Sept. 1, 2014
"I have learned so much from your newsletter, and now I have a question. "I read that Panama is an offshore investment haven and that I could live in this country tax free, but I am confused. If I relocate to Panama and run a local business or an Internet business, does that mean I pay no Panama taxes or no income taxes at all, including in the United States?" -- Doug H., United States Yes, you could live in Panama tax-free, even as a U.S. citizen (that is to say, paying no income tax either in Panama or in the United States). However, some work and preparation are required. You have to set yourself up properly. If you're retired, you won't pay taxes on retirement income you bring into Panama or on any dividends or interest income earned outside the country. You would still pay taxes in the United States on the dividends and interest income, and, depending on the source of the retirement income, you'd pay the same tax to the IRS as you would if you lived in the States (although, if you live in a state that taxes retirement income, you'd avoid that tax by moving to Panama). To live completely income tax free in Panama as a U.S. citizen, you must have a business generating earned income for you as an individual and that income must be derived from outside Panama. Panama taxes residents on income earned in the country only, so your non-Panama business would pay no taxes in Panama, and assuming it is a business where you can legitimately claim that you are earning your income outside the country, your individual income wouldn't be taxed there. Typically, this means a consulting or an Internet-based business. If you start an active business in Panama, with sales in Panama to Panama residents, then that income would be taxable in Panama, as would any related personal compensation you receive. In either case, your salary up to the annual Foreign Earned Income Exclusion limit (US$99,200 for 2014) can be excluded for U.S. income tax purposes. The key is that it be truly earned income.
An added bonus of the Languedoc region is that it's just three hours' drive to my joint-favorite European city, Barcelona! Lief Simon: Medellin and Buenos Aires I prefer cities over more rural areas. Two of the best cities in Latin America to spend time in, whether it's full- or part-time living, are Medellin, Colombia, and Buenos Aires, Argentina. In Medellin, the weather is pleasant year-round—though some would argue that it isn't "spring-like" weather as it's generally referenced to be. Temperatures regularly break 80 degrees. Having grown up in Arizona, that's like winter weather for me. In other words, it's all relative. It's pleasant enough to walk around Medellin, which is important to me, though I wouldn't call this a walking city. Medellin has First World infrastructure and amenities (also important to me), and museums, festivals, gardens, and parks all add to the variety of activities available in this city of about 3.5 million people. And, to make the point, despite its history, Medellin is fairly calm these days unless you wander into the gang neighborhoods. Bigger and livelier is Buenos Aires, which also has four seasons. I like change and contrast, so I like this part of the world a lot. Argentina rides an economic roller coaster that cycles harder and faster than economic cycles in any other country I could name, thanks to general and gross mismanagement by the government. Argentina is right now close to another breaking point. I'm watching for the coming next crisis, which will be another good time to be considering an investment here. From a lifestyle point of view, Buenos Aries offers all the activities that Medellin does and more. It's a city of about 15 million people (around one-third of the total population of the country). It has a tremendous variety and diversity of restaurants, shopping, museums, and parks and does qualify as a walking city—though it's too big to walk across in one go. For me, Buenos Aries' core neighborhoods of Recoleta and Retiro offer an ideal way of life. Just be prepared for big ups and downs and lots of drama. For me that's all a big part of the charm of this place. Kathleen Peddicord P.S. The countdown is on. You have three days remaining to register for this year's Retire Overseas Conference in Nashville next month taking advantage of the Early Bird Discount. More details here.
