#610 – The Expat Files: Colombia’s Changing Landscape and Legal Strategies for Expats

Automatically transcribed from the original recording; names and wording may contain errors.

[00:00] South of the border down Mexico way That's where I fell in love when the stars above came up to play and now as I wonder Hello there all you expat wannabes I'm Johnny Mueller and you're listening to the expat files living in Latin America the show that tells you just what it's like to live Work play and or retire down here in Latin America It's a mix of the good the bad the ugly and the great and it's all right here. So let's get started Well, you know with all the emails I get about people wanting to move to Colombia and all the talk about it being the place to go the next Costa Rica and all That and since lately I've been tossing some cold water on those ideas and people are kind of upset about what I've been saying

[00:46] They think maybe I've got something against Colombia. Well, I don't I really used to love the place In fact, I had or had some nice property in Cartagena, but Colombia is off my radar now And I don't recommend it anymore Oh, it's a nice place to visit our right for a few weeks Anyway, and you can always find some great places in any land country But the problem is the Colombian government man have things changed now Of course, all Latin politicians are corrupt lard ass pussbags You know of any first-world ones who aren't but the difference is in those places off the gringo tourist trail We are not bothered one bit by that Yep, the good life keeps going on for us and we have very few Confrontations with those lard ass government types except in the very beginning the first few stages when we're out to get our residency

[01:31] Drivers license opening a legit brick-and-mortar business stuff like that And even when you open a business you're only in for that government crap for about the first month after that They completely leave you alone. Of course, I'm referring to places that are off the normal gringo tourist trail However in places where gringos have landed the rules and regs get rather stiff and so do the fines etc Because they know the gringos can afford it now Columbia all of a sudden is on the gringo tourist trail gringo is living there now have reason to worry In fact you longtime listeners know I've read some reports and have gone through in some detail How the Colombian government is starting to tax the hell out of their citizens and that means you too if you're living there However, that's just not the case in places off the gringo tourist real sure all Latin countries tax

[02:18] In fact, some Latin countries have a tax structure that they copied directly from the US So it looks bad when you get down there. You think what I'm jumping into the same putrid bureaucratic toilet Why move there? But as you'll find out when you get down here and get boots on the ground No one but morons and idiots actually pay those taxes not at those listed rates You see when you look up the tax tables for various countries on the internet anyway for example some Latin countries have a maximum 29 or 30 percent personal income tax and when you're up there in Seattle or Cleveland reading about that you're Thinking why do I want to move there? The reality is no one in that country actually pays that rate people who should be in that 29 or 30 percent tax bracket They pay at most five percent and if you're wondering how can that be?

[03:04] Well, it's because Latin countries off the tourist trail again Do not have tax enforcement agencies like the IRS They don't beat your door down call for big-time audits throw tax evaders in jail You never see that their government tax collection services are basically toothless in most cases You're on the honor system to report what you make if you can believe that and Latin businesses don't issue 1099 forms either which is the way those IRS criminals in the US track everyone's income However, when you talk about Latin countries on the gringo tourist trail like Costa Rica Panama and now Unfortunately, Colombia they're in the active process of slapping on more taxes and beefing up the tax collection process now

[03:50] You're calling a past show. I mentioned that the countries that are off the gringo tourist trail That's about three quarters of the 20 Latin countries They have income tax corporate tax and capital gains tax most all of them do anyway except for beliefs But they collect so little with those three types of taxes that they've instituted the EVA the BAT tax The only tax that can be collected on a predictable and uniform basis That's how Latin governments with their very weak tax collection agencies make their money You don't need an IRS force with guns and battering rams if you have EVA or value-added tax In fact, you could look to Latin America to see how a flat tax would work up in the states It's so much better and easier and you could completely get rid of the wretched IRS, but that's not gonna happen

[04:36] Bringing us full circle to the case of Colombia, which is now Solidly on the gringo and European tourist trail at least in all the well-known major cities And even if you live out in the boonies where the living is nice and cheap and easy There's a new kind of tax that's hitting everyone where it really hurts Listen to this email. I just got from a listener with eight years of boots on the ground in Colombia And I'll paraphrase this a bit. It starts. Hey Johnny. I really dig your podcast I swear you must be reading my emails and my mind as for me. I left the US in 1992 at the age of 17. I'm now 42 I have five kids and I'm happily married to the same woman for a very long time. She is Colombian and I am originally from Serbia

