- Tax exile
A tax exile is one who chooses to leave a country and instead to reside in a foreign nation or jurisdiction because personal
taxes there are appreciably lower or even nil. Going into tax exile is a means of tax mitigation or avoidance.
In most countries one becomes liable to be taxed in that country if one is resident there. For taxation purposes residence is often defined as spending 6 months (or some other length of time) in any one year in the country, and/or having an abiding attachment to the country, such as fixed property.
UK lawa person is "tax resident" if that person visits the country for 183 days or more in the tax year or for 91 days or more on average in any four consecutive tax years. [http://www.hmrc.gov.uk/pdfs/ir20.htm]
Internal Revenue Code, the income of a U.S. citizen is taxable without regard to the citizen's place of residence, and, significantly, without regard to where the income is earned or produced. Hence, a US citizen can only eliminate his tax liability by both moving abroad and renouncing citizenship.
The process of renunciation requires the US citizen to appear at a foreign US embassy or consulate, prove that another citizenship has already been obtained (so that the renunciation will not make one a
stateless person), and sign various documents which basically state that you are of good mental health, acting without force or duress, and realize that the renunciation is irrevocable. The State Department then reviews the documentation and may decide to permanently bar the person from entering the US - even for visits. This decision is based upon whether or not State decides that the person renouncing is or is not doing so for tax reasons alone. For the purposes of the IRS, the effective date of the renunciation becomes the final day that US income taxes are due - assuming that all US assets are liquidated and have left US jurisdiction.
An immigrant who has been granted permanent resident status in the U.S. is generally treated as a citizen for tax purposes. An immigrant not legally admitted for permanent residence (such as a
guest worker) becomes liable for U.S. taxes if he spends more than 122 days in the year in the United States.
The US tax law, at the state and federal level -- broadly speaking -- only tolerates Americans taking money outside the US. As long as money taken outside the US is never brought back into the US there is no violation of the law. It is broadly understood that Americans can use corporations or trusts to cover moving money outside the US, providing that said corporations or trusts are not based in nations that would raise suspicion.
Broadly speaking, the US taxation rules encourage people to move their assets offshore -- and to retire offshore. This creates a permanent outflow of
USDinto other currency zones.
Famous tax exiles
Noel Cowardlived in Jamaicaand Switzerland
Ronnie Corbettliving in Australia
Sean Conneryand Shakiraliving in the Bahamas
Paula Radcliffe, David Coulthard, Jenson Button, Roger Moore, Ringo Starr, Wafic Said, Ken Batesand Julian Lennonin Monaco
Peter Ebdonliving in the United Arab Emirates
Stelios Haji-Ioannouwho was quoted as saying: "I have no UK income to be taxed in the UK." Source: David Leigh, Monday, July 10, 2006, The Guardian.
Mick Jagger(and at one point in the early 1970s, the rest of the Rolling Stonesas well)
Led Zeppelinliving in Malibuand Jersey
Mick Fleetwoodliving in California
Michael Schumacher, Kimi Räikkönen, Fernando Alonso, Lewis Hamilton, Phil Collins, Boris Becker, Tina Turner, Ingvar Kampradand Shania Twainliving in Switzerland
Ralf Schumacherliving in Austria
Sir Richard BransonUK resident living in British Virgin IslandsFact|date=August 2008
Douglas Adamsdid a lot of traveling to avoid tax problems, eventually settling in Santa Barbara, California
Ozzy Osbourneliving in Beverly Hills, CAand Florida
Tony Ryanliving in Monte Carlo
Freddie Mercurylived in Munichduring the late 1970s then in New York Cityduring the early 1980s
* Pat Rafter, living in
K. C. Irvingowner of most media in the Canadian province of New Brunswick(lived in Bermuda from the 1970s until his death in the 1990s. Willed his empire to his sons on the condition that they become non-residents of Canada for tax avoidance).
Spice Girls, who spent enough time away from the UK during their Spiceworld Tourto mean they were tax exempt, reportedly saving them over £1m each.
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