Talking Expat Taxes #20

Absolutely. Well, first of all, Alex, thank you so much for having me on here. We connected because I saw some of your other episodes, and I just really love the work that you're doing. There's just, so much diverse content, even though it's got kind of tax as its center. You're talking to people from Mexico.

You're talking to people from other countries. You're in Costa Rica yourself. You're an expat yourself, at least part of the year. And it's very exciting because we need more people like you actually shining a light on, the realities of the situation, whether it's taxes, whether it's business, and not just, getting information from Facebook groups or TikToks.

Yeah. Yeah. Thank you.

And to answer your question, I'm Justin Keltner, as, as you mentioned, and I'm the founder of a relocation and strategy firm called Entrepreneur Expat. We typically work with two classes of people, and they obviously have different needs and desires. We work with high net worth individuals who want to not just move to Mexico or Costa Rica or Panama or Albania or Portugal or so many other countries that we've helped people relocate to, but they really want this holistic strategy that they're not really gonna get from what we call the $5 Facebook lawyers, who are essentially the people that hang out in the groups all the time, and they have a, a service where they'll push paper.

They'll get your work done usually, eventually, but they are not necessarily thinking about what it actually means to be an entrepreneur. I've been an entrepreneur for over, over 25 years, and that's been my focus with multiple businesses that I've run, including a six-figure marketing agency that I had for over 15 years, and still kind of run as a hobby on the side, in addition to this consultancy business.

Um, they don't have that kind of experience, like with actually building businesses, with consulting technology companies, consulting real estate companies, consulting home services and so many other types of businesses, and now obviously working a lot with expats and working heavily now in real estate. What we do that's very different is we don't just say, "Hey, we're gonna get you a visa in Mexico," or, "We're gonna get you a visa in Portugal," or wherever. We're not a visa mill. We actually help people understand holistically what the implications are. And we work with referral partners like yourself with some more of the detailed, the nuance, like actually doing the execution of a tax strategy or filing returns for expats and things like that.

But we help people come up with holistic plans where they can really see what they're getting themselves into. Some of them do want to move somewhere like Mexico right away. Others, in fact, the vast majority, are high net worth individuals. They're millionaires. They may be close to retirement age or semi-retirement age, and they just wanna have security.

They see what's going on politically in the US or in Canada or even in Western Europe, but most of our clients are from North America. They see those things. They see the political instability. They see what the governments are doing. They see that speech is not really as free as maybe it used to be, or at least we pretended like it was before.

And, they want to have a plan B in a place like Mexico, where there are a lot more soft freedoms, where there are, in some cases, more opportunities to invest and be on the ground floor of some investments, whether that's real estate investments or otherwise. And they're really just trying to have more optionality in their life.

That's essentially what we help people accomplish, is having that optionality.

the most part, there isn't.

Uh, I mean, I will say there's a little caveat, and we were just talking about this actually before we came on today, officially on this recording, is you have to know how to do things. You have to understand the sequencing. That's very important. Like for example, we were just chatting about how if you're going to, let's say, wanna have Mexico as a plan B residency, it's a great plan B residency, but unless you're planning on staying most of the rest of your life between Mexico and whatever country you currently hold a passport, in cases like Mexico, oftentimes it's better to have, let's say, a permanent residency versus a passport because you can't get any more passports after Mexico in a lot of cases.

There's little quirks like that. Or there are quirks where, if you are a Mexican, citizen, but typically by like descent or something else, they're a little bit more strict on if you were naturalized, but if you're a Mexican citizen by descent, well, you can have a fast track to a Spanish passport.

Um, but a lot of people don't know that. So a lot of this is really, it's like there's no downside if you do it the right way, right? And actually, I would also say too, this is, it's the, it's an interesting point, right? 'Cause I, I've thought of this. I'm like, "Hmm, are, are there downsides of giving, you know, certain passports?"

As a Jew, I could get my Israeli passport. I, you know, there's certainly reasons why I might do that, and there are a lot of other reasons perhaps why I might not do that,

And Ukraine, you know, I'm actually Ukrainian on my mother's side, and I have the right through, uh, descendancy to get my Ukrainian passport.

Problem is, especially now in times of war, they have mandatory military conscription until like age 65

running out of people.

