#1388 – The Expat Files: Tax Strategies, Plan B Checklists, and Dangerous Cities

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 ex-pad 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 Alright, let's take an email from Scott. He talks about an interesting subject here He says hi Johnny. Do you see many expats holding good US jobs online? But working from places like Guatemala or any place in Central America

[00:46] Most of what I do for a living he says is online working for a fortune 500 company a US company He says I was thinking I could speed up my plan B If I could just continue working for a US company, but from south of the border I thought this might be a good subject for one of your future podcasts. Love to hear your thoughts on it Looking forward to your next seminar. Be well Signed Scott. Well Scott. Thanks for asking and funny. You should bring that up It reminds me of a little story a gringo expat told me about I'd say a year ago now We were talking about the fact that so many people in the US believe that big corporations pay zero tax Or pay next to nothing in taxes compared to a company's massive profits

[01:32] Average everyday Americans seem pissed off about that and of course a lot of big companies do pay next to nothing in taxes That's why they have batteries of lawyers and accountants advising them to set up foreign corporations and bank accounts They set up satellite offices and foreign jurisdictions, etc Etc to make it appear that the mothership where the real business is being done is not US based That way they pay no US tax or minimal US tax. It's slight of hand All right, but legal slight of hand they do have to pay that battery of lawyers and accounts to make that happen Something that the average guy in the US even the above average guy in the US working for a corporation has no access to it Which is why the subject always seem to come up around tax time and election time

[02:19] You know the drill you've heard it before. How come Elon Musk and Microsoft, etc Pay little or no US tax. Well, that's because they've incorporated or have their business offices in a foreign jurisdiction Usually a foreign jurisdiction in a very very low tax country funny how most of those foreign jurisdictions turn out to be Caribbean islands Anyway, I'm bringing this up because in a discussion I had with an expat about a year ago now We were sitting in a little cafe with another recently retired expat who was saying how unfair it was that all his life He paid US taxes Even though he lived many years outside the country and even moving to Latin America as long as the company he was working for Was US based he'd have to pay taxes

[03:05] He thought it was so unfair that if he worked for a foreign non-us company the IRS rules were completely different He wouldn't have to pay US taxes at all up to a certain limit at the time. It was about a hundred and thirty thousand dollars a year That's that foreign earned income tax exemption You may have heard about it. In other words up in the states if you make 130,000 bucks you pay taxes on it, right federal state all that big taxes painful taxes all told in the 25 to 40 percent range for your income and you know with all the other little taxes and fees you get nailed with Working Americans pay 50 percent or more when you include licenses and fees property taxes, etc so anyway About a year ago me and a bunch of gringos were sitting around at a coffee shop

[03:53] One of the guys was whining about his heavy tax burden Meanwhile another guy sitting there gringo software engineer a guy who works from home for a fortune 500 company, too Anyway, he said every time tax season came around he thought man Why am I paying such high US taxes when I'm working from home don't even go into the office? So when he ended up moving to Latin America Panama in this case, he visited a well-known Latino tax lawyer By the way, he was not in a yearly contract with this company every year. He'd have to resign Anyway, what he did was have his Latino lawyer in Panama set up an SA corporation for him with his lawyer as the principal Signatory and last year when he went to renew his contract with this company He brought in the articles of incorporation for that SA Corp

[04:40] And he worked it out with his company's payroll department to direct deposit his salary to a bank account in Panama under the SA corporations name The checks and deposits would come in the name of the corporation not him personally In other words, they signed a contract with his SA corporation for his services You see his Latino lawyer worked it out so that he the gringo was an employee of the SA corporation. So The salary which I think at the time was like a hundred and sixty thousand dollars a year Would get deposited into the SA corporations bank account in Panama and in turn the SA corporation would pay the gringo salary Further deposit the money in another bank account the gringo's personal account in his name and because the SA corporation was based in Panama

[05:31] the gringo was responsible for Panama taxes not US taxes and thus has a gringo living outside the US being paid by a foreign entity he would receive that $130,000 a year foreign income tax exemption by the way That number goes up a little bit every year due to what else inflation and other malignancy due to too much government So he made 160 K a year and a hundred thirty of it was exempt from taxes That means instead of paying 25 to 40 percent Whatever it was for the US federal income tax on the first hundred and thirty thousand dollars of income He paid those taxes to Panama and his tax rate in Panama was around twelve percent a huge yearly tax savings of probably around 25,000 bucks by the way, the average person could live like a king in most places in Latin America

