The WORST Tax System In The World (HOW TO AVOID)

Summary

This video by First Class Citizen explores the global landscape of tax systems, highlighting the inefficiency and expense of European tax residencies. Through discussing real-life examples, the video investigates viable methods to avoid exorbitant taxes legally, like setting up overseas businesses, exploiting specific laws like Spain’s Beckham Law, and utilizing trust structures. The video emphasizes flexibility in living arrangements and smart financial planning to mitigate tax burdens while maintaining citizenship.

Highlights

• European countries can have tax brackets as high as 55.9%, making them costly places to live. 🇪🇺
• Flexibility in living arrangements allows individuals to avoid high taxes by spending less time in a single country. 🚶‍♂️
• Spain offers the Beckham Law, which provides tax breaks for newcomers for a specified period, benefiting foreign investors. 🇪🇸
• Setting up companies in countries like Bulgaria or Cyprus can provide tax relief while maintaining Spanish residency. 🏢
• Trusts allow for control over assets without direct ownership, providing legal ways to enjoy assets tax-free. 🏦

Key Takeaways

• European tax systems, particularly in Nordic countries, are often inefficient and expensive, placing individuals in high tax brackets early. 🌍
• Strategies to avoid high taxes include moving overseas, being a perpetual traveler, or setting up foreign businesses to create tax benefits. ✈️
• Leveraging specific laws, like Spain's Beckham Law, can help mitigate tax liabilities on foreign investments for a limited time. 📜
• Creating a strong external business presence can shield individuals from heavy taxes while maintaining legality. 🏢
• The use of trusts can offer privacy, asset protection, and tax efficiency by separating personal and business assets. 🔐

Overview

Navigating the world's tax systems can be a daunting task, especially with European countries leading in high tax rates. First Class Citizen opens up a discussion on how these tax systems burden individuals by quickly placing them into high tax brackets. The focus here is on regions like the Nordic countries and Spain, where high taxes can significantly impact finances.

The video dives into creative solutions for reducing tax liabilities while maintaining one's lifestyle and citizenship. From becoming a perpetual traveler to leveraging legal loopholes like Spain’s Beckham Law, various strategies are presented. These methods require individuals to balance family life, business interests, and tax efficiency, providing a nuanced approach to financial planning.

One of the notable strategies discussed is the use of trust structures. By forming trusts, individuals can separate ownership from control, shielding their assets and maintaining privacy. This method, combined with international business setups, offers a layered approach to managing tax obligations while preserving wealth and anonymity.

