000 plus additional time spent in residence. While not ideal solutions, they represent understandable approaches for satisfying tightened KYC standards under the circumstances described.

 

[khinkali]

I'm uncertain as to why or under what conditions a broker would independently inquire about a company owner's tax records, unless responding to a request from a government authority

It's fear of huge penalties, criminal prosecution or having access removed by other institutions. The latter can be worst, as each link in the chain has to over-react a bit out of fear that the link above will ditch them.

Now, it's sanctions evasion. Effectively secondary sanctions, along the lines of "if we find that one of your customers was fronting from a sanctioned entity or individual then we'll prosecute you and/or lock you out of correspondent banks, SWIFT, SEPA, etc.". "Sanctions evasion" will be used to invade privacy for tax enforcement, just as "terrorist financing" was after 9/11

one could respectfully respond that as a citizen of XYZ currently in transit, taxation obligations do not presently exist given their non-resident status

I've done "self declaration" before, signing an affidavit that my citizenship countries have a clear statutory rules regarding residence and that I cannot possibly be resident due to time spent. But to give an example where I am now, after about 4 years my bank no longer accepted my self declaration. That was presumably due to pressure from EU or US as I don't think that local or OECD rules changed in this specific regard.

that establishing residency may become necessary

I agree with your points and at the extreme end, time spend might become a requirement. Mostly this is not the case and I expect that in almost all circumstances there will be a route that doesn't require time spent, whether that's merely an offshore corporation or whether it means finding a location that can give you a utility bill, bank statement, drivers license, tax return, etc. It just depends on the provider (and to some extent, where they are located).

Georgia is nice because you can get most of of what's needed without time spent. A "tourist" can get a bank account and drivers license here, which is quite unusual. A cheap rental contract, drivers license, tax return, utility bills (if the landlord is helpful) and bank account. Without gaining legal residence you need almost zero time spent and costs are very low. Or add legal residence for some cost but nobody asked me for that yet. Also Georgia doesn't have a reputation for chasing down foreign providers over residents' unpaid taxes, largely because a lot of foreign income (including shares, forex, crypto) is exempt for residents (whether citizens or not).

One option I'm looking at for the future is maintaining a home in one of my citizenship countries (not on any black or grey list) that has clear tax residence rules that won't apply due to lack of time spent, and where I was never tax resident. Rent out the spare room cheaply to someone who will deal with mail, paying bills and keeping squatters out, while I keep a room for myself (which I spend say 3 nights every 4 months). Generate a little income there to get a tax return, unrelated to my main business (maybe the rental income from the spare room if it's over any related threshold). Then I would have a 12 month lease or property deed, drivers license, utility bills, bank statement, tax return and passport all from the same country along with a residential postal address that can actually receive mail. With that package, the likelihood of being asked for a TRC (either as an individual or as UBO of an offshore entity) seems very low. This is my plan for if things tighten up more and my current approach gets harder.

While KYC/AML is getting tougher, I have sometimes found that if I send enough material to show that I am genuine, they'll accept it even if I don't have exactly what they asked for. The worst are fully automated providers with no human contacts.