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Vincenzo Villamena has extensive experience in both tax preparation and advising clients in accounting and financial transactions. He has “Big 4” audit and corporate accounting experience during his time with PricewaterhouseCoopers, involved in Fortune 100 audit engagements and M&A transactions, giving him the knowledge to perform analysis in valuation, corporate finance, and technical accounting issues. More recently, Vincenzo has served as partner in 4 Corners Inc., focusing on individuals and businesses for accounting and tax preparation matters as well as advising high net worth individuals in private equity investing.

He has both a Masters of Accounting and Bachelors of Business Administration with distinction from the University of Michigan’s Stephen M Ross School of Business.

ANNOUNCER: Welcome to the JetSetter Show, where we explore lifestyle-friendly destinations worldwide. Enjoy and learn from a variety of experts on topics ranging from upscale travel at wholesale prices, to retiring overseas, to global real estate and business opportunities, to tax havens and expatriate opportunities. You’ll get great ideas on unique cultures, causes, and cruise vacations. Whether you’re wealthy or just want to live a wealthy lifestyle, the JetSetter Show is for you. Here’s your host, Jason Hartman.

JASON HARTMAN: Welcome to the JetSetter Show! This is Jason Hartman, your host, where we explore lifestyle-friendly destinations worldwide. I think you’ll enjoy the interview we have for you today, and we will be back with that, in less than 60 seconds, here on the JetSetter Show.

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JASON HARTMAN: It’s my pleasure to welcome Vincenzo Villamena! He is founder of onlinetaxman.com, and today we’re going to talk about tax implications for expats, and a whole bunch of other things as well. Vincenzo, welcome. How are you?

VINCENZO VILLAMENA: I’m doing well. Thank you for having me.

JASON HARTMAN: Good, good. And oddly, we’re talking about living overseas, and so forth, but you’re coming to us today from New York, right?

VINCENZO VILLAMENA: Yeah, I’m based in New York. I do actually split time between New York and South America, particularly Colombia, Brazil, Argentina, but right now I happen to be in New York.

JASON HARTMAN: Okay, fantastic. Now, one of the show notes I have to ask you—since we’re talking about it, we might as well cover this now, rather than later—it says that you recently moved to Medellin, Colombia, last December. And so, do you have two homes? Or is New York your primary base? Or Medellin?

VINCENZO VILLAMENA: Yeah, I’d say essentially I have two homes. You know, I take advantage of living abroad, both tax wise as well as just quality of living an opportunities, etcetera. Right now, I live primarily in Medellin, although, as you said, I’m in New York now. And I think, Colombia, there’s a lot of opportunity there, both investment wise, and just the amount of expats living there. So, you know, recently I kind of set up show there, to take advantage of that, and all the movement and shaking going on, as well as just a large expat community down there.

JASON HARTMAN: Okay, great, great. Well, so, this kind of leads into a good question. So, you mentioned to take advantage of the tax advantages of being an expat, I believe. So, are you technically considered an expat by the IRS? Even though you live part of your time in New York? Or—is there some rule—I’m expecting you to say something like, as long as you spend 181 days out of the country, you’re considered an expat, or you know, something like that.

VINCENZO VILLAMENA: Yeah. Yeah, there is—I am considered an expat, and really, the reason is that I have established my residency in Colombia, both in the form of visas, and just having a place down there. Having a bank account, etcetera. And so, I qualify under what’s known as the bona fide residency rule.

JASON HARTMAN: Okay, tell us about that. The bona fide residency rule?

VINCENZO VILLAMENA: Correct. And then, that is not—there’s no, let’s say, clear cut sort of rule. I mean, there’s two rules. One is physical presence test, which means that you have to be outside of the US for 330 days out of a 365 day period. So, you can only be in the US for 35 days. Now, that’s pretty cut and dry as far as timing, and there’s, you know, a little more intricacy about that, but that’s essentially the rule. The second rule is what’s known as the bona fide residence test. Now, there’s no sort of set time, as far as being abroad, or being in a certain country, but you know, generally, you want to clearly spend more of your time abroad than in the United States, which of course I do, and then also have, you know, other support to show that you’re a resident of that country. So, again, having a visa, and having a, you know, bank account, with utility bills, you know, obviously an actual residence, be it a rental property or a property that you own. And really, spending the majority of the time in that country. And that—that essentially would qualify you for what’s known as bona fide residence. And then, it would allow you to take up to $97,600, which again, that’s for 2013, and that goes up, indexed by inflation per year. But it allows you to earn this $97,000 number tax-free, meaning that you do not have to pay income tax on that.

JASON HARTMAN: So, you get the $97,000 or so, you know, we’ll just round it off, tax-free, every year. That’s the first $97,000. So if you make $500,000, you’re still gonna pay taxes on the other $403,000 in that example, right?

VINCENZO VILLAMENA: Correct.

JASON HARTMAN: Because the IRS taxes all worldwide income. Which is—I hear they’re the only taxing agency on the planet that actually has the audacity to do that. You know, when citizens of other countries move out of the country, from what I understand, their taxing authority stops taxing them until they move back. Is that mostly correct?

VINCENZO VILLAMENA: Mhmm.

JASON HARTMAN: Well, that’s the IRS for you. So, you mentioned there are two ways to qualify for the bona fide residency, is that correct?

VINCENZO VILLAMENA: Well no, there’s two ways to qualify for this foreign earned income exclusion of the $97,000, one being bona fide residency, and the other being physically present outside the United States.

JASON HARTMAN: Okay. And so, the physical presence rule—so, if I understand you correctly, you said that the bona fide residency rule is somewhat ambiguous, into, you know, there’s not like a specific amount of days, or something like that. But you mentioned utility bills, having a place in that other jurisdiction. Having a visa, etcetera. So, on the physical presence rule, is that a certain number of days? I’m looking to quantify this as much as possible.

VINCENZO VILLAMENA: That is, again, 330 days, out of a 365 day period. And when I say 365 day period, it doesn’t have to be a calendar year. So, let’s say, one moves out of the United States July 1st of 2014. You know, if they’re out of the states from July 1st 2014 through July 1st of 2015, then they would qualify for physical presence tests. And you know, we would have to pro rata their portion of days and earnings that they were outside the United States let’s say for tax year 2014. But to your point, it’s a lot more kind of cut and dry, as far as how long you have to be outside the United States.

JASON HARTMAN: So, but that’s 330 days, you said, right?

VINCENZO VILLAMENA: Right.

JASON HARTMAN: Out of—so that’s a lot of time. You can only be in the US for 35 days a year. So, you don’t have to be in the particular jurisdiction where you’re claiming residency; you just have to be out of the US. Is that correct?

VINCENZO VILLAMENA: Right.

JASON HARTMAN: To qualify for that one?

VINCENZO VILLAMENA: Right.

JASON HARTMAN: Okay, okay, good. Okay, well, we kind of got off on a bit of a tangent, and I didn’t ask you for some background, which I’d like to do now. So, when did you found Online Taxman?

VINCENZO VILLAMENA: So, I’ve been a CPA for roughly 12 years, and I founded Online Taxman back in 2009, with a few partners I used to work at PricewaterhouseCoopers, and, you know, the Big Four, etcetera. So, that Online Taxman actually started in 2009, and we’ve been obviously growing and serving the international community ever since. Both US expats, divested clients with international reporting requirements, investments abroad, etcetera, and then also just non-residents that want to do business in the United States.

JASON HARTMAN: It seems l