Chapters

• 00:00 - 00:30: Introduction to European Tax Residency The chapter 'Introduction to European Tax Residency' discusses the inefficiencies and high costs associated with maintaining a European tax residency while residing in the same country. The author has researched various tax structures globally and identified European tax residency as one of the most expensive and inefficient options. They highlight how European countries like Spain, Norway, the Netherlands, Austria, and Denmark impose high tax rates on individuals, even as they start earning moderate incomes. For instance, in Spain, earning between 60,000 to 80,000 euros places a person in the 47% tax bracket, and some Nordic countries and others can approach tax rates as high as 55%.
• 00:30 - 01:00: Challenges of Moving Out of High-Tax Countries The chapter addresses the issues faced by individuals and families wanting to move out of high-tax countries, such as the one with a 55.9% tax rate, without losing their citizenship. It includes a case study of a client who faces difficulties due to having children in school in Marbella, highlighting the real-world challenges of relocating in the face of family and business ties.
• 01:00 - 01:30: Perpetual Traveler Strategy The chapter discusses the challenges and strategies associated with not paying taxes while living in Spain. It introduces the concept of a 'Perpetual Traveler' who spends less than six months in any given country to avoid establishing a tax residency. The chapter provides a potential solution involving setting up a tax residency in countries like Panama, Paraguay, or Dubai by establishing an LLC or LLP, which can simplify matters for those who are frequently traveling. It also advises considering whether this structure is best for those living full-time in one country or if flexibility allows for a more nomadic lifestyle.
• 01:30 - 02:00: Alternative Education and Flexible Living The chapter discusses the benefits and flexibility of alternative education practices, particularly through the use of tutors instead of traditional schooling. It highlights the story of a wealthy family that utilizes tutors in two different countries for six months each year. Their children thrive in this setting, forming friendships in both locations and becoming multilingual at a young age, demonstrating the effective and adaptable nature of this educational approach for the family.
• 02:00 - 02:30: Center of Interest Strategy The chapter "Center of Interest Strategy" discusses strategies for establishing a strong Center of Interest outside one's home country to achieve greater stability. It provides an example of creating a company in countries like Bulgaria, Cyprus, or Estonia to handle certain business activities such as invoicing marketing expenses for a company based in Spain. The strategy involves not just having a company on paper but setting up an operational company in another country that provides legitimate services to the original company.
• 02:30 - 03:00: Creating a Legal Structure Abroad In this chapter, the discussion revolves around creating a legal business structure abroad to avoid accusations of tax evasion. It suggests establishing a legitimate business presence in another country, like Cyprus, Estonia, or Bulgaria, including setting up actual offices, obtaining a legal address, and hiring employees. This setup helps establish a 'solid Center of Interest,' which makes the business operations appear legitimate and not just a means to evade taxes. This chapter emphasizes the importance of having a tangible and legal business structure to argue for legitimate business presence rather than engaging in illegal tax practices.
• 03:00 - 03:30: Beckham Law Benefits This chapter discusses the Beckham Law and its benefits for individuals moving to Spain. The law allows new residents to pay 0% taxes on dividends and capital gains for the first year and five additional years if they don't make a profit in their Spanish company or personally. This is geared towards those moving to Spain or other European countries with similar tax incentives.
• 03:30 - 04:00: Trust Structure Overview This chapter discusses the strategy of using real estate investments outside of Spain as a financial tactic for living in Spain. It presents the scenario of residing in Spain for five to six years and contemplating future decisions thereafter, including potentially acquiring Spanish citizenship. It highlights a method to obtain a Spanish passport by first obtaining citizenship in a Latin American country, such as Mexico, which allows for residency in Spain for two years and ultimately achieving citizenship without the obligation of paying taxes during this period.
• 04:00 - 04:30: Advantages of Trusts and Asset Protection The chapter discusses the advantages of utilizing trusts for asset protection. It outlines the concept of a trust structure, emphasizing that the individual creating the trust is not the owner, which provides anonymity and a separation of personal liability. The chapter advises on the importance of appointing trustworthy nominees or hiring a reputable company to manage the trust. This setup can help in distancing oneself from the trust, thus offering protective benefits as the assets are legally not owned by the individual, which can also affect how expenses related to the trust are handled.
• 04:30 - 05:00: Conclusion and Call to Action This chapter provides insights into the strategic use of trusts in asset management, focusing on the philosophy of 'owning nothing and controlling everything.' It explores how trusts can be utilized to enjoy assets like houses and cars without direct ownership. The chapter highlights the diversity within the world of trusts, mentioning 13 different types designed for purposes such as asset protection, estate planning, and tax reduction. It stresses the importance of choosing the right jurisdiction, type of trust, and contract terms, likening the choice to selecting a tailored suit.