Meantime, throughout all that time, we were traveling a lot, especially Lief. We were hosting one or two conferences per month as part of our business by the time we were running that business from Paris, each conference in a different city around the world, and Lief was involved in nearly every one of them. This was in addition to other business and personal travel. Lief, especially, was traveling a lot. He needed a break.I explain that as preface for the story that follows, and I feel compelled to explain further that I did not understand this reality this clearly at the time. Had I been more aware of Lief’s desperate desire to take an uninterrupted, business-free holiday, things might have turned out differently than they did. When Lief told me at the time that we should plan a family trip, I didn’t think any more of it than that and so I didn’t object when a friend who was also a business associate suggested that he and his new wife join us. We’d taken lots of “family vacations” with business associates along for company. I didn’t recognize this as different, but it was. Our plan initially was to take Jackson to Argentina. We’d spend a few days in Buenos Aires and then travel to the see the mountains and wine country. When our business friend suggested that he and his wife come along, he introduced what I saw as a small variation on that agenda. Another friend was considering investing in a piece of land in Salta Province with the idea to develop the parcel into a mountain resort. We could use the trip as an opportunity to go to see that property. Then, this friend suggested, we could take a look at some vineyard land for sale nearby that he might want to buy. It all sounded fine to me. I’d never been anywhere in Argentina beyond Buenos Aires. And, as far as I could tell, the plan the friend was proposing wasn’t too different from Lief’s original agenda—B.A., mountains, vineyards. As we all seemed interested in seeing more or less the same things and in traveling at more or less the same time, why not travel together? Plus, it’d give me a chance to get to know our friend’s new wife better. In the weeks leading up to this Argentine adventure, the trip grew more complicated. It wouldn’t be just Lief, Jackson, our friend, his wife, and me. It’d be us five plus another couple...and then another couple...and then a representative of the development property we were going to see. By the time the date for the trip arrived, we were a party of 10. Our original plan had been to meet up in Buenos Aires and then to fly together from there to Salta. However, we discovered too late, it was a holiday week in Argentina, and all flights to Salta were booked. We had to fly instead to Tucuman. From Tucuman, we would drive to Cafayate, our base for the rest of the trip. It was supposed to be a two- to three-hour drive from Tucuman to Cafayate, but, thanks to the hairpin, switchback roads in this part of this country and the fact that two of our party, including young Jackson, suffered serious car sickness the entire way and had to be accommodated with regular roadside breaks, it turned into a six-hour drive. Lief had arrived in Buenos Aires predicting that the trip was going to be a disaster. By the time we’d finally made it to Cafayete, Jack sick and all of us tired, he was sure he’d already been proven right. In fact, that miserable six-hour mountain drive turned out to be the best part of the trip. We spent a couple of nights at Patios de Cafayate Hotel and Spa, a beautiful property in a wonderful mountain setting. Our room had a four-poster bed and a dramatic view; our bathroom had a big tub and soft, thick towels. It could have been a lovely getaway, but Lief seethed. In his sleep, I would watch him seething. One day we went hiking through the mountains, another, we were off to the lake near Salta. All the while, Lief seethed. Then came the time to go to see the development land of our friend. Another long drive punctuated by regular roadside stops, some triggered by Jackson’s crying that he was going to be sick...right now! “Pull over, pull over, pull over!” he’d cry. We arrived at the property late, after dark, and after 6-year-old Jackson’s dinner time. He was exhausted, and perhaps I should have put him straight to bed, but his stomach was so empty, I thought, after having been sick on the road all day. He should eat something before I put him to sleep. We were to be the guests of one of the sellers of the property, who had invited all 10 of us to stay in houses already built on the piece of land our friend was considering buying from him. It had been raining for hours in advance of our arrival that night. The dirt roads were muddy, the grassy areas swamps. We were each driven to our respective houses and dropped off with the suggestion that we all meet back at the main house, the home of our host, for dinner. Through the mud of the yard and into our house Lief, Jackson, and I went. I wanted to wash Jack’s face and my own and so went to the bathroom and turned on the taps in the wash basin. No hot water. Meantime, I noticed that I was cold. “Lief, would you please see if you can find the control for the heat?” I asked. Turned out there wasn’t one. Because the house not only had no hot water; it also had no central heating. “OK, let’s just go back to the main house and have something to eat so we can put Jack to sleep,” I suggested. “Which room do you want to put him