[05:23] I was fortunate enough to join the US military and stay overseas for most of my career So I know what it's like to live in foreign cultures I'd like to mention here some of the things that you mentioned in one of your recent podcasts that is Alarmingly true and that is about the state of Colombia right now There's no secret that they are going to tax us gringos with money and businesses abroad to death All of our worldwide income will now be taxed at 33 percent. That includes my pension If you're on Social Security, yep, they'll get that too at 33% Nothing now in this country Colombia is safe from the government no matter how much those ad

[06:11] Campaigns want to pump up their paid reviews saying Colombia is one of the happiest countries in the world They'll never escape the past and the new taxation laws and because of the apathetic cops Nothing will be done either about the epidemic of motorcycle assisted robberies They just won't do anything about it. In fact, my own home was robbed by a policeman I even knew the guy I later hired a private investigator to trail him He was buying millions of pesos worth of gold on the side Then when they got the evidence on the guy the cops quickly and quietly Transferred him to another part of the country. He's still a cop

[07:00] So in spite of that, I have had a nice long eight-year run in this country with the girl of my dreams And I have our wonderful kids, too Unfortunately, if the robbers and thieves don't get you here now the real robbers That is the government will steal the rest of it But without using a gun of course and the worst part is that the US is assisting them To discover what our assets are down here Of course He's talking about the worldwide fat guy and get galos where all the banks have to report your deposits and movements to the US government Which is why by the way these days so many astute expats are going down to their friendly local Latin lawyer and opening up an essay Corporation that SA Corporation then acts like a person in the eyes of the law and can open up a bank account in the SA

[07:52] Corporation's name not you the owner of the SA Corporation. How nice convenient stealthy and anonymous, huh? We won't go into that here But we will go into that in great detail at my expat insider seminar coming up in January Don't forget there are still a few spots open. Just go to www.thenewexpat.com click on Johnny's 2017 seminar link and find out all about it and while you're at it if you come down you can pull a double whammy by applying for Permanent or temporary guatemalan residency at the same time kill two birds with one stone You can do it all with one trip down Remember guatemalan is one of the easiest and least expensive countries in Latin America in which to get your temporary or permanent Residency and there's the added bonus that you only have to visit the country one day per year to maintain that

[08:41] Residency and then after five years of permanent residency remember you might only be in a country five days during that time you can apply for a passport and Naturalization from that point on you'll have dual citizenship then if you want you can flip the bird to Uncle Sam many expats do Because from that point on you can travel the world on your guatemalan passport You won't really need that US passport anymore Not to mention to the rest of the world were ugly Americans as you probably heard these days People don't like Americans much except luckily in Latin America So if you are traveling which passport would you rather flash? That's a no-brainer, huh? Then if you want you can make that break and leave the sinking first-world ship for good in order to do that

[09:26] You do need a second passport again. All that will be thoroughly explained at my January 2017 expat insider seminar So unless you plan on going down with the ship do check it out But back to what our emailer says he goes on and says that the US is assisting the Colombian government to discover What our assets are is horrendous. This makes me want to run like hell So I have decided to pull up stakes from this formerly fine country and find a higher ground as it stands now I'll be staying 183 days per year Not a minute more because you see that's how long you can live in Colombia Without them taxing you on the money that comes from the outside

[10:12] ie your worldwide income the money they'll tax and don't deserve Anyway, Johnny love the show keep it up signed the Colombian bro fesser By the way, some of this calls for an explanation Certainly you've heard me say in previous shows that if you live out of the United States more than 330 days a year you get a hundred and one thousand five hundred dollar foreign earned income tax exemption So approximately the first hundred thousand dollars you make overseas not coming from the States is not taxed at all Again, we go over all that at this seminar It's kind of complicated But that's the exemption you get if you live outside the US over 330 days a year In other words, you can spend one month a year in the US and still get that exemption and believe me

[11:02] It is a fantastic exemption mention that paying no income taxes on the first hundred and some thousand dollars though I guess I shouldn't say that because it's your money in the first place you earned it But let's not get into that. Okay, that said many people believe that when they move out of the United States and they stay over 330 days a year they get that big tax exemption, right and it's true Except in countries like Brazil and Colombia and soon to be Argentina They too have recently passed laws to tax your worldwide income. So you're not exempt Yes, you can escape uncle Sam's tax news by leaving the United States But you'll get nailed once again if you land in Brazil, Argentina or Colombia So that's it still want to move to Colombia

