Long term capital gains tax on stock market?

[doublestack23]

Hello im new sorry if this is a stupid question lol.


Is there a offshore strategy to avoid paying long-term capital gains tax


Let’s say you invest in the stock market for 20 years, and your investment appreciates to $20 million?

 

[Martin Everson]

A lot depends on your current country of residency and its tax rules. For example if you lived in Spain and had a current portfolio of over 4m euros if you tried to leave Spain to avoid capital gains tax in future you will be hit with Spain's 'Exit Taxation'. You will be taxed on unrealized gains in your stock portfolio at 23%. However if you move to another EU country you will only need to declare and be taxed on gains if you sell within 10 years or then move outside EU...lol. Still a long time to be watched by home country.

Best to move now to a country with no capital gains if you intend to hold and keep the stock portfolio without trading in and out of positions or put in an offshore structure depending on how offshore structures are treated in your home country.

 

[RGRG]

A lot depends on your current country of residency and its tax rules. For example if you lived in Spain and had a current portfolio of over 4m euros if you tried to leave Spain to avoid capital gains tax in future you will be hit with Spain's 'Exit Taxation'. You will be taxed on unrealized gains in your stock portfolio at 23%. However if you move to another EU country you will only need to declare and be taxed on gains if you sell within 10 years or then move outside EU...lol. Still a long time to be watched by home country.

Best to move now to a country with no capital gains if you intend to hold and keep the stock portfolio without trading in and out of positions or put in an offshore structure depending on how offshore structures are treated in your home country.

Martin... I've been reading your comments in many different threats & topics, its nice you share all experience and knowledge with others.

I have been reading so much that idk what to do, all this Proxy Residence, DUBAI residency w/bank account and 0% tax strategy, USA LLC for investment strategies tax free for non-residents, Georgia TBC account. Andorra 10% tax.

Perhaps you can give me some insides on my scenario below ( THE plan still under development, not there yet.)

I'm thinking about moving to Spain with family (coming from Mexico) (final goal for us is to get the Nationality after the 2yrs period)

My general plan is to set up an offshore account in a SAFE country focused on investment strategies and wealth management (DUBAI), I will be using this account ONLY for Long term compound interest investments, Dividend based investments and Short term investing ( ETFs / VWRL / REITs.. etc.. anything that generate passive income, looking at 8-10% p/year) I will be declaring my accounts and all sources of income, as well as filling my taxes every year in Spain, paying taxes as per below:

-Under Spain Tax Code a Resident has to pay 21% tax for income obtained from interest, investments or dividends, when less than <EU$50k... I have no problem with paying this tax. (However the $50k represents ONLY 30% of the total passive generated income)
-The other 70% will stay invested (thus, is not income). In order to take advantage of the following tax code: under Spain Tax Code, taxes can be deferred on Dividends or Interest that are NOT liquidated and immediately put back into the principal, such a Compounded Interest Investments. Thus, there are no taxes to be paid here (yet), until you actually take money from your investment and put it in your bank. Meaning it can remain invested & compounding/growing without paying taxes on it. Obviously I will be declaring my bank accounts and filing the taxes on time every year and living a normal live under the rules.

1. Do you think this scheme will work for this scenario?
2. Which strategy you consider best for a long term investment 8-10% gains p/year. (compounding)? Withdrawing only $50k p/year
3. Based on your experience and taking in consideration this scenario? Do you recommend any better strategy? (taking into account that family is in the equation, paying 21% tax is OK for me, NOT MORE than this%)

*Taking the Residency and Living in Dubai with Family to enjoy the 0% taxes could be a possibility, but I rather leave this scenario as the 2nd option, since Spain checks all the boxes (language, culture, live style, weather), and if my strategy is validated, I would be paying 10k per year in taxes (minus deductions, insurance, schooling, medicals etc. could be 7-8k per year) which I'm OK with that amount.
*I will need an exit strategy, but that will be in the future for whenever I want to liquidate my entire portfolio (once outside Spain), however, since we are a young family, we are talking about 20years from now (which means we can leave the investment compounding for that time frame, withdrawing only 50k per year/paying only 21% on taxes p/year while keeping the rest of the passive generated income as and addition to the principal to continue) ( I just read about the 'exit tax' in Spain)
*It scares me to read comments here like: "stay away from EU & Spain" "EU tax hell'.. It might be all true, but if you become wealthy with clean money in Mexico, believe me, you are better off in another part of the world, and if this works, living in Spain paying 10k in taxes per year sounds more like a haven for me.