Uh, yeah, and so probably not gonna get my Ukrainian passport. Now, if things calm down a little bit, like in the next, let's say, three or four years, I hope to God that they do, perhaps we go and we live in Ukraine for a while.

Who knows? We can, my wife and I can both get our permanent residency there really quickly, but I don't know if I would necessarily want the passport. So for the most part, there are no downsides if you're actually, working with people like us where we understand, what the different quirks are.

Didn't they just close that program as well? I, I guess it depends on how you're applying, but most people now got locked out of Italy

it's kinda hit or miss. We haven't personally heard of any examples like that with our clients where, they did start and then things changed. But we definitely have had people who wanted to, for example, get into Portugal, and then they said, "Hey, we just got locked out of Portugal 'cause we were gonna spend half a million euros and just buy property."

Yeah, that's another thing. They can change the requirements on you. And that's why we tell people all the time, most of the clients, like probably over 50% typically will come to countries in Latin America like Mexico, because that's where we have the strongest presence and offices on the ground here with, local people, partners and staff.

But the thing is, even with somewhere like Mexico, we've had people that, you know, waited a little bit too long and then they said, "Oh, we're not qualified because of X, Y, and Z." It used to be like, even when I applied, uh, about four and a half years ago for residency, you only needed a couple thousand dollars a month in income. Now that's almost tripled.

if somebody is considering moving abroad, they gotta look into the requirements now and understand, you know, what they can qualify for and make move on it because there's like absolutely no advantage in waiting. I see that all the time where people like kinda think, "You know, it's a good idea.

Maybe I'll consider diversifying. I'll get my plan B, but I don't wanna do it right now." And then they end up getting

So what's next for you, out of curiosity? Like, where have you been looking at other potential residencies? Do you have yours in Costa Rica already?

So we get this question a lot, and the simple answer is they're two very distinct things, residency versus citizenship, and they really fulfill two different purposes. So I'll give you an example, and maybe we can... We'll get a little, doomy just because, you know, I, it's not that anything we do is necessarily based on fear, but, people need to understand what actually can happen if they want to live somewhere and they don't pursue, the proper legal pathways.

Let's say that another pandemic happens, or let's say that there's some other sort of travel ban or shutdown or, the stuff really hits the fan in the United States and now all of a sudden there's 2 or 3 or 5 million people who want out, which by the way is a pretty small percentage. You know, it's 1% of the population or less.

And by the way, there's already over 6 million US expats living abroad, it wouldn't be that crazy that number doubles. Yeah, yeah.

In a catastrophe. Um, exactly. Yeah. There's no, official record because a lot of people are perpetual tourists or they live, kind of undocumented in places and whatever.

But let's say that something does happen a bunch of people wanna leave. A lot of clients that we've talked to are like, "Oh, you know, I'll just... If anything bad happens, I'll just, I'll just drive across the border and I'll just go to Mexico and it'll be fine." It's like, well, do you really think the Mexican border is going to be open when things hit the fan and when, uh, life gets even more challenging?

Yeah.

And with Mexico specifically, like it's not just theory. I mean, we have people now regularly that come to us because they wanna start the residency process because they have been at the airport. Like they'll arrive, they're used to flying into Guadalajara or Cancun or Mexico City or wherever and just getting a six-month stamp, just like in Costa Rica.

I don't know if it's three months now or six, but they'll give you a stamp. Yeah, it's a six-month there too. So they'll give you the stamp for, the maximum amount of time. In a lot of countries, Mexico included, in the last couple years, that's not been happening anymore. The immigration officers here are actually starting to ask and say, "Hey, do you have a hotel stay?

Do you have an Airbnb reserved and paid for? When is your return flight home?" And you say, "Oh, you're, you only got, you know, 12 days of stays booked." "Okay, here's a visa," you know, write in 12... Not even a visa, a travel authorization, like a tourist authorization. They'll write in 12 on

And because people were so used to every time they come into Mexico for decades, they would just give you the six months, no problemo. Uh, it's not happening anymore. We have a lot of people who are actually living here. They have pets here, they have their stuff here, and the customs officer is, only giving them 10 days, 12 days, 45 days, whatever, instead of 180, and now they've got a big problem on their hands because then they're illegal in the country.

