How the founder of DigiTax is paying 0% Tax completely legally!
– DigiTax
The History
Leonardo, founder of DigiTax, established the company with the clear purpose of supporting the latest generation of young entrepreneurs in navigating the complexities of accounting and finance, allowing them to focus on their business endavours.
DigiTax comes in to provide expert guidance, ensuring accurate tax management, minimising tax liabilities, and protecting against potential issues with the tax authorities.
The Challenge
As a company that aims to minimise people’s taxes, Leo wanted to create the biggest case study out of his own situation as proof that he could help people become tax-free.
Digital entrepreneurs are free to work from anywhere in the world, and as a result there are many different ways of minimising the tax bill. The best way of doing this often depends on the entrepreneur’s preferences such as where they want to live, if they want to travel or settle down, and where they have their clients.
In Leo’s case, he wanted to spend most of his time in Thailand, travelling, learning Muay Thai and networking with other Digital Entrepreneurs, but he also didn’t want to give up going back to Europe to visit his family. When deciding on the business setup that best suits Digital Entrepreneurs, there are two main tax obligations to look at.
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Income Tax is what you have to pay on your personal income, and this tax rate is given by your Personal Tax Residency. Most people are tax residents of their home country, which is usually where they were born, where they grew up and where they have their life set up. Corporation Tax is what your company must pay on its profits, and this tax rate is set by the country where your company is incorporated.
– Leonardo Vincenti
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When addressing Leo’s situation, we had to look at both these tax obligations, and tackled one at a time.
The Solution
Having lived the previous 4 year in the United Kingdom, the first step in creating Leo’s Tax Strategy was getting rid of his Personal Tax Residency in the UK. Adhering to the UK’s tax regulations, spending fewer than 91 days per tax year ensured he remained non-resident for tax purposes.
0%
Income Tax
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And just like that, by spending less than 91 days in England, I could avoid high taxes!
”
– Leonardo Vincenti
Thailand emerged as the ideal new Tax Residence, aligning with Leo’s lifestyle preferences.
While tax rates are relatively high there, Foreign Sourced Income is only taxable if received and remitted to Thailand, meaning that all income made online is not taxable as long as it is not brought inside the country.
To secure Tax Residency, Leo now spends at least 180 days in Thailand each year.
0%
Corporate
Tax
Having addressed the Personal Tax Residency, we then set up an LLC in the United States, in Wyoming. The peculiarity of a US LLC is that it is a pass-through entity, which means that all the profits are not taxed at a company-level, but are ‘passed through’ directly to the owner. This effectively mean that the US LLC has an effective 0% corporation tax rate.
By doing so, Leo (the owner), receives all the profits as personal income, which are then taxed based on his Personal Tax Residency, in this case in Thailand.
But as Thai rules state, you are only taxed on income remitted to Thailand, which means that by keeping all income outside of the country, Leo has achieved an effective tax rate of 0%!
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I pay 0% Corporation Tax, because the US LLC is a pass-through entity, and I pay 0% income tax because I don’t bring my profits into Thailand. I live completely tax-free!
– Leonardo Vincenti