I was reading a thread on 2+2 today where somebody asked what was the best country for a US citizen to live in as an online poker pro. As there seemed to be a lot of confusion and misinformation about the issue I thought I would write up what I know about the subject.
I am not a tax expert. That’s why I have an accountant who I burden with my financial details. However, I do live abroad so this is how I understand things to work. Some of what I mention applies if you meet certain conditions and may not be applicable to everyone.
First off, it needs to be noted that as a US citizen, you owe taxes on worldwide income. Yes, proud to be American means proud to pay taxes on monies earned anywhere in the world. The US is one of the only countries in the world to impose such an oppressive tax system but there is some relief.
Most countries have agreements with the US whereby if you pay taxes in that country you can count that against what you owe in US taxes. Say for instance that you paid $30,000 in taxes in the UK and you file a tax return in the US where your liability is $35,000. You would only owe Uncle Sam $5000.
Thankfully, there is also an exemption of up to the first $80,000 in income. That means if you earn $50,000 a year you would not pay taxes in the US. Unfortunately, there’s been a bit of a screw job by Uncle Sam lately. Previously if you made $90,000 you would deduct the exemption amount ($80,000) and then pay taxes as if you only earned $10,000. But thanks to our friends in Congress you now pay taxes on the $10,000 at the tax rate for someone earning $90,000.
Okay, with the tax issues out of the way, let’s talk about picking a country. First off, I can’t answer what is best for you because you’re going to have your own preferences on things like standard of living and access to schools. What I can outline is some issues you should consider.
I am going to assume that you’re considering someplace in the civilized world. I’m not going to go into internet connectivity or telecommunications infrastructure considerations as even most of the third world has a decent infrastructure. If you’re thinking about moving to some remote village in Burma (Myanmar) you’re going to need something far more extensive than what I can write about in this post.
I’m also going to assume that you have the right mindset to live overseas. By that I mean that some people look at living overseas as an exciting journey and others bitch and moan about everything that isn’t exactly like it is in America. If you’re in the later group quit reading now. You’re going to hate it.
Taxes: I said we were done with taxes but I lied. You need to consider the tax rate of the country you want to take up residence in. Here in Gibraltar the tax rate used to be 43%. Obviously that sucks compared to US tax rates. Other countries have zero taxes. You should sit down with an accountant and figure in your US tax exemptions and determine what your real after-tax income will work out to be.
Quality of life: We’re a little spoiled in the US. Quality of life is pretty high in the US. If you’re from Los Angeles or New York and want to maintain a similar quality of life your choices are certainly limited. Also factored into this are going to be things like education (if you have kids), nightlife (if you are single), climate, culture, etc.
Cost of living: Anybody who has ever been to London can tell you the shock they experience at the cost of everything. My rule of thumb is that everything in London (and Gibraltar) costs the same as the US but in sterling. So if you go to McDonald’s and a value meal costs $5, it will cost Â£5 in London. Considering the 2 to 1 exchange rate that effectively doubles the cost of everything. An optimal scenario is to move somewhere with an acceptable quality of life and a low cost of living.
I know of a few guys who live in Thailand and play online as their only source of income (who obviously prefer to remain nameless since gambling is strictly prohibited in Thailand). Considering that $2000 a month will let you live like a king (serviced apartment, eating out every night, entertainment, etc) it’s pretty easy to be a $2/$4 or $3/$6 player and eek out a pretty nice life. I also have heard of some guys doing the same down in Central and South America in countries with ridiculously low costs of living.
Language: Unless you already speak another language you might want to restrict your search to English speaking countries. Of course that may be part of the experience for you. Living in a different culture and learning a new language could be part of the thrill of living overseas.
Visas: If you think we create a big fuss in the US about immigration just wait until you go overseas. Every time I fly through Gatwick airport in London I get twenty questioned about my stay because my passport has a billion stamps in it. In the vast majority of places in the world a US passport gets you 90 days without having to apply for a visa. At the end of 90 days you must leave the country.
So you have two options; you can apply for a visa to stay longer than 90 days or you can do the boarder run. Visas are usually pretty hard to come by unless you can make an overwhelming case why you don’t need to work while you are there (like a large cash deposit in a local bank). No country wants you to end up penniless and mooching off the state for benefits. Also keep in mind that you need to apply for the visa BEFORE you go to your new country of residence.
The other option is quasi-legal. You’re basically playing games with the laws. You move into the country and then every 90 days you take a trip to a neighboring country and get your passport stamped showing that you have not stayed longer than 90 days. Some countries, like Thailand, have recently begun to clamp down on the boarder runs by passing laws that say that you have to be out of the country 90 days before returning for a 90 day stay.
Please keep in mind that a single overstay can get you barred from re-entry to the country. That means that if you’re playing games with the boarder run don’t expect to find a sympathetic ear when you get hospitalized the week you were planning to do your cross-boarder travel.
Access to gambling: It would be a shame to relocate overseas only to find out that the government’s firewall blocks access to your favorite online poker sites. In many countries online gambling is illegal. In addition to the extra hassle you’re going to have to go through to play online poker you should also consider the fact that applying for a visa or explaining to immigration that you engage in a profession that is illegal in their country isn’t going to win you any brownie points.
Tips of moving:
If there’s anything worse than paying US federal taxes on income earned overseas it’s paying state taxes on income earned overseas. It would be advisable that if you live in a state with oppressive state taxes that you establish residency in a state with no state tax prior to making your move otherwise the state will claim that you are only temporarily not living there and will demand taxes on your income. Just move there for a month or two before you make the big move overseas. Register to vote, get a driver’s license, and rent a property. Most importantly, break ALL ties to the high-tax state. Close your bank accounts, sell any property, etc. If they can form any tie to the state they will try to tax you.
Speaking of banks, keep a bank in the US. Also keep your credit cards. While it’s difficult to get an overseas bank account (especially if you don’t have a legal right to stay in the country you’re trying to get a bank account in), it’s very difficult to get any sort of credit.
For keeping your US finances in order I highly recommend a service called Pay Trust which is owned by Intuit (the guys who make Quicken). All my credit card companies send statements to Pay Trust, Pay Trust scans them, and they put them online for me to view.
You’ll need to report any monies you keep in your foreign bank account so make sure you file the proper IRS forms to declare overseas assets.
You aren’t likely to have any health coverage while you live overseas so you need to check out someone like BUPA which is worldwide medical insurance provider. Check into it before you leave.
It would also serve you well to get the lowdown on the place before you go. Go on 2+2 and see if there are any other grinders making a living there. Do a search on Google and find some expat communities and get some feedback from guys and gals who live there. Many places sound like paradise only to find out that foreigners are treated poorly by the locals.
Other than that, have fun! Living overseas can be an exciting experience. Make the most of it.