And by the way, Mexico is not messing around anymore. They have checkpoints. They will arrest you. You will go to immigration jail if you overstay your visa. I'm not saying that's gonna happen to you every time, but if they do catch you and you are on a tour, like they can hold you up to 60 days, sometimes longer.

It's not something I would wanna mess around with. So that's residency. Residency is really having a legal right to reside in a country. If another shutdown happens, if another pandemic happens, if something else goes down, Mexico was good about this. They really didn't shut their travel or tourists or anything down at all, which is cool.

Uh, I respect that a lot. But who knows what the future holds or what political instability holds or what the orange man in the White House is gonna do tomorrow to piss somebody off, right? And then, hey, guess what? Yeah, I know we're only giving Americans 30 days now. I'm not saying that's gonna happen literally or that that exact scenario will happen, but there are things like that.

Thailand, same kind of thing. They're no longer allowing visa runs, and they're getting a lot more strict. And now if you wanna be a tourist long term or basically have like a temporary type of residence, you gotta show $20,000 in the bank. Actually, I think the new visas, 'cause they changed this again, you gotta pay them 20 grand and then you get like an elite visa.

There's

different digital nomad programs like that, all around the globe. But the point is you cannot depend on being a tourist somewhere forever. And this applies to you, Alex. This applies to

Yeah. So I would say, like, the distinction is really... So that's the residency base, and then citizenship is you have the right to, receive a passport in that country, and that gives you obviously rights to consular support and things like that. But realistically, I'm not expecting, the government of Mexico or the United States for that matter to go and bail me out of jail somewhere in Zimbabwe.

You know what I mean? Like, realistically, governments don't do all that much anyway in terms of consular support. But it is mainly for that passport. It's mainly for that travel document, and you don't know when political tensions rise more and the US passport is not as favored on the global stage as it is today.

Mexico is actually in the top 20 passports in the world. They've got visa-free access to over 120 countries, including Japan. You can go there for six months. You can't, on a US visa. A lot less in terms of, a lot fewer complications with places like Russia. You don't have, the kind of same stigma that you might get, let's say, being an American in many countries around the world if you're a Mexican.

"Hey, I'm a Mexican." Mexico is a very neutral country. Mexico doesn't just go to war with anybody. They don't go and bomb schools or whatever they're bombing in the Middle East. We're very well respected around the world. I say we. I mean, I, I almost consider myself Mexican now because this is, you know, my

in total over six years now.

Not all sequentially, but in total

It's definitely both and, Alex. I would say that probably 60 or 70% of the people today that come to us are like, "Hey, we know you, you can do Mexico for residency. We know that you've got contacts in Uruguay, Paraguay, Costa Rica, Panama, other parts of Latin America. We would like to get our residency or eventually a passport there.

Can you help us?" A lot of the time though, We talk about this thing a lot in the industry called this flag strategy. So you wanna have different flags, sort of your personal flags, right, in, in different places. to your point about, "Hey, you know, maybe I see this as a country I wanna live," I mean, yes, and sometimes they're looking at a country for the tax benefits.

Granted, going and saying that you're a resident of Dubai now and getting paperwork there but spending all of your time in the US is not gonna save you any money on taxes. The only way that having a low tax regime actually saves you on taxes, and you can speak a little bit more to this for sure, from the US standpoint, but it's if you're out of the United States in a, or where- wherever your home country is, enough time for you to not officially be a tax resident there, and you don't spend enough time in a tax-heavy country to trigger taxes there, and perhaps you plant another flag in a place like the UAE or in a place like Turkey that now has a 20-year tax holiday or in a place like, uh, Paraguay, right?

Like maybe you're spending the majority of your time there and you're able to take, advantage of tax benefits like that. Um, but

Exactly. And sometimes, you know, they, it, they want a combination. They want to have a residency or citizenship perhaps in a place where they can bank, because in some cases, even in Mexico, you typically have to be a resident to even get access to the banking or get access to the investments.

We've had people come to us and say, "Hey, we wanna just start investing in Mexico. How do you do it?" Well, you need an RFC, which is kinda like a Mexican tax ID number, and you need typically a Mexican bank account. You can't just get that as a foreigner. You definitely can't get an RFC as a foreigner on a tourist visa.