Really appreciate your inputs and recommendations and thanks again for sharing knowledge, experiences and taking the time to read and write... truly remarkable.

 

[uplana]

If you appreciate the answer he gave you a LIKE would be in place

Best to move now to a country with no capital gains if you intend to hold and keep the stock portfolio without trading in and out of positions or put in an offshore structure depending on how offshore structures are treated in your home country.

I agree, if you want to sleep well and good, you have to relocate.

 

[Martin Everson]

1. Do you think this scheme will work for this scenario?

Yes. If you have a portfolio that generates income then your tax will only ever be between 19% to 26% as of 2021 which is fair taxation.

2. Which strategy you consider best for a long term investment 8-10% gains p/year. (compounding)? Withdrawing only $50k p/year

If you can compound safely 8-10% a year and keep that discipline then thats a good strategy.

3. Based on your experience and taking in consideration this scenario? Do you recommend any better strategy? (taking into account that family is in the equation, paying 21% tax is OK for me, NOT MORE than this%)

Keep in mind Spanish tax laws change like the weather. 21% is only up to 50k. Then you got 50k-200k @ 23% and now 200k+ @ 26% and who knows what over next years. Then unless you live in Madrid (no wealth tax) wealth tax will start to bite as your money grows if you live in Andalusia region especially.

*I will need an exit strategy, but that will be in the future for whenever I want to liquidate my entire portfolio (once outside Spain), however, since we are a young family, we are talking about 20years from now (which means we can leave the investment compounding for that time frame, withdrawing only 50k per year/paying only 21% on taxes p/year while keeping the rest of the passive generated income as and addition to the principal to continue) ( I just read about the 'exit tax' in Spain)

The exit taxation rate could be brutal in 20 years time. Especially in a country like Spain. But it is not crazy with likelyhood most you will pay will be in 20's fingers crossed.

But to be straight with you, you will have a good lifestyle in Spain with family if you earn 50k in investment income a year and pay 21% tax rate. You will be living far better than most people if you can live somewhere cheap. You won't get the same lifestyle or enjoyment living in Dubai and it will cost you far more as a family for everything.

 

[RGRG]

Yes. If you have a portfolio that generates income then your tax will only ever be between 19% to 26% as of 2021 which is fair taxation.



If you can compound safely 8-10% a year and keep that discipline then thats a good strategy.



Keep in mind Spanish tax laws change like the weather. 21% is only up to 50k. Then you got 50k-200k @ 23% and now 200k+ @ 26% and who knows what over next years. Then unless you live in Madrid (no wealth tax) wealth tax will start to bite as your money grows if you live in Andalusia region especially.



The exit taxation rate could be brutal in 20 years time. Especially in a country like Spain. But it is not crazy with likely hood most you will be will in in 20's fingers crossed.

But to be straight with you, you will have a good lifestyle in Spain with family if you earn 50k in investment income a year and pay 21% tax rate. You will be living far better than most people if you can live somewhere cheap. You won't get the same lifestyle or enjoyment living in Dubai and it will cost you far more as a family for everything.

Really appreciate your inputs.

Glad to hear that at least on paper the 50k/21% strategy is valid and could work.

And Yes, Spain tick all the boxes for us coming from Mex, taxes are similar (Mexico copy/paste whatever other countries do) however Spain being a more develop country and a EU country has the means to f**k you up while in Mex still ways to... navigate...

The end goal is to enjoy life and family in a nice place, with good weather, travel the world, do your hobbies and pay tax on what is fair (for me 21%) and not 40/50% of all your hard earn money.