[11:49] However, if you plant yourself in one of the other 17 Latin countries that don't tax worldwide income and you live there for more than 330 days a year you will get that huge US foreign income tax exemption By the way, just to muddy things up a bit more. Like I said US tax law says 330 days outside the US to get that exemption Well, there's another way to get that exemption is a bit more complicated and we do go over all of this at the seminar There is a certain legal loophole that allows you to go back and forth from your Latin country to the US at will and Still get that big tax exemption That means you might stay more than half the year in the US and still get that exemption. So how is it done? It's too complicated to go into on the show right now But it is a hundred percent legal and spelled out in US tax law

[12:35] Even though H&R block and other cookie-cutter tax preparers will never tell you about it Since most of them have never had a client living out of the country who's eligible and thus the case simply never came up Which is why they always rely on the three hundred and thirty day out of the country rule Which is not the only rule to go by anyway We'll save that discussion for our expat insider seminar in January So you get what I'm saying, right? You can legally escape US taxation on the first hundred or so thousand if you move out of the United States or Latin country or any foreign country But you're subject to the tax laws of the country that you're resonant in and in Colombia's case You're considered a resident for tax purposes if you live 183 days or more in the country So the question is what do you do if you're already living in Colombia and you've committed some resources there

[13:23] You've got a house or some land or a business whatever Well, you stay there and you get whacked for thirty three percent income tax or like our Colombian professor said in his email After 183 days you get the hell out for the rest of the year now, obviously not everyone can do that Just pick up and leave especially if you got a family However, if you got a lot of money all of this really doesn't matter does it and I'd say about 10 to 20 percent of the people Listening to this show have enough money. They think it pretty much live anywhere No matter what big brother tax rules and regulations are hit with but then there's that other 80 percent of you out there, huh? You want to live a nice first world life, but you're on a budget. Maybe even a strict budget Like maybe a thousand to sixteen hundred bucks in Social Security Well, guess what unless you're bringing in 30,000 40,000 or more a year

[14:10] You're gonna have a very hard time living a first world life as you've come to realize it if you're living in Costa Rica Colombia Panama most of Mexico and Argentina and Brazil unless you're into home-sitting and do a lot of things for yourself And if you think I'm blowing hot air about that think about Costa Rica. They just change their residency requirement. You have to have $2,500 a month income to qualify for permanent residency. That's 30 grand a year coming from the outside, right? Whereas in a country like Nicaragua Honduras Guatemala El Salvador, etc Along with a few South American countries like Bolivia, too You only have to prove a thousand bucks a year income or less to get permanent residency That should say it all right there, huh? Turns out those government slugs who are granting residency don't know much

[14:57] But they do know how much a gringo needs to live on in their country And by the way, a lot of people ask me about Brazil Brazil's a huge country almost as big as the continental US So there are many many places you can live and have a great life Except you'll be paying twice for almost all imported items stuff That's not manufactured in Brazil and even appliances manufactured their washers dryers air conditioners, etc Will be half again more than what you're used to paying up in the States or even Central America Where the same imported stuff is much cheaper by the way, most imported products and cars and electronics stuff is Slightly more expensive in Central America than what you're used to paying up in the States However, when there's a sale at any of the big stores you can usually get it for about the same price

[15:42] Which is why in the past few years I've always leaned towards Central America as the best plain B for most people on a tight budget But then the obvious question comes up if places like Brazil Argentina and Colombia Are starting to tax their citizens on worldwide income. What about the other land countries? When are they jumping on that and if they do that lessens the incentives to move there? Well, as it turns out It's all about those gluttonous governments and their ability to collect taxes and the case of Colombia with all the gringos landing and Europeans too and all the investment that's going into that country government is just salivating at the chance to tax all that money because you see Foreign income coming into the country is one thing they can monitor very closely because it has to go to a bank and land

[16:29] Somewhere in someone's account. They don't need a jack-boot type foot soldier IRS on the street knocking on doors They just make the banks report that money and or withhold the taxes For example, most Latin American governments have a capital gains tax with a loan exception being Belize and your average gringo in Latin America only sees that capital gains tax when they see their interest on their bank accounts or CDs get nailed for whatever that capital gains tax is The banks will actually deduct that amount and give it to the government So in Latin America, the capital gains tax is range anywhere from five to thirty percent on the interest earned now Let's take the example of Guatemala, which has a capital gains tax of ten percent However, you must remember that if you have a CD in a Latin American Bank