The WORST Tax System In The World (HOW TO AVOID) Transcription

• 00:00 - 00:30 over the last two years I've been researching the best most optimal tax structures in the world and I can tell you the most expensive inefficient and probably worst of all it's an European tax residency while you're living in the same country why because as you start making a little bit of money they already consider you're like super rich example in Spain as you start making 60,000 80,000 you already are boom 47% tax bracket but Spain is not even the worst you have the noric countries you have the Netherlands you have Austria you have Denmark close to 55% the
• 00:30 - 01:00 highest in Europe actually it's 55.9% in taxes and it's ridiculous to me but the question is how do you get out of there you know you know that the tax situation is not good but how do you move out of those tax Hells without losing the citizenship especially if you have a family what are you going to do if you have the kids in school for example going School in marbela like one of our clients he says Miguel I have the rent I have the business I have my wife and the kidss going to school in Mar
• 01:00 - 01:30 how am I supposed not pay taxes in Spain and that's a great question and it's one of the most difficult puzzles that we face because if you are a Perpetual traveler it's so easy right you spend less than six months in any country parag or Panama or Dubai tax residency with an LLC or an LLP boom done right but what you do in your situation what I usually advise is two things okay number one it's well consider if that is the best structure you want living full-time in one country let say more than 6 months 10 11 12 months a year or if you are flexible enough that you want to
• 01:30 - 02:00 educate your children instead of going to Traditional School with tutors we have one of our wealthiest Clans that chose that path and he's so happy the tutors in one country 6 months a year tutors in another country 6 months a year they children are not facing any issues they have friends in both countries different languages they are like sponges they are learning six Languages by the time they are not even six years old and it's a way that works for him for the wife for the family
• 02:00 - 02:30 right but if it does not work for you and you prefer more stability or just any one country I would say you have a couple options first one is creting a strong Center of Interest outside of the country let's say that you are in Spain what if you create a company in Bulgaria or Cyprus or Estonia right and those companies invoice marketing expense or any service that they provide to your Spanish company so you have AO limitada SL in Spain and then you have another company somewhere else but not just on paper like you create the company and
• 02:30 - 03:00 then you say oh there's a marketing expense for $20,000 a month or half a million dollars a month depending on you know how much you're generating because then Spain is going to smell that it's going to say bro you're just doing illegal tax evasion right so what you want to do is create a solid Center of Interest like literally with offices with a legal address there registered with employees say five six employees in Cyprus Estonia Bulgaria or any other jurisdiction and with that solid structure there then you can argue hey
• 03:00 - 03:30 no I literally have a company that does this this this in this other place and that's why I have expenses that if you don't make profit in the Spanish company or yourself personally then you don't have to pay taxes on those and actually the cool thing about Spain if you haven't mooved to Spain or any European country but let's say you move you want to move to Spain you can ad there to the Beckham law the Beckham law allows you for the first year and five more to pay 0% taxes on dividends and capital gains
• 03:30 - 04:00 from for example real estate Investments that you do outside of Spain so it's a nice way to live in Spain for example five six years and then you'll decide in six years what you're going to do and maybe you even collected the passport because if you saw other videos and you think a little bit you can get this Spanish passport with preferred nationality which means that if you become Citizen First of a Latin American country could be for example Mexico then you can move to Spain for 2 years and get the Spanish citizenship and you can do that without paying tax is adhering
• 04:00 - 04:30 to the Beckham BL I give you one there's another one which is the trust structure I have another video I prefer that you watch that that one because it's going to give you a better context of what it's all about but to summarize it here is that you create a trust and you are not the owner of the trust you can put nominees of course you need people that you trust or you need to hire a good company that is reputable that can represent the trust for you so depending on how Anonymous you want to be you can even withdraw yourself from anything related to that trust therefore because it's not yours all the expens go through
• 04:30 - 05:00 that trust and then that trust buys assets that you get to enjoy the trust bought me a house the trust bought me a car whatever you want literally like a Rox and then you get to use it but it's not yours so that's the ultimate Way of owning nothing and controlling everything and also inside the world of trust there are 13 different types of trust so one for asset protection for State planning for reducing taxes it's choosing the jurisdiction choosing the type of trust and then choosing exactly what the contract of the trust will say it's like a suit okay you can go to the shop and get it cheap $80 suit $100 suit
• 05:00 - 05:30 or you can have a tailored one that is what we recommend when you start having assets you want to protect and things that you don't want to get taxed on so if you want to know more about this ghost structure that we call it at first class Citizen and if you want to take action and directly have this plan implemented for you then click the link down below we call with our team but if you need more information first you can watch it in this video right here