Insights
Managing your wealth effectively goes beyond just earning and investing. Especially, finding legal ways to reduce taxable income can significantly enhance your financial health.
As a high-net-worth individual, your taxes are likely to be in the highest of brackets. According to reports, millionaires paid around $776,800 in income taxes in the US. This may bring you the question: how can I reduce my taxable income? Understanding the various strategies can help you retain earnings and make more informed financial decisions.
One effective strategy you should consider to reduce taxable income is obtaining a new passport. While you can access tax incentives from your home country, a new passport allows you to access a different set. It also allows you to manage your taxes to take advantage of your current and new tax regimes.
In this article, we will explain how you can reduce taxable income through Grenada citizenship. To start with, let us explore income taxes and how they work.
Every government imposes taxes on an income. In the US, the government taxes income to varying degrees at the federal, state, and local levels. Once they have collected this tax, the government uses it to fund social programs, such as Medicare.
However, if you have another citizenship or live in a foreign country, you may be subject to that country's income tax. Their income taxes may offer ways to organise or otherwise lower your taxes. In fact, seeking a second passport is a major tax optimization strategy.
For instance, you will have access to a favourable tax regime with Grenada Citizenship by Investment. In particular, Grenada has no inheritance or wealth taxes. In this country, sole traders, partners, trustees, corporations, and employees are subject to income taxes through the following activities:
Once you have a Grenada passport, you can access the tax regime dedicated to their citizens. Then, you will be able to plan your taxes to best retain and grow your wealth for you and your family.
Here are the best strategies to lower your taxable income through this Citizenship by Investment:
The first strategy to lower your income tax is to invest in hotel development and refurbishment. The government offers tax incentives to this particular sector.
Here is a list of the tax incentives/exemptions the government offers in this sector:
This citizenship gives you access to a favourable tax regime, but if you are in the highest tax bracket, you can opt to be a non-resident. When you live 183 days or less in this country, you are considered a non-resident and instead of receiving the 30% tax, you will then only be subject to 15% tax.
Another strategy you should consider is doing business outside Grenada while you live there. The government does not tax your foreign income. Therefore, you can conduct business from anywhere globally and only be subject to the taxes in that country instead of being double-taxed on your income.
One of the best ways to reduce taxable income is to focus on profiting from capital gains. In this country, you will not be taxed on capital gains, such as income from the sale or exchange of assets such as stocks. So, you should avoid making profits through employment or royalties. These other types of income can incur taxes so long as you earn more than $8,900 (24,000 XCD) a year.
One strategy you can use to lower your income tax is to direct your income to a pension fund. In this country, your company can send a portion of your income to a pension fund. The government will tax only the remaining portion.
To understand how this can reduce your taxes, consider an example whereby you make $600,000 a year. In that case, the government will tax you 30% which will total: $180,000. However, if your company submits 10% of your salary to a pension fund, you will save $18,000 in taxes.
You can make the maximum in a lower tax bracket to lower your taxable income. In this country, you can earn less than $8,900 (24,000 XCD) and be liable to pay no taxes. Nevertheless, you are free to earn as much income as you desire that is not taxable or has tax incentives.
If you wish to earn more in taxable income, you may have to pay 30% in income tax. This amount is still less than the top bracket in the USA which is 37%.
Another way to reduce taxable income is to earn income through dividends and interest. The government does not tax income earned through dividends and interest. Therefore, as a Grenada citizen, you will not need to pay taxes on dividend income, whether earned locally or in foreign lands.
In this country, you can lower your taxes when selling properties as a citizen than if you were a foreigner. This is because there is a transfer tax when you sell property. While foreigners need to pay a 15% transfer fee, getting Citizenship by Investment will lower this tax down to 5%.
If you are a business person, you should take advantage of the country's tax holidays. When you open a new business in a priority sector, you will have access to tax holidays during the 15 years of business. Through tax holidays, the government will exempt you from paying certain taxes.
More specifically, the following industries offer these exemptions:
The last way to decrease taxable income is to remain up-to-date and utilise the tax exemptions you have access to. These exemptions may change as the government updates tax laws, and they will affect you in different areas of your life.
Here are the types of income that the government has exempt from taxable income:
Taking advantage of a generous tax regime is one of the best strategies. However, to select the right one for your specific situation, you should rely on Vancis Capital. We are an investment migration boutique that provides expert advice based on your goals. During consultations, we will centre the future you desire for yourself and your family to guide you toward citizenship or residence with a personalised journey.
In particular, for Grenada Citizenship by Investment, we will point you toward the best investment option based on your specific circumstances. We will also walk you through the requirements and paperwork for a streamlined application process.
Money, property, goods, and services you have received are included in taxable income. However, the specifics of what your country considers taxable will depend on your laws. Some income may also be exempt by law.
Taxable income is not the same as net income. Taxable income refers to all your earned income minus standard/itemised deductions and business deductions. Conversely, net income refers to the income that remains after you have either paid your taxes or received a refund.
In US income tax, you should not include the proceeds you have gained from welfare, child support, or municipal bonds. In addition, the government will not tax you on the proceeds from a death through life insurance.
Now you know how to reduce taxable income with Grenada Citizenship by Investment. Once you have gained citizenship, you will have access to this country’s many advantageous taxes. In particular, there is no tax on capital gains, foreign income, or income directly sent to a pension fund. Moreover, you can structure your finances to earn income in ways that are not taxed, such as dividends. Alternatively, you can invest in priority sectors such as tourism to receive tax incentives. Whichever strategies you opt for, consider using expert migration services such as Vancis Capital to ensure a smooth transition to this country and its advantages taxes.
Note: This content is for informational purposes only. You should not construe any such information and other material as legal, tax, investment, financial, or other advice. Please consult with a tax professional or registered financial advisor.
Get in touch to discuss how we can help you with your citizenship or residency by investment goals. One of our investment migration experts will contact you to discuss your case. With over 16 years of combined experience our team has helped hundreds of families achieve freedom.