[17:17] Many of them are paying four or five even six percent interest in US dollars if you have a large enough sum Now where could you get even two percent interest in the States almost nowhere, right? So you are way ahead by having a CD in Latin America, even if you're hit for a ten percent capital gains now I know I know you're thinking me put some real money in a CD in a Latin American Bank you crazy Yeah, that would be the normal thought if you haven't had boots on the ground here but there are many many banks in Latin America that are infinitely stronger and have much more capital reserves than the seemingly safe but teetering banks you're using right now up in the States as mentioned in a previous show some of the biggest the strongest banks in Latin America are not

[18:03] Government banks, but they're owned by private consortiums of huge agricultural and mining families For example in many Latin countries some of the biggest coffee growers have gotten together and created their own bank because they don't trust government banks Do you blame them same with sugar producers now this stuff happened way back in the 40s and 50s So there are banks down here that have been around for more than a half a century That have become so big and solid that they are full-service banks for the general populace, too So with all the banks down here most countries have 20 or more How does a gringo sitting up in Philly, Milwaukee or Cleveland know which of those banks are really solid ones? You can trust your money in long term against about boots on the ground here and knowing a good honest lawyer

[18:51] Because even though there are a lot of banks of unknown quality and strength They all put on a good happy marketing face for the public, but you never really know what's going on deep inside Sound familiar that said there are always at least two or three very solid banks in any Latin country Your lawyer will absolutely know which ones are safe and which ones aren't and of course He'll be banking at the very safest ones himself, but you knew that already, right? But wait a minute the card is before the horse here How do you find a good honest lawyer so you can find out those things get the inside dope on the banks? That's very important. You know to a gringo Well, you know us trusting gringos and we come down here to Latin America We're not very good at selecting lawyers. I've watched many many gringos get ripped off that way Sad to say when I was in Costa Rica, I got scammed by one myself and most times you never even realize he's gouging you

[19:42] Or just plain crooked and I'd say the two worst ways to find a Latin lawyer is one Look on the internet from up in Cleveland thinking. Hey, I'll search out one who speaks English I'll check out Latin lawyers from my TV room. That way I can watch the Kardashians and dancing with the stars at the same time By the way, pretty much all Latin lawyers under 45 or 50 years old speak some English But the ones that advertise in English on the internet. Well, you gotta look out for those guys, man There's just looking for gringos to gouge not that they won't provide a good legal service for you But it'll just be way too expensive compared to what locals are being charged for the same service Which is why if you can you should always get a local Latin to do your negotiating for you in Spanish

[20:27] Another bad way to find a Latin lawyer is to ask a gringo in one of those gringo expat bars Hey, do you know any good lawyers because they'll all say yes I do and if that gringo you're speaking to doesn't speak Spanish or his Spanish really sucks There's a good chance. He's being gouged by that very same lawyer that he's referring you to Because you see especially on the gringo tourist trail like Costa Rica in Panama You could have your lawyer for years and not even know he's gouging the crap out of you Fact is I've known plenty of gringos who get that routine and call from their lawyer and suddenly you find out There's some more paperwork to be filed or another person to be greased. Whatever he's doing for you You'll hear that tired old refrain. I heard it when I was in Costa Rica, Johnny

[21:14] I need some more dough Which is why you should always nail a price down with your Latin lawyer for whatever you've hired him to do Then you've got to like to stand on if he tries to hit you for extra charges In Latin America business is done on a very casual basis Even the best most ironclad contract you might sign can have its loopholes and dodges Which is why you'll not only need an avocado, which is a lawyer to handle your legal stuff You'll need it to be your friend so you can call them up at all hours and say hey got to help me out with And believe me everyone who's moved down to Latin America has been in that situation I mean, let's face it He'll be either the first or the second guy you call if you get in a car accident Especially if your Spanish sucks because even though you'll have insurance and I always recommend you carry liability insurance