[06:20] Maybe not Panama, but most places on that amount 25,000 bucks a year So yes as a single American living overseas You can pull some of the same tricks a big corporation does to pay little or no taxes But you won't be able to do that if your income is sourced directly from a US corporation or a US source So what that gringo expat software engineer did was created an artificial buffer for himself an SA corporation And that entity became his employer not the fortune 500 company up in the states It turns out they were only buying his services through that corporation They didn't pay him directly. They paid his foreign SA corporation who in turn paid his salary Now if you're in that kind of situation living overseas permanently still working and getting your income from a US corporation or US source

[07:12] I'm sure you'll find it painful to pay US taxes every year Especially since you're not living there and getting no benefit at all from it. So you should do yourself a favor get yourself a Latino lawyer And and he may be able to help you out with an SA corporation to get around all that legally or maybe not Maybe your company your fortune 500 company or whatever will not hire a foreign SA corporation for your services But maybe they will Talk to your Latino lawyer about it You got nothing to lose and if it works if you can pull it off a hell of a lot to gain Again, I'm not suggesting you do anything illegal though I know lots of people when you start talking about this stuff tax avoidance and all that they get a little nervous about it

[07:57] Well, you know Apple and Microsoft and General Motors the ones that pay almost no taxes. They're not breaking the law It's all legal. So why can't you take a shot at by the way? We covered all that in great detail at my expat insider seminars. So that's yet another reason to think about signing up Alright now that we're in the email pile. Let's take this one from Jason. He says Johnny, I just want to tell you that me and my wife just want to thank you for your podcast He says we recently traveled to Costa Rica last year and El Salvador earlier this year and man You're right about the Costa Rica angle. That place is really woke He says we currently live in Madison, Wisconsin. We just have to get out of this place eventually So we're dipping our toes into Latin America to check it out for our plan B

[08:44] We decided next week to take a trip to Guatemala We haven't booked anything yet, but we're probably staying around the Antigua area So I'm meaning to ask you do you still have that worksheet that you talk about in a previous show? The one you said you'd give out to people if they asked for it that plan B worksheet Me and my wife would like to go over it while we're down on vacation in Guatemala He says I really appreciate what you're doing. Thank you ahead of time. Have a great day signed Jason from the very woke city of Madison, Wisconsin Alright, thanks for that Jason. You're absolutely right about Madison, Wisconsin. My sister went to University there She says not only is that a sanctuary city? But the whole damn city is a safe space and you know if we were meant to be all that safe We wouldn't have slipped out of our mother's wombs now, would we oh and by the way speaking of woke and unwoke

[09:34] This is the first show coming at you since the election after Trump made his clean sweep Well, you know along the way before the election that is lots of people said Johnny. What's your take on the election? Well, I mentioned it a few times on this show, but if I was to contend sit down to a few words Ah, let's just say I absolutely did not want to see Obama get a fourth term Anyway Jason talks about a plan B worksheet that I put together. Well, actually it's to plan B worksheets One's fairly general and it turns out the second one is my phone consult questionnaire and on that sheet There's lots of questions about your own life your personal life things that will affect where you end up having your plan B So if you want a copy of those two worksheets, send me an email the expat files at gmail.com

[10:22] But since Jason asked I'll get you started by reading the first worksheet the simple more general one Called the checklist on how to pick your plan B country I'll read the bullet points here first bullet point. You must know the past history of your country That must be carefully considered Does the country have a long record for political stability or a short one does that have currency restrictions? All countries have currency restrictions as do airports, right? Do check that out You don't want to be surprised when you go through customs next bullet point can foreigners own property outright I'm sure you've heard stories of foreign countries where you can own property But it can't be for example within a hundred meters of a beach or maybe you need to be a permanent resident to own property

[11:13] You have to check that out next bullet point Do you have friends relatives or a network of people living there who have thoroughly checked the place out? There could be a huge advantage there are none at all next bullet point Does it have decent shopping and some fast and inexpensive career services and access to Amazon eBay etc? Next a very important bullet point can citizens and residents own guns Next bullet point is it easy to get residency that leads to passport and nationality next bullet point and this is important Does it grow most of its own food is there abundant water? Next important point do they offer private first-world health care? Can foreigners sign up for their private health care plans and what are the age restrictions?