in?” Lief and I walked through the three bedrooms, considering the situation. Then we started looking inside cabinets and under beds. We came up with two pillows and no blankets. It was June. It gets cold at night in this part of Argentina in June. Yet we had neither heat nor blankets... Now, on my own, I could have been ok with all this. A little cold and uncomfortable but ok. I was worried for Jackson, but I’m one of those people who likes to put a positive spin on everything and to make the best of any bad situation. Like Pollyana. I also don’t like anyone around me to be upset. That night, as my mind was working overtime to figure the best way to navigate the events as they were unfolding, Lief began to lose it. I watched as his subterranean seething started seeping to the surface and bubbling over. “OK, OK,” I offered. “Let’s just go to dinner. We’ll all feel better after we’ve had something to eat.” We walked through the dark, through the mud, the 15 minutes from the house where we were staying to the one where our host and the rest of our party were waiting for us. It was after 10 p.m. when we walked in, and dinner was nowhere in sight. This isn’t uncommon in Argentina, where 11 p.m. is considered a reasonable family dinner hour, but Jackson wasn’t accustomed to eating after 10 at night. By this time, Jackson had gone so pale and weak he could hardly sit up on the edge of the sofa where he’d perched himself. Lief asked about dinner, and our host assured us it was coming. Could he possibly make something sooner rather than later for Jackson, Lief wondered. At this suggestion, Jackson perked up and asked if he could have a hamburger. “Could you make a hamburger for my son?” Lief asked our host, translating Jack’s English to Spanish. “Si, si,” our host replied, “No problem.” A half-hour later there was still no sign of any dinner. Lief asked again if something could be brought out for Jackson. And, then, finally, a plate appeared and was put before Jackson on the coffee table. But the plate didn’t contain a hamburger. It was a plate of chicken. Ordinarily, a child in this situation should do the polite thing and eat what he’s been served without complaint. But these weren’t ordinary circumstances, and Jack had long before this moment been pushed past his breaking point. I take full responsibility for all that followed. I should have put Jackson straight to bed. If I hadn’t chosen to bring him to the main house for dinner, the rest of the evening’s events might have been avoided. Jackson looked at the plate with the chicken on the table in front of him and began to cry. Not loudly but definitely. He looked up, pale and small, at Lief and me and said, “But I didn’t want chicken. I asked for a hamburger. The man said I could have a hamburger. Do I have to eat the chicken?” I leaned down to begin cutting off a few pieces of chicken, thinking that I’d try to get Jack to put two or three bites in his stomach and then excuse him and me for the night. But, as I bent down, I heard Lief, behind me, starting to shout. He wasn’t speaking sternly or loudly. He was shouting. I’d never found myself in a situation like this before, and I was at a loss. What does a wife do when her husband begins to shout at their host amidst a living room-full of business associates, all guests of that host for the night? I can’t tell you what Lief shouted, because I can’t remember. My mind went blank. I remember cutting Jackson’s chicken and asking him, quietly, if he’d please just eat a bite or two for me. But Jackson wasn’t interested in the chicken. The more I cut, the more he cried. All the while, Lief continued to shout, at the host, at the group, at the room. While everyone else, the rest of our travel party, our host, the cook, and the other house staff, they all stood around the big stone fireplace in that big, high-ceilinged, wood-paneled living room silent and still and staring at Jackson and his plate of chicken and at me leaning down cutting pieces of chicken that I knew Jackson was never going to eat but what else was I going to do with Lief all the while still shouting and everyone else just standing silently staring. Finally, I picked Jackson up, grabbed our coats, and headed for the door. As I pushed past him, I noticed Lief, still shouting, bending over. He was reaching out to the sofa and picking up two cushions. Then he was putting one cushion under one arm and the other cushion under his other arm as he stood back up. “There aren’t enough pillows in the house where you’ve put us,” he shouted at our host. “So I’m taking these.” With that, I carried Jackson out the front door. Lief followed behind with his two cushions, and we three walked through the rain and the mud back to our little unheated house. Kathleen Peddicord Editor’s Note: This tale from Argentina is excerpted from Kathleen’s next book, the story of her and Lief’s adventures overseas over the past 16 years.
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Kathleen Peddicord is the founder of the Live and Invest Overseas publishing group. With more than 25 years experience covering this beat, Kathleen reports daily on current opportunities for living, retiring, and investing overseas in her free e-letter.
Her book, How To Retire Overseas—Everything You Need To Know To Live Well Abroad For Less, was recently released by Penguin Books.
Read more here.
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