So they get that residency because it's gonna give them access to investment opportunities. It's gonna give acc- give them access to be able to sell a house without paying almost any capital gains relative to what they would pay if they sold it as a tourist. And then even if they don't move, we have plenty of clients that come down here, they're here for a few weeks, they get their Mexican residency, but they plan on retiring here in, let's say, three or four years.

Well, guess what? They just have to come once essentially for the extra three years on their temporary. So they get... They come down here once, they get their, typically their temporary residency card for a year. They come back in, in that year, they get it for another three years, and then they just have to come back one more time to Mexico, even if they're not living here.

They convert that to permanent residence, and they don't really have to do anything else with immigration. They're set. Or if they're retirement age already, like in their typically early to mid-60s at least, depending on the consulate, they get that, that permanent residence. Now they're set, and they can live in Mexico.

They can not live in Mexico, but they've got access to the investment. So part of it for sure is, hey, where do you see yourself living? Part of it is, what kind of businesses do you wanna run? We at Entrepreneur Expat are obviously very big on entrepreneurship. We're actually launching for people that, maybe have a, you know, that are kinda tied to their...

Either it's a highly paid W2 job or they're a contractor or they're doing something, for example, that, that is tied to their geographic area. We teach them how to turn that into a location-independent business. They can find a little bit more and some free resources at entrepreneurexpat.com/income.

I'll share the link, you know, with you later as well. But they can download our guides. They can, see more information about the cohort we're starting on that. So sometimes, they wanna start a business and they wanna do it remotely and they're like, "What's the best country for me to live in remotely, start a business, perhaps online, work with clients, making dollars, and then money in pesos?"

There's other clients that come to us and they're like, kinda like my wife and I are, where we're doing that, but then we also are forming things more on the ground. Like here we have an office. We're already getting into to relationships with developers, with real, other real estate agents. We're building a real estate agency here now on the ground and- We wanna do business in person with people here because it's fun.

I mean, I love to, to just kinda, uh, be in the action a little bit and be making connections and speaking at events like we've done here in Ajijic and, um, you know, beautiful Lake Chapala here. It's just like there's, there's an energy

many people coming, and it's not just retirees.

There's a lot of people our age, like in their 30s and their 40s

For sure. Yeah.

We have a kind of a running joke here about Mexico and kind of Latin America in general. The things that are very difficult in the US, like getting permits to open a business or opening a business in general or, things to do with, even like a lot of government operations related to entrepreneurship, they're actually quite easy in Mexico.

What's hard are the simple things like opening a bank account. Believe it or not, it took my wife and I each multiple days just to finish the process

in the US,

yeah, in the US, like you, you got, you know, you walk into a bank, you typically don't even need a Social Security number, and in 12 minutes you walk out with a debit card in your hand and a checking account, and probably an offer for a 5% interest car loan or something. Here, loans are, even for houses, are upwards of 12%, right?

It's a totally different economy. And to open like a cellphone plan, you gotta give, references, credit checks, your firstborn child. Like it's a whole thing. To open a bank account... I mean, we were in Telcel when we started our like our postpaid accounts, which we've now switched off of, for prepaid, which is a lot easier.

But when we opened our postpaid accounts, it literally took six hours to open a phone line. The bank account took multiple days. And we had to each do a call with Spain

To verify that we are who we say we are. Now, uh, nowadays, right, now that we have, we're more settled in here, we do this as a business, we have more connections, we can get you in and out of there typically in an hour or two,

in a, in a, on a good

you can do it if you speak Spanish well and if you kind of know how to navigate the bureaucracy a little bit. We do always tell people though, whether you're doing it on your own or even with help, do not expect to get more than one errand done in a day here. Like it's not gonna happen.

I received a package 'cause I had to get a Kindle that I bought on, Amazon forwarded here from, my suegros, my, my in-laws in Miami. And, we had to send it through the basically like the mail expr- express priority mail, which then routes through the Mexican, postal service.

And it didn't take la- that long 'cause it was an express package. It probably took like a week. But they never delivered it to the house. I had to physically go in person to the post office, and then on top of that they said, "Oh, you owe, you know, we assessed this at this value, so you owe us taxes." And it wasn't that much.