[12:01] Next bullet point cost of living considerations is your prospective plan B country Cheaper to live in then the US Europe or Canada Next is your prospective plan B country loaded with tourists Is it on or off the gringo tourist trail if it's heavily gringo wise then many of the locals will certainly be jaded tricksters think Costa Rica Next does that have a long record for economic stability, and does sustainable prosperity exist or are pretty much all the common citizens living on the edge Take a drive through one of the bigger cities are there a very poor body Oh is adjacent to the wealthier areas or are the cities nicely spread out next does your prospective plan B destination allow for basic freedoms?

[12:47] For all residents, or might there be a different standard for foreigners versus the natives next to the locals welcome foreign Nationals, and are they considered equal under the law in other words to the locals like gringos or do they consider us a nuisance? Only dollar signs to be gouged next bullet point does the government leave you alone We all know that if you start a brick-and-mortar business in Latin America. There's a ton of paperwork We accept that but once that's done do they leave you alone only a local lawyer can answer that next as a country have a tiny Or outsized army, and do they have a friendly or antagonistic relationship with their neighbors those countries that share a common border Next bullet point will you have a substantial gringo advantage do they like and appreciate gringos moving in

[13:38] Next bullet point does your prospective country have leftists and or socialists in power is the guy in charge considered a dictator Or just a benevolent placeholder Next bullet point is your prospective plan B countries government small medium or large as a percentage of the workforce as a reference Consider the USA which has an unacceptably bloated 20% of the adult workforce working for or under contract to the government whereas for example in Guatemala It's been estimated to be around 6% Next bullet point are the taxes minimal compared to the USA or Canada Do note that any Latin American countries taxes are lower than Canada's or Europe's Next bullet point how much debt does your prospective plan B country have as a percentage of GDP?

[14:27] Note the USA has had a hundred and thirty percent, which is ruinous that number is also vastly underestimated You know how governments lie next bullet point does your prospective country have strong bank secrecy laws? Next does your prospective country have an international airport nearby within let's say one to three hours drive Does the airport have frequent flights to the US Canada and Europe and finally can you open a bank account without being a legal Resident so there you have it there. It is a basic expat plan B worksheet Send me an email the expat files at gmail.com, and I'll send you a copy plus a much more detailed and complete personal plan B questionnaire It's something you should go through line by line before you make your first trip down or

[15:17] Anytime before you make the permanent decision to leave and now a little something on the lighter side of living here in Latin America For those of you who've been down to any one of my 20 Latin American week-long seminars Yep, I've done 20 so far if you recall somewhere in my PowerPoint Presentation when I'm talking about the people in the different cultures in Latin American countries if you recall I post a couple of pictures of different people's Sedula's you know those are national ideas everyone gets one Doesn't matter what country you're in you get a settler that way you don't have to haul around your passport with you everywhere Sedula is your national ID document. You'll get one too if you become a permanent resident Then you can leave your passport at home too even when you go to change money in the bank

[16:04] Anyway in my seminar PowerPoint Resentation I showed three rather crazy Sedula's three guys one's name is Lennon one Stalin and one named Adolfo Hitler Yep, they're real. They're the McCoy these three guys all grown men over 50 Have lived worked and played all their lives With those particular horrible handles and guess what they don't seem to have suffered a bit for it either no bullying No insults. No after-school punch-ups, which begs the question for Gringo's and expats anyway Why are there so many people in Latin America named Lennon Stalin and Hitler for that matter? There is less of Fidel's running around too I haven't met a mile yet, but Lennon Stalin Hitler and Fidel

