I don’t like paying tax… I mean I understand the logistics of it and why you should pay tax, especially if you’re a resident of a country. But as I’ve mentioned a few times on this blog, it is my goal to be location independent with my partner and travel the world and we’re leaving in two months. I feel like, if we’re traveling the world, paying for our own insurance (comprehensive travel insurance that includes medical coverage) then why should we pay tax while we’re not here?
If I make my target of $20,000 for this month, which is looking a tiny bit unlikely, my month’s tax bill will be around $7,000. That is a pretty big sum of money and if you factor it as an annual figure, it starts to get pretty huge. I would much, much, much prefer to keep that money in the bank and I think I’ve figured out a way this is possible.
When we leave New Zealand, we can apply to be non-tax residents. There’s a form you have to fill it and the criteria is being out of the country for a certain number of days and proving you do not have an enduring relationship with New Zealand. We might run into problems here as we both have student loans. My original plan with my student loan was to pay it back as slowly as possible, but the student loan might be considered an enduring relationship with New Zealand, in which case I’ll be dramatically changing my approach and paying it off as quickly as possible. Bare in mind that around 4-5 months of tax savings would completely wipe my loan for me, so getting it paid off sooner than later is a big help.
The other thing that would be an enduring relationship with New Zealand is my car, which I was thinking about keeping but realistically might be better to sell or to gift to my dad. I’m undecided about that at this stage, but have two months to figure it out.
The final issue I might run into is my bank accounts and the fact I have credit cards in New Zealand. I am sure I have a great credit history, but this is something we’ll have to see.
What I’m Going to do to Pay No Taxes LEGALLY:
1) Apply to be a non-tax resident as soon as I leave the country
They’ll look at my loan, bank accounts and then they’ll make a decision whether I’m a tax resident or not. I’m already planning to open a bank account in another country and will move all my “business” banking to that account
2) Open up a bank account in UAE – a country that does not charge ANY tax on international income.
I have already looked into this and it is possible to open up a bank account with a debit card in Dubai with only a visitor’s visa. I can pick the card up in store, it should take about a week to process, but if I have left before it’s finalised they can post it to me elsewhere in Europe.
3) Spend the longest part of any year in a country that doesn’t charge income tax on international earnings.
As I wont be a resident anywhere, i.e. staying long enough to be a resident or applying for a resident visa rather than just being on a tourist visa, I wont actually be liable for tax anywhere, but I think by spending the largest portion of the year in a country that doesn’t charge tax on international earnings is a smart move, just as a safety net. Places that we are looking at that would be appropriate for this are: Panama, Costa Rica, Guatemala, Malaysia, Singapore, Hong Kong and the UAE.
We were originally looking to move to Panama and set up a LLC there for residency, but I kind of want the “easiest” way to do this. There’s a lot of advantages to us basing ourselves in Asia, as it’s fairly close to New Zealand and very, very cheap. However, I’ve not been to central America and from the photos it does look amazing, so we might just end up happy there anyway. Learning Spanish is a pretty big bonus for us!
The Downsides to being a Non-Tax Resident
Limited Time in NZ
My father’s pretty sick and probably doesn’t have very long left, so I feel a bit conflicted about moving overseas and limiting the amount of time I can spend in the country knowing his health is on the down. There’s also a court case that will be happening some time next year that I would like to be present for. In a 364 day period I only get 39 days in New Zealand – not sure if that’s just for the first year or every year – which is a pretty restrictive, especially considering the circumstances. However, I’m at the age where I need to start thinking about the future too and the opportunity to save both mine and Ben’s tax money is pretty appealing. Realistically we could save $100,000 a year if we both worked hard in tax savings alone. This is a crazy amount of money to me and I know money isn’t everything, but I think my dad knowing I am getting a jump start in life would mean a lot to him.
Paying Back my Student Loan Fast
I didn’t really want to do this, but I think it’s the best shot I have at becoming a non-tax resident and it’s probably best for me in the long term, too.
No Investing in New Zealand
If I bought a rental property in New Zealand, it would probably make me a tax resident as I would be earning an income from the rent and I would have a permanent place of abode here, which is one of the criteria for an enduring relationship with the country. Likewise, I wont be investing in mutual funds as any profits are taxable, once again making me a tax resident. It’s a bit of a shame as this is something I was pretty excited about, but I think in the long run not paying tax will have much better returns.
So hopefully this all works out… this is something I’ll keep you guys updated with as I think it’s going to be a long process. I’m a bit nervous about the logistics of opening up a UAE bank account, but that’s probably only because it’s something new… and different. Hopefully the process goes smoothly and I can stop paying tax very, very soon.
Have you ever considered being location independent so you could pay no tax? Would you like a location independent lifestyle or are you happy staying put? Let me know in the comments below.