"Do it yourself" worst horror story ever of international tax planning

"Do it yourself" worst horror story ever of international tax planning

Some time ago, we happened to hear the worst horror story of international tax planning.

A taxpayer a few years ago decided to relocate abroad and inquired on the internet on the necessary requirements he becomes aware of the 183 days rule that in order not to be considered tax resident in a country for a given year he must change his tax residence in the foreign country within the first 183 days of that year.

Otherwise according to the worldwide income principle it will pay taxes on everything earned anywhere in the world even to the first country.

So a large month in advance he decides to move to the foreign country.

Here he collects the necessary documentation in 10 days and submits an application to his country to be considered resident abroad.

What he doesn't know is that the application is not enough and the application approval is required the first country did not answer his application for another two weeks.

Without warning, after two weeks, that country reply only a few days before the deadline, to tell him that the entire application was rejected because he had not filled in the line of the application regarding the post office box, so he would have to resubmit the whole application.

Except that the approval of this second application was now late.

The taxpayer, after the second application approval, pretended nothing had happened except that, years later, he discovered that in the first country there were debts and penalties against him for unpaid taxes calculated on the earnings of that year for over 240 000 euros, and that the admitted declaration of income for that year had even been considered a crime and now a huge debt awaited him in the first country and a trial that could have seen him end up in prison for four years.

The story is not over for him even today.

Doing international tax planning by yourself is a bad idea

International tax planning involves designing a financial and investment strategy to minimize tax liabilities in multiple countries. While it may seem appealing to try to handle international tax planning on your own, there are several reasons why it is a bad idea:

1. Complexity: International tax laws and regulations can be extremely complex, and it is difficult for individuals without specialized training to navigate them. There are often many different factors to consider, including tax rates, tax treaties, tax credits, and exemptions, and it is easy to make mistakes if you are not familiar with the rules.

2. Risk of errors: If you make mistakes in your international tax planning, you could be subject to penalties, fines, or even criminal charges. Even if you are careful and try your best to follow the rules, you may still make mistakes due to the complexity of the laws.

3. Cost: International tax planning can be time-consuming, and you may need to invest a significant amount of time and resources into researching the rules and designing a plan. If you make mistakes, you may also need to pay for professional help to fix them, which can be costly.

4. Professional expertise: International tax planning requires specialized knowledge and expertise that most individuals do not have. Working with a lawyer who has experience in international tax planning can help you design a plan that is tailored to your specific needs and goals.

Overall, while it may be tempting to try to handle international tax planning on your own, it is generally a bad idea due to the complexity and risk of errors. Working with a lawyer is a better option, as they have the expertise and experience needed to help you navigate the rules and design a plan that minimizes your tax liabilities.