[16:51] Yeah, I certainly have now just think about it for a minute Suppose you're living up in New Jersey your Chicago, Milwaukee, Cleveland a new neighbor moves in next door You introduce yourself. His name is Stalin or Hitler or Fidel I know what would be going through your mind what the fuck where his parents think Parents must have been blood-red commies poor kid But of course things like that up in the States just don't happen though You can just about guarantee it's on its way with all the illegal swarm in it Because you know if you're meeting Lenin's Stalin's Hitler's and Fidel's down here in Latin America Certainly lots of those guys there will be sneaking into the States Funny thing too that it's always guys. There are no women Leninitas or Stalinitas or Hitler ethos for that matter

[17:37] I've never met a Fidel either. Thank God for small favors, huh? So then how did all this happen? What are the origins? What's it all about? Well as it turns out people in the Census Bureau's here in Latin America Have determined which country has the most Lenin's Stalin's Hitler's and Fidel's per capita Can you guess which Latin American country that is man? Time's up Ecuador sure the 19 other Latin American countries are full of commie and fascist namesakes But Ecuador man is off the charts get this Turns out in Ecuador those names are so common that a first world journalist named Jim Weiss Has written a syndicated article about it explaining what the fuck is going on

[18:24] Obviously the whole thing's so strange to us a sprinkles an ex-face the whole thing does seem to need a bit of serious scholarship Some kind of reasonable explanation, so let me paraphrase this article a bit and cut out some of the boring parts He starts off by saying for outsiders who spend much time in Ecuador the question invariably Rises as to why so many people are named for such well-known historical figures, especially for wicked infamous ones It goes on to say think about the 2017 Presidential election the guy who won Lenin Moreno Lennon Moreno Yeah, so obviously Ecuadorian voters see no downside in electing someone who's got the name of a Russian dictator

[19:11] responsible for the deaths of millions And it says according to Ecuador's National Statistics Institute there were eighteen thousand four hundred and sixty four people named Lennon registered on their birth certificates in the country from 1950 to 2015 by comparison the USA Which has 20 times the population of Ecuador has fewer than one thousand seven hundred registered Lennons now, of course in the states most probably were named after John Lennon as opposed to Vladimir Lennon But you can bet those eighteen thousand four hundred sixty four Lennons living in Ecuador were not named after John That goes for the tens of thousands of other Lennons throughout Latin America Apparently to the parents of these kids Vlad was a thing but John not

[20:00] Then the article goes on to say Ecuador is also full of Stalin's there are eighteen thousand seven hundred and twenty eight registered by the official census takers by the way the federal census registry also shows 560 Hitler's 122 mouths and 22 Trotsky's So I was wrong. They do have some mouths a hundred twenty two of them But remember that's just in Ecuador now in writing this article the journalists interviewed quite a few Hitler's Stalin's and Mao's This article by the way published in the newspaper El Pais Anyway, he says he interviewed for example a guy named Giovanni Hitler Kondo who said his Ecuadorian father was named Bolivar after the Latin American

[20:45] Liberator Simon Bolivar by the way for a diabolic reference. He was Hugo Chavez and Maduro's hero anyway Mr.. Hitler has a brother named Stalin Now apparently the guy's father was big into World War two because he also has a brother named Roosevelt By the way, the Ecuador National Citizen Registry shows there are 587 Roosevelt's alive right now in the country anyway the guy interviewed for the newspaper Giovanni Hitler Kondo When asked why his father would name his three kids that way he said possibly my father thought it was amusing to witness domestic squabbles between his sons named Hitler Lenin and Roosevelt You can't make this stuff up can't you just picture three adolescent boys in that household?

[21:34] Daddy, daddy Hitler stuck my head in the oven and Roosevelt's kicking Lenin's way bows mmm sounds to me They've got the makings of World War three in that household man. You know you can't make this stuff up Oh, and here's something else you can't make up an article just came out two days ago Title the ten most dangerous cities in the world not based on petty crimes like pickpocketing or mugging But based on homicide rate in other words It's a list of the ten cities in the world where you're most likely to get murdered All right little background here It says the most dangerous cities in the world are a major concern for residents visitors law enforcement, etc While crime exists everywhere some cities are statistically much higher in crime levels So for this study we turn to Statistica a global data and business intelligence platform to find the hard numbers on the murder rate per capita