It was like maybe $30 of taxes. I'm like: "Oh, okay, great. You know, here's a, here's a credit card, here's a debit card." "No, no, no, no, señor. You have to take this receipt..." Uh, and actually they wouldn't even give me the receipt. I had to write down the numbers from the thing on a piece of paper and then go to the bank.

So I went to one bank to try to pay it. I was in line for an hour. Finally I get to the front. "Ah, no señor, no se puede. You can't do that here." I was at Santander. They said, "No, there's only one bank in the entire town that you can go..." In the city, actually. This is in Guadalajara. "You have to go to BBVA Bancomer.

That's the only bank you can use to pay tax payments." So I, I mosey on over to the Bancomer and it's Saturday at like, uh, 1:00 p.m. and I go there. This is like the day after the post office 'cause, you know. Uh, so I go to the Bancomer and it's a Saturday and I drive across town, pay the fee for the parking in the little plaza or the shopping center or whatever.

And I go into the bank and again, waiting, waiting. "Okay, I wanna pay my, my thing, my bill for the package so that I can receive my package." "Ah, no señor, es fin de semana. You can't pay that on weekends here. You have to come back on Monday." Like what? So then I come ba- drive all the way back home, drive all the way back to the bank, wait in line again.

I-- even though I have an account at this bank, they made me go outside of the bank, go to the ATM, take out cash, bring it back to the teller after waiting in line again, then get a, a, a printed receipt, take that all the way back to the post office on the other side of town by where I live, and then finally

yeah, yeah. Don't expect to get more than one thing done in a day or sometimes a week

right?

here, some banks will give you an account if you have a temporary residence. Others, you need a permanent residence. Others don't wanna open an account for you unless you're a Mexican. Most of them won't speak any English at all. It's, yeah, it's kind of a cluster

and that's why we include all of those things in our services. We work with people who have, frankly, more money than time. They wanna do things right. They don't wanna try to guess and attempt to do things themselves that could potentially cost them not just hundreds of hours of time if they do it on their own, but also potentially cost them their residency or even their citizenship.

We help people avoid mistakes like that because we have SOPs. My background is in technology and operations and, I ran multiple businesses, you know, for decades, and so I understand that you need a process for something. And that's doubly true in Latin America, where even though they're more relaxed about certain things, they're more regimented and structured about other things.

So you really have to have your ducks in a row when you're dealing with these bureaucracies, whether it's the government, the federal government here, the state government, getting your driver's license, getting your RFC number, because there are easy ways to do things, and then there are really hard ways to do things.

We try to get people to avoid, doing the things the hard way.

Of course.

So I'll split that into two parts, one of which is our kind of capabilities, and the other of which is where actually makes the most sense for the most people in North America, and I'll start with that. reason that we're living in Mexico and the reason that we have businesses here catering towards mainly Americans and Canadians is that this is a very logical soft landing, and it's a very logical first step for someone trying to get their first second residency or passport. reason for that is, you know, very inexpensive, fast flights to the US or Canada, mostly direct ones. We have flights at multiple times a week from Guadalajara to Miami, for example you have a relatively similar culture, right? There's a lot of cultural influence from both sides of the border, across the border, and so it's not really a culture shock for most people.

English is fairly widely spoken here, and at least in the touristy areas where a lot of expats come and in the expat hotspots like, like Ajijic, for example. The menus are all in English and Spanish in most places. Not in all of Chapala, not in all of the Lake Chapala area, but, in most of the places where expats are going, it's very common that English is spoken. Um, the other reason is it's not that difficult if you're working with for example, us or you're working with a reputable firm to actually get your residency. They have consulates in the U.S., they have consulates in Canada. You're not traveling, halfway around the world just to go and get an appointment to even get that initial approval.

It, it's just, it's a really good, it's a good soft landing. Uh, it's also very business-friendly and I would say more business-friendly than perhaps somewhere like Colombia that at least lately has been a little bit left-leaning for my tastes or somewhere like Costa Rica where, Sure, Mexico, you still have a lot of the mañana and it's difficult to coordinate contractors for home repairs and things like that, but it's not the pura vida that you hear every day when you're in the Guanacaste coast or you try to get your car fixed or your, you know, a leak fixed or whatever and you're waiting six weeks for a contractor to show up, right?