[22:02] Screw the full coverage and the theft and all that get liability and what do you pay for that? Well off the gringo tourist trail, you'll pay around 150 bucks a year and you'll get full triple-a style service and more and get this ladies The insurance company will even come out and change your tire for you Or if you run out of gas put a couple gallons in it's all covered in the policy believe it or not You know earlier I was talking about black Friday sales here in Latin America They've got no idea what black Friday is people say huh First of all only one percent of Latin's know what the word black and Friday mean in Spanish But you know Latin businesses as Latin's in general are extreme gringo wannabes and if well the gringos are having a black Friday blowout sale Si hombre, neci tambos una tambien. We must have one too hombre

[22:51] Now a few years ago when Sears first started bringing its franchises down They must have had a real dickhead manager of international sales and promotion because I walked into a Sears in Guatemala No, less we're talking about as far off the gringo tourist trails You can get and almost all the signs and stickers were still in English in other words They cloned a Sears store up in the States sent it down and confused the hell out of everybody and I mean nobody got it Except for me being the only gringo in the place actually it kind of was a twilight zone moment for me now That was maybe seven or eight years ago And now you go into that very same Sears store and only a few English words are to be found like for instance signs all over the place saying Black Friday sale and Latins know nothing of Black Friday

[23:39] And then I got one of those notorious text messages on my cell phone the other day Yes, beware if you have a cell phone here in Latin America You'll get bombarded with all kinds of offers and text messages from horoscopes to backtones to banks offering to transfer Remisses from your illegal relatives up in Chicago all in Spanish of course, and it will drive you crazy So be on the lookout for that now all you long-time listeners know about those decammer on all-inclusive resort hotels I've done a few shows over the years on them because they've been such a good deal and Completely unknown to gringos up in the first world why because they're owned and operated by Latin Americans and everything's in Spanish That said they're undoubtedly the least expensive all-inclusive hotel resorts in the world

[24:27] And though there's 50 or 60 of them 99% of them in Latin America almost no gringos know about them because Everything's in Spanish including the ads Like the surprise Black Friday ad I got on my cell phone the other day that said there was a 30% Discount on all decammer on all-inclusive vacations in the month of November, so I went down to one of their local kiosks Practically every big city in Latin America has one or two so in about two weeks I'll be doing a show from one of the decammer ons in Panama So why am I bringing this up because there's been a lot of interest since I've mentioned this place a few times on my show I'm probably the only one who's ever brought this place up in English broadcasts anywhere I've been to at least ten of them myself long-time listeners to know I found by hook and crook a couple of Harley drivers who are living

[25:18] Exclusively in decammer ons and why not they're like little cities where everything's included Back, then I found out those Harley guys were paying less than ten grand a year To live at these all-inclusive places and they did that by joining a decammer on membership club And that club still exists, but the rules have changed you can't pay ten grand and stay for a year anymore However, it's still one of the greatest deals around and I'm gonna find out the details for you And I'll report on it in a couple of weeks By the way with that Black Friday deal. I was able to get the place for $50 a night double occupancy so a hundred bucks for two persons tax and tipping and everything included now I dare you to find an all-inclusive resort deal like that at twice the price

[26:06] Anyway, I'll be giving you the lowdown on the latest greatest plans and deals in that decammer on resort membership club For all you listeners out there who wouldn't mind living that kind of 24-7 all-inclusive resort Retirement lifestyle and who wouldn't so might you get bored not likely since they've got more than 50 resorts in 15 different countries each one within an hour's drive of a big Latin City People who've bought into that membership club say they never feel trapped or stuck in a gilded cage because they get always pop off To the nearest Latin City for some it's the perfect year-round retirement life And I'm gonna find out if you can still do it on a social security check, okay? We're getting towards the end of the show now And I'd like to remind all you who can't make it down to my January expat insider seminar for whatever reason

[26:56] That there is a next best thing to getting your own boots on the ground. It's my new expat essentials course It's a way to get your ducks lined up get that plan B in motion from right up there in the states So that when you can swing it when you're ready to come down. You've got the resources knowledge and confidence Necessary to pull it off, so do check out my new expat essentials video course just go to www Expat plan B.com to get my three free introductory videos to get you started. That's www.expatplanb.com South of the border This is the expat files living in Latin America if you want me to help you out with your own plan B Just schedule a one-on-one consult send me an email the expat files at gmail.com

[27:45] And if you want to learn how to move forward with your own plan B from right up there in the states go to www.expatplanb.com and check out my three videos see ya nos vemos