The ultra-rich can buy yachts to live ‘nowhere’ — but can it also be a tax strategy? Not for most Americans

And along with the six-figure parties complete with champagne and caviar, there may be a practical reason for yacht life, too: tax breaks — especially for European ultra-high-net-worth individuals (UHNWI).

“European UHNWI have a structural incentive to stay mobile. Not being in one place too long is itself a tax strategy,” writes author and financial communications strategist Richard Amador on X.

Yachts are “a remarkably efficient asset class for people whose wealth depends on being nowhere in particular,” he writes. “This is why European UHNWI do a yearly circuit — Wimbledon one week, Cannes another, the WEF, the Biennale.”

Amador argues that the social calendar of the ultra-rich isn’t separate from tax strategy: “They are the same thing.”

But this isn’t as straightforward as it might sound.

“Most countries have regulations determining tax residency, which involves more than just physical location. Factors like income, assets, and connections to a country can affect your tax status,” writes Iven De Hoon, a lawyer and tax expert from Belgium, for No More Tax. “Attempting to avoid taxes by living on a yacht and avoiding tax residency could be considered tax evasion or fraud.”

As De Hoon points out, Americans in particular can’t escape taxes — even if they happen to live on a yacht — since they’re taxed on their worldwide income. “Additionally, Americans living on a yacht may need to pay state and local taxes, based on the yacht’s registration and where it stays for extended periods,” he writes.

So whether you’re moving abroad for a job, planning to retire in another country or choosing to live the yacht life, you’ll likely still be paying taxes to the IRS.

Why Americans living abroad can face complicated taxes

The U.S. taxation system requires Americans to pay taxes on their worldwide income based on citizenship — regardless of where they happen to live. The only other country that uses citizen-based taxation is Eritrea, although its model is a bit different.

The rest of the world uses residency-based taxation, which means you pay taxes based on where you reside, rather than your citizenship.

While the U.S. has tax treaties with 68 foreign countries that can help Americans living abroad as residents avoid double taxation, it also means doing your taxes is a whole lot more complicated.

Typically, with residency-based taxation, if you stay longer than a certain number of days in a calendar year, you have to pay local taxes. A popular claim is that if you stay less than 183 days, you can avoid this. But that’s not entirely accurate.

Every country is different — even when it comes to their definition of a calendar year. And residency is often based on more than just the number of days you’ve spent in a country.

“A country may care far less about your travel spreadsheet than about whether you kept a family home, ran your business there, or kept the centre of your life there,” writes Adrian Blackwell, an international tax policy researcher, in the Tax Haven Directory.

For example, he writes, “Portugal can treat you as resident if you maintain a home there as a habitual residence, France can look at home, main professional activity, or economic interests, Australia can use the resides or domicile test, and Cyprus has a 60-day statutory route.”

That’s not to say the ultra-rich in the U.S. don’t have other options to shield their wealth. As Amador writes in his tweet, they “optimise differently” with such tactics as dynasty trusts or state domicile arbitrage, which refers to the practice of establishing permanent residency somewhere with favorable tax laws while still maintaining ties to other locations.

Managing your taxes when you move abroad

If you’re planning to move from the U.S. to another country, you’ll need a tax strategy. And it doesn’t matter how long you’ll be gone, whether it’s a short stint for work or a permanent move for retirement (or just hanging out on a yacht).