Taxes and Tax Residency

Argentina to impose 30% on non-declared foreign assets. What’s the solution?

5/6/2022 8:00:00 AM
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Mundo encourages and helps business people all around the world to legally protect their wealth in perpetuity. As we pointed out several times, asset protection is our commitment as a path towards ultimate freedom. We offer several services including family office accounting, trust services, corporate, and banking.

However, the keyword in this matter is ‘legally’. Let’s not forget that tax evasion, besides being morally wrong, can lead you to the absolute opposite of freedom. This is great debt and even jail. 

Tax planning for high-net-worth individuals requires great skills and commitment. A good asset protection strategy lies in the ability to reduce taxes legally and effectively and for this, the best way is to shift tax residency to another jurisdiction. 

Argentina to pay the debt to the IMF through extraordinary taxation 

Towards the end of March, a new law project has been put forward in Argentina. It seems that the government wants a share of what they consider has been stolen when the arrangement with the IMF was set in motion. 

Thus, only one month ago, senators from the officialism presented a project that consists of imposing extraordinary taxation on those holding non-declared assets abroad. The payment would have to be made in dollars and the funds destined to pay the debt with the said institution. 

Payments will reach the percentage of 20% during the first collecting period and 35% if done later. The senators warned that the non-observance of this law may result in jail. Nonetheless, it’s worth noting that such a strict measure is meant to reach those taxpayers that have illegally shifted their tax residency to another country when their main interests remain in Argentina. 

What’s the solution?

So, what do we learn from this? We can safely narrow it down to two points:

  • One must never depend on one single government.
  • One must never commit fraud or skip the law to reduce taxes. 

The solution to the first point is a word that everyone in the asset management business loves: ‘diversification’. In the same way you diversify an investment portfolio into different types of assets, you must ‘diversify your jurisdictions’. 

No matter how wealthy you are or what assets you have: you must never rely on one single government. Luckily, many states offer fast-track citizenship applications usually in exchange for an investment which can mean almost half a million or simply USD100,000 like for example, in some Caribbean islands.

We have discussed this topic thoroughly since Mundo was created, and this is why citizenship is the first step in our Forever Free strategy. 

By having a second passport (a third and a fourth are also recommended) you have a second home to go to if:

  • Your government decides to impose crazy taxation.
  • Your government imposes movement restrictions. 
  • Your government confiscates your passport. 
  • Your government freezes domestic assets.

But let's not forget that having a second passport does not automatically make you a tax resident, let alone relieve you from paying taxes in your home country, which takes us to the second point: tax residency. 

Shifting your tax residency to a different country can be beneficial. Usually, Mundo recommends countries with territorial taxation for such a strategy. In general, these are low-tax jurisdictions with plenty of tax incentives like double taxation agreements, credits, and exemptions for some types of activities. These flexible tax conditions go hand-in-hand with business incentives such as free zones, free repatriation of capital, etc.

However, let’s not forget our keyword: ‘legally’. For a tax residency to be legal, you must meet certain requirements. Although they may vary depending on the jurisdiction, they mainly focus on what is called the ‘center of interest’.

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How to establish tax residency legally and avoid jail penalties and legal issues in the future 

You can only get tax residency in a country if you prove that you have meaningful connections. Your interests must be closely related to the country. This means any of the following:

  • Having your children go to school in the country.
  • Living in the country for most of the year (usually, 6 months is the minimum).
  • Having an active business in the country. 
  • Having property (and preferably living in this property) in the country. 
  • Having family, relatives, and friends in the country. 

This can be proven by showing utility bills in your name, receipts from day-to-day expenses like gas or groceries, a property title, etc. 

In the same way, you can’t spend more than 6 months in another country because this may make you tax liable there. Let’s take the example of Argentina. Imagine an Argentinian businessperson who shifts their tax residency to Panama. This is a good option for him or her. It has the same language, similar culture, and is relatively close. 

Panama tax residency: a sample case

So, the person moves to Panama, buys Panama real estate, puts his or her children to school there, starts a business, and finally manages to get a Panama tax residency certificate. If the said person were to visit Argentina (home country) and overstay the 6-month period, that would make them taxable there too. 

All in all, if you want to avoid jail or unexpected extraordinary taxes, you need to do things right. Mundo is proud of its team in Panama who have been present there for several years. Our experts can assist you with everything you need when establishing tax residency including getting a permanent visa, establishing a business, and even helping you get settled in your new home. 

Panama is the ideal tax residency alternative for Americans due to its proximity, business friendliness, and territorial taxation. For other regions, we can offer options like Portugal, Singapore, Nevis, Montenegro, And Cyprus.

Our team has wide experience in everything related to tax planning for high-net-worth individuals. Contact our experts now and start your journey towards ultimate freedom!

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