Tax exile

A tax exile is a person who leaves a country to avoid the payment of income or other taxes. It is a person who already owes money to the tax authorities or wishes to avoid being liable in the future to taxation at what he or she considers high tax rates, instead choosing to reside in a foreign country or jurisdiction which has no taxes or lower tax rates. In general, there is no extradition agreement between countries which covers extradition for outstanding tax liabilities. Going into tax exile is a form of tax mitigation or avoidance. A tax exile normally cannot return to their home country without being subject to outstanding tax liabilities, which may prevent them from leaving the country until they have been paid.

Most countries tax individuals who are resident in their jurisdiction. Though residency rules vary, most commonly individuals are resident in a country for taxation purposes if they spend at least six months (or some other period) in any one tax year in the country, and/or having an abiding attachment to the country, such as owning a fixed property.

A very simplified 'rule of thumb' is that under UK law a person is "tax resident" if that person meets any of the residency tests set out under the Statutory Residency Test introduced on 6 April 2014. The reality of the matter is far more complex and unclear.

Under the Internal Revenue Code, a United States citizen is taxed on his or her worldwide income, regardless to their place of residence. United States citizens can avoid tax liability only by both moving abroad and renouncing citizenship, but if they continue to earn money inside the United States, they will still be liable for taxes as if they were guest workers. However, United States citizens living abroad are entitled to substantial tax savings through the foreign earned income exclusion.

A permanent resident in the United States is generally treated as a citizen for tax purposes unless his or her residency lapses. An immigrant not legally admitted for permanent residence (such as a guest worker) becomes liable for United States taxes if he or she spends more than 122 days in the tax year in the United States.

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