It's not quite as bad. Yeah. Those sorts of things, um, do make the adjustment more difficult. So there, there's a little bit more friction versus in Mexico. Yeah, it's more laid back, but people here still like money. They like doing business. It's not as much of a culture shock for people in general or specifically for entrepreneurs.

So we like that a lot. That's part of the reason that we're here personally and, of course, because we're advising so many Americans, the vast majority of them are interested in Mexico. It's just a logical first, uh, step. Now, in terms of capabilities, we have experts that we work with because we partner with people all around the world.

So we have experts we work with in Panama, Albania, Costa Rica, Portugal, Spain, Uruguay, Paraguay. Really all over the place. And the reason for that is we're not lawyers, we're not accountants. We don't claim to be any of those things. We will create comprehensive, holistic packages where we are doing the strategy.

You know, I, myself and my team, we're working on the strategy with our clients. We're helping them look at the overall hierarchy of like what residencies do they need? Where is their business gonna lo- gonna be located? Where perhaps are they gonna do their banking if they wanna move some or all of their banking to another country for different reasons, or at least diversify?

Where are they gonna have their investments? Where are they protecting their assets? We look at things like that in a very comprehensive manner. Uh, we help them diversify with real estate as well. Now, I don't, even though I sell real estate, I don't tell the average person who's in their 30s or 40s like, "Hey, go and dump 300,000, 500,000, a million dollars into a single family home in Mexico."

Nor would I tell them to dump that into a single family home in the United States, right? Because there might be better vehicles, whether it's in real estate or otherwise, for their money, depending on where the- where they're at, right? So there, there's like different strategies for different people. Now, if somebody is 60 and they're like, "Yeah, I think I'm gonna retire in Mexico," sure. Maybe you wanna own your home so you don't deal with as much BS. You can fix it, make it up, you know, to make it look the way you want it to, right? I love, uh, improving houses, and so far we've been renting them, but now we finally have a plot of land actually right here down the mountain where we're gonna start building in about 24 months.

individual and our main focus is like the strategy. You have to start with

Exactly. And we have people that we, like, directly manage in even properties, just like in, right here in our, gated community that we manage, where we've had a lot of experiences, for example, with Airbnbs, and we said, "You know what?

No, we're not sending people to Airbnbs," because there's such a diversity, in a, not in a good way, of quality, right? And maintenance and things like that. So we directly manage, or our team manages the properties that we typically will put our clients in, or we know the owners directly. So we definitely have a little bit more of a, on-the-ground presence in Mexico than other places.

But again, that's because, we can only be in one place at a time. But if somebody's looking at Portugal, we've helped advise people on Portugal. Now, because I'm Ukrainian on my mother's side, and eventually I will have the residency there in my back pocket for Ukraine. In fact, we've already started on that process.

I'll be able to advise people on Ukraine, and we've got a ton of other countries that either we've already researched for ourselves, we've already started our own. Now it's gonna be the third residency that we're gonna get, perhaps in, in Paraguay is where we're seriously considering, doing that this year.

We've already started that process. So we've got reach really globally with a concentration in Latin America because it's just the easiest jumping-off point. And, you know, a lot of people working in time zones that are US-centric as well, if they're still running their business.

Yeah, the best place to go is really gonna be entrepreneurexpat.com is our website. And if you go to entrepreneurexpat.com/consult, that's where you can actually get started. There's a very simple form. It takes about three minutes to fill out just to give us a little bit of context about what you really want, uh, what countries you're looking at, what countries you're coming from, and then, what your specific needs and desires are.

You'll fill that form out. We'll let you know whether we can give you a consultation and dive in a little bit deeper with you, to help you on a one-on-one basis with that. Or if not, you know, perhaps you're in a position where maybe you need more of an online course to build income, or maybe you're still in the research phases and you haven't committed to actually moving abroad.

We've got tools and courses and things for that, so we would point you in that direction, depending on, how you fill out your application and what the next logical step for you would be. And of course, YouTube as well. People can follow us on YouTube at Entrepreneur Expat.

Of course. Thank you for having me