Your country of citizenship may tax you on worldwide income, income earned in country, or a both.
Lawrence is a UK citizen, a Uruguay resident, and a “nonresident” for UK tax.
The UK only taxes income earned in the UK for nonresidents.
First Hurdle – Citizenship Country
As long as @lawrencekingyo stays out of the UK for all but 46 days a year, he should keep his UK tax nonresident status and not owe any income tax on any income he earns outside of the UK (presumably all of his income).
Hurdle cleared!
Next Hurdle - Resident Country
If you aren’t taxed where you have citizenship, it’s probably because you live in another country.
It would be great to not get taxed in your country of residence either.
Uruguay only taxes Uruguay-sourced income, nothing earned outside.
Next Hurdle - Resident Country (Continued)
Lawrence avoids any economic activity within Uruguay that would give him Uruguay-sourced income. Thus he pays no income tax in Uruguay.
He also needs to live there 183 days per year to maintain residency.
Next Hurdle - Resident Country (Continued)
Part of his ability to avoid Uruguay-sourced income is by earning it in a free-trade zone. Several countries have these and Uruguay has several of its own.
Hurdle cleared!
Last Hurdle - Everywhere Else
It would be a bummer to not get taxed in your country of citizenship or country of residence, but end up paying tax somewhere else.
How does Lawrence clear this hurdle?
Last Hurdle - Everywhere Else
This is country by country, but in general you cannot:
1) Have a place of business in country. 2) Have employees/agents working for you in country
You also don’t want to visit for more than 183 days/year and risk tripping residency.
Last Hurdle - Everywhere Else (Continued)
As long as @lawrencekingyo spends 183 days/year in Uruguay, he is spending less than that per year in other countries and generally avoids residency in other countries.
He also has to avoid a business presence in other countries.
Last Hurdle - Everywhere Else (Continued)
Assume this as he is making sales on the internet rather than operating.
As long as he does the above, he’s generally free to travel to all the countries he makes money in and not create income tax for himself.
Hurdle Cleared!
Benefit of no Income Tax
What is the benefit of not paying income tax? To @lawrencekingyo it is 45% of the profits he would be paying if he still lived in the UK.
That's HUGE!
What could you do if you kept 45% more of your profits?!
So what about YOU?
Are YOU tired of paying income tax?
US: 30% to 50%
Canada: 30% to 60%
UK: 45%
Australia: 45%
Others: Plenty of tax!
Like Lawrence, can you find a way to legally avoid it?
If you want to substantially reduce your income tax, saving $1,000s, buy my guide TODAY to start saving immediately and before the prices goes up!
Have you ever wondered what an S Corp actually does for you?
***Thread***
2) First, Self-Employment Tax (“SE Tax”)
If you are self employed - entity or not - and have no other sources of income, you will be taxed 15.3% of your profits to $137,700 of profit and 2.9% profits after $137,700.
It approximates payroll tax.
3) For example, let's say your business profits $150k, either as a sole proprietor or single member LLC.
In this example your SE Tax would be approx. $21,425.
When do I NEED to form and LLC for my business or side hustle?
***Thread***
1) Upfront, you have to ask this question from multiple perspectives.
There is an answer for legal purposes.
There is an answer for tax purposes.
There may be an answer for commercial purposes.
I'm going to address the tax aspect directly.
2) From a tax perspective, if you are the only owner (called a "Member" in an LLC), the IRS does not see the LLC as separate and distinct from you. It is "disregarded" from you for tax so it doesn't matter.
(You can elect to regard it, but that's another topic.)
Someone that will not only do a nice job on filing your taxes, but will find you all the LOOPHOLES.
***Thread***
Ask people similar to you who they use and if they are happy with the service.
If that doesn't work, google "[your city] + CPA.
While it's not necessary to have a local accountant you can meet with in person, it has it's benefits.
Visit some websites and get a feel.
Pick a few that you think you want to work with and call them.
Here's a script,
"I am in the business of [your operations], making about [your expected revenue] this year, and am looking for someone to help me with my books and taxes. Are you taking new clients?"
FACT: You LOSE at least 1/3 of your income to TAX! ...and if you are making a lot of money, it's over 1/2!!!
Think what you could do with that money, even just some of it?
If you could just take 10% back, what would that mean to your life?
If invested properly, could you retire 10 years earlier and enjoy more of the good life? What would you do if you could stop working 10 years earlier?
What would your vacations look like if you had 10% more of your income?
That's like going from a hotel inland to staying in the biggest house on the beach!
Maybe you would put it all in dividend stocks or real estate and enjoy the financial security of knowing you had regular dividends and rents coming in.