Crafty Crypto Tax Dodgers Use Alternative Passports To Avoid The IRS

bitcoin and ethereum cryptocurrency coins
znm / Getty Images

Plan B Passport offers crypto investors a pick of seven different passports, mostly in tax-haven countries, in order to dodge capital gains taxes on crypto assets, and the service is catching on as crypto becomes more ubiquitous.

Tax havens have long been a thorn in the side of the IRS and for the majority of politicians on both sides of the aisle. Almost every President since Reagan has campaigned on the premise of abolishing the ability of companies to hide away their profits in tropical locations that seldom tax their corporations. 

Make Money: What Is the Next Big Cryptocurrency To Explode in 2021?
Coins: Is the Shiba Inu Coin the Cryptocurrency You Should Be Watching?

Now, a new market has opened up for individuals to do the same but this time for an alternative kind of investor — the crypto rich. 

Plan B is fairly transparent and straightforward in their mission statement. On their website, one of the first bits of information they provide on their services reads, “Tax avoidance: learn how to legally optimize your tax strategies by selecting the best jurisdictions for residencies and citizenships(s).”

Building Wealth

What they are referencing is a well-known loophole used by mega-corporations and the rich to hide their taxes in offshore accounts. By claiming citizenship, residency, or headquarters in a tax-haven country, corporations and individuals report their earnings through a different country, say the Cayman Islands, versus the United States – despite having nothing but a bank account in that country. All business activities can technically take place in the United States, but because of this rule, all profits can be rerouted through a different country and sheltered from tax. Countries like the Cayman Islands and Ireland have either very low or zero income tax, meaning you keep what you make.

Read: 10 Best Cryptocurrencies To Invest in for 2021
Find Out More: How Does Cryptocurrency Work – and Is It Safe?

The countries in which they offer passports are: Saint Kitts and Nevis, Antigua and Barbuda, Dominica, Vanuatu, Grenada, St. Lucia and Portugal. 

The programs are constructed to help you attain citizenship in one of these countries. Each country has its own requirements for obtaining citizenship, which need to be fulfilled before you can start taking advantage of the low tax rates. In St. Lucia for example, you can obtain citizenship by an investment of between a $100K donation, purchasing $250K in government bonds, or owning at least $300K worth of real estate, CNBC reports. This means that you would have to make a minimum investment of $100K before you can start enjoying the tax advantages.

More Economy Explained: What Does Cost of Living Include and How Is It Calculated?

Important to note: in order to benefit from these tax advantages, you will likely have to renounce U.S. citizenship. If a taxpayer is a U.S. citizen, has a green card, or is a U.S. resident alien, that taxpayer owes U.S. tax on any gains from crypto investments regardless of where the taxpayer or crypto is located. Dual citizenship will also not get you out of paying your taxes on crypto income. If you want to take advantage of low or zero taxes, you will need to give up your U.S. passport for a foreign one.

The reason many countries offer these kinds of incentives is to boost foreign investment into their struggling economies. Small Caribbean island-nations can benefit from the money they would otherwise not see as a result of tax benefits. Multi-billion dollar companies like Amazon and Google flock to these destinations to shelter their assets, and as a result, pour money into economies that otherwise would only rely on vacation tourism. This new kind of “crypto-tourism” could offer itself as a new revenue source for tax havens, but international leaders have recently been putting pressure on global tax evasion.

Building Wealth

At the recent G7 summit, the world’s top economic leaders agreed to push for a global corporate minimum tax rate sometime in the near future. Should it succeed, it could make obtaining tax haven passports for crypto tax-dodgers all the more difficult.

More From GOBankingRates

About the Author

Georgina Tzanetos is a former financial advisor who studied post-industrial capitalist structures at New York University. She has eight years of experience with concentrations in asset management, portfolio management, private client banking, and investment research. Georgina has written for Investopedia and WallStreetMojo. 

Untitled design (1)
Close popup The GBR Closer icon

Sending you timely financial stories that you can bank on.

Sign up for our daily newsletter for the latest financial news and trending topics.

Loading...
Please enter an email.
Please enter a valid email address.
There was an unknown error. Please try again later.

For our full Privacy Policy, click here.