[22:25] in cities worldwide So below we have the ten most dangerous cities in the world in descending order according to the murder rate per 100,000 inhabitants, it's important to highlight that this list does not include countries that are at war number one Colima, Mexico Mexico C-O-L-I-M-A in 2024 Colima Mexico emerged as the most dangerous city in the world with a homicide rate of 140 per 100,000 inhabitants with the highest murder rate in the world the city is grappling with alarming levels of violence Primarily driven by surprise surprise gangs and drug trafficking number two Ciudad Obregón, Mexico Ciudad Obregón, Mexico ranked as the world's second most dangerous city in 2024 with a homicide rate of

[23:17] 117 per 100,000 inhabitants. It says the city has witnessed extreme surges in homicides kidnapping and violent confrontations between rival gangs Etc. Etc with the pervasive influence of drug cartels. Hmm Number three Porta Prince Haiti Porta Prince capital of Haiti was the third most dangerous city in the world with a 2024 homicide rate of 117 per 100,000 inhabitants. It says even international organizations fear entering the city number four Zamora, Mexico Zamora Mexico ranks as the fourth most dangerous city in the world with a homicide rate in 2024 of 105 per 100,000 inhabitants This city is noted for a significant uptick in homicides kidnappings and other violent incidents driven by surprise surprise

[24:08] rival cartels Competing for control over lucrative drug routes and production facilities number five Manzanillo, Mexico The fifth most dangerous city in the world Manzanillo, Mexico saw a homicide rate of 102 per 100,000 in 2024 it says the homicides and violent crimes are primarily driven by surprise surprise turf wars between rival drug cartels number six, Tijuana, Mexico Tijuana, Mexico just south of San Diego on the US border has a 2024 homicide index of 91 for every 100,000 inhabitants making it the sixth most dangerous city in the world number seven Zacateas, Mexico Zacateas, Mexico has emerged as the seventh most dangerous city in the world with a homicide rate in

[25:00] 2024 of 89 per 100,000 inhabitants known for its rich history and colonial architecture. The city is now grappling with significant homicides kidnappings and extortion Driven by fierce competition among rival gangs. Hmm. Number eight Guayaquil, Ecuador Guayaquil is Ecuador's largest city has gained notoriety as the eighth most violent city in the world in 2024 The homicide rate was 88.8 per 100,000 inhabitants Only slightly less dangerous than Tijuana. Number nine Mandela Bay, South Africa How ironic is that it says Nelson Mandela Bay commonly referred to as Mandela Bay or Port Elizabeth is the ninth most dangerous city in the world with a homicide rate in 2024 of 78 for every

[25:49] 100,000 inhabitants. It says with the activities of large-scale criminal groups and gangs Surely old Nelson Mandela himself the town's namesake wherever he is must surely be proud Rolling in his grave to say the least, you know, I know a few people from South Africa I've had a few come to my seminars and you know, it's funny Every last one of them tells me it's ten times more dangerous to live there now than it was under apartheid When the whites were ruling they say it's a complete disaster You cannot go out alone at night ever and since today the white ruling class were removed the ran Their currency has lost 95% of its value. Hmm sound familiar But you know, you never hear first world media talking about that because guess what you'd get canceled

[26:36] Yeah, it seems the media only likes to publish the truth that agrees with their sentiments But you knew that already right look at what they tried to do to Trump talk about nine lives Talk about having a thick skin. Any normal person would have given up he would have cracked Oh, and by the way, I understand the Dems are not conceding the election completely until 110% of the votes are counted Hmm. All right number 10 see you dad. What is Mexico? Ranked as the 10th most dangerous city in the world So there you have it the 10 most dangerous cities in the world by homicide rate. Did you ever notice a trend there? That seven out of ten of the most dangerous cities in the world are in Mexico lindo So then and how's that plan be going for all you guys and girls out there who are just gaga over, Mexico

[27:26] Well, you know what they say a man may work from son to son, but Darwin's work is never done You've been listening to the expat files living in Latin America If you need some help with your own plan be we can schedule a one-on-one phone or Skype consult Just send me an email the expat files at gmail.com And if you want to get on the waiting list for my next week-long expat insider seminar in Central America Where you're guaranteed to get a two to five year head start on your plan B Send me an email the expat files at gmail.com