Living in a tax free zone - Tips needed

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Do you want to pay tax?

 
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Jase
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Joined: Wed Sep 29, 2010 9:49 am

Living in a tax free zone - Tips needed

Post by Jase » Tue Oct 05, 2010 4:53 am

Hi all you Bogleheads,

I'm Jase, I'm relatively new to bogleheads, I would like some advice.

Bahrain is a tax free zone I do not have to pay any income tax, capital gains or any other type of tax.
(WOW your lucky I hear you all say)

The Bahraini Dinar is fixed to the US Dollar (US$1=BD0.378)

I am a 30+ year old Bahraini National Living in Bahrain so I am afforded all these rights.

I am not absolutely new to saving/investing, I have money in three types of savings:
- 2 year fixed deposit account at 7% (My main savings)
- Monthly fixed deposit account 4% (Used as an emergency fund)
- Investment plan $1,250 per month for 18 months


But I am relatively new to stock trading, I just invested my first US$1000 into my Zecco account just to test how the system of trading works, and have raised this amount from trading to $1110 in my first month. (I Bought 2 shares of google)

I would like to get some tips, about what would be best to start trading in to take advantage of my unique situation.


I am looking for a longer term safe strategy and at the same time looking for a smaller fun account where I can be more risky.

Looking forward to your tips and suggestions.
Don't forget to vote at the top of the page.

livesoft
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Post by livesoft » Tue Oct 05, 2010 5:56 am

Here is a very serious thought: Why don't you write a book about how to invest for Bahraini nationals? Or does such a book/website already exist?

Jase
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Post by Jase » Tue Oct 05, 2010 7:05 am

livesoft wrote:Here is a very serious thought: Why don't you write a book about how to invest for Bahraini nationals? Or does such a book/website already exist?
Thanks live soft,
I don't think their is any book or website out their right now regarding investing for Bahrainis, but I don't think I have any right to write anything, with my limited knowledge of investing. Plus I think the market would be to small with less than 1 million population.

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Houston101
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Re: Living in a tax free zone - Tips needed

Post by Houston101 » Tue Oct 05, 2010 7:26 am

Jase wrote:I would like to get some tips, about what would be best to start trading in to take advantage of my unique situation.
I wonder if a foreign national and/or resident will have to pay any taxes on earnings and gains generated from U.S. capital markets?

deerhunter
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Post by deerhunter » Tue Oct 05, 2010 7:52 am

Wish I could get a two year savings account at 7 percent. Your country sounds like what the US used to be. How do I become a citizen.
Living off the land is a family tradition.

Jase
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Re: Living in a tax free zone - Tips needed

Post by Jase » Tue Oct 05, 2010 8:00 am

Houston101 wrote: I wonder if a foreign national and/or resident will have to pay any taxes on earnings and gains generated from U.S. capital markets?
No we do not have any taxes on gains from the US capital market.

Indices
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Post by Indices » Tue Oct 05, 2010 8:07 am

I once lived in Bahrain myself, in Saar. Very lovely country, I hope things are well there for you. I heard you recently had some unrest in the country, and I hope things have stabilized.

Since you can use an American broker, I would just buy ETFs of indexes. The Bahraini dinar is pegged to the dollar, so I would invest mostly in US equities and bonds to avoid currency difficulties.

VTI for stocks, BND for bonds, the percentages you hold are based on your age. Since you are in your 30s, hold that percentage in BND.

Indices
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Post by Indices » Tue Oct 05, 2010 8:13 am

livesoft wrote:Here is a very serious thought: Why don't you write a book about how to invest for Bahraini nationals? Or does such a book/website already exist?
Bahrain has a very small population, so I doubt a book written for them would have a large market. However, a book could be written for people living in the entire GCC which is also largely a tax haven. The GCC is made up of Saudi Arabia, Qatar, Bahrain, UAE, Oman, and Kuwait.

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Houston101
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Re: Living in a tax free zone - Tips needed

Post by Houston101 » Wed Oct 06, 2010 6:20 am

Jase wrote:
Houston101 wrote: I wonder if a foreign national and/or resident will have to pay any taxes on earnings and gains generated from U.S. capital markets?
No we do not have any taxes on gains from the US capital market.
Bahrain is not going to require you to pay any taxes probably but I wonder if IRS is going to ask you to pay taxes.

If this is not the case wouldn't it be very easy for people to setup offshore legal entities and invest in whatever they want? Not a very clear cut loophole but I guess you guys can see what I am talking about.

TedSwippet
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Re: Living in a tax free zone - Tips needed

Post by TedSwippet » Wed Oct 06, 2010 10:36 am

Houston101 wrote:Bahrain is not going to require you to pay any taxes probably but I wonder if IRS is going to ask you to pay taxes.
The US angle on investments held in the US by foreigners: Withholding of 30% of dividends and interest, or any lower rate if specified in a tax treaty. Currently no withholding of capital gains, but watch for FATCA at the end of 2012, which introduces a 30% withholding not just on capital gain but on the gross sale proceeds for "non-qualified" foreign payments. US estate tax issues for non-resident aliens if holdings in the US exceed around $60k in total; note that US estate taxes fall on the balance of funds, not just accrued gain.

I lived in Muscat for a while in the late 80's. Brilliant place. I'd go back in a heartbeat.

Indices
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Re: Living in a tax free zone - Tips needed

Post by Indices » Wed Oct 06, 2010 10:38 am

Houston101 wrote:
Jase wrote:
Houston101 wrote: I wonder if a foreign national and/or resident will have to pay any taxes on earnings and gains generated from U.S. capital markets?
No we do not have any taxes on gains from the US capital market.
Bahrain is not going to require you to pay any taxes probably but I wonder if IRS is going to ask you to pay taxes.

If this is not the case wouldn't it be very easy for people to setup offshore legal entities and invest in whatever they want? Not a very clear cut loophole but I guess you guys can see what I am talking about.
The OP is not American. But you are correct, if you are an American citizen you will be forced to pay tax on your worldwide income. The United States is the only developed country that taxes its citizens who are domiciled abroad.

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