How Billionaires Avoid Paying Taxes?

The Day Jeff Bezos Paid Nothing

In 2007, Jeff Bezos, the founder of Amazon and one of the wealthiest men on earth, filed his tax return with the I.R.S. His official taxable income: zero dollars. Not only did he pay no income tax—he actually received a four-thousand-dollar refund, courtesy of the child tax credit. That same year, his net worth increased by three point eight billion dollars.

This wasn’t an error. It wasn’t fraud. It was a perfectly legal tax strategy employed by virtually every American billionaire. ProPublica, which obtained and analyzed years of tax returns from the country’s wealthiest individuals, uncovered a systematic pattern: in years when Bezos’s fortune grew by tens of billions of dollars, his official taxable income was often zero, or close to it. Elon Musk, in 2018: zero federal tax. Michael Bloomberg, in certain years: zero. Carl Icahn: zero.

How is this possible? Is it legal? And, more to the point, is the tax system designed this way deliberately, or is it the result of unintended loopholes in the code?

Recent research from the E.U. Tax Observatory provides an answer that should trouble anyone who pays taxes. Billionaires around the world pay an average of 0.3 per cent of their wealth annually in taxes. Meanwhile, their average investment return is 7.5 per cent per year. This means that their wealth grows at a net rate of 7.2 per cent after tax—faster than virtually any rate of economic growth. The average taxpayer? Pays twenty to thirty-five per cent of his or her income in taxes.

This is not an accident. This is a system. And if you want to understand how global capitalism really works, you need to understand this system.

The “Have No Income” Strategy: How to Be a Billionaire Without Earnings

The first fundamental principle of tax optimization for the ultra-wealthy is straightforward: never realize income.

Tax systems around the world are built on the concept of “realized income.” You don’t pay tax on the fact that your stocks have appreciated—you pay only when you sell them and actually receive the money. This makes sense for the average investor, who needs to sell shares to buy a house or pay for a child’s education. But for billionaires this principle becomes a loophole the size of the Grand Canyon.

The “Buy, Borrow, Die” strategy is the somewhat tongue-in-cheek motto of contemporary tax optimization for the ultra-wealthy:

Buy—Invest in assets that will appreciate. Ideally, shares in your own company, which you can control and whose value you can maximize by reinvesting profits rather than paying dividends.

Borrow—When you need cash for living expenses (and even billionaires need cash—yachts, mansions, private jets don’t buy themselves), don’t sell your shares. Instead, take out a loan secured by your stock. Banks are happy to lend at one to two per cent annually when the collateral is shares worth billions. And a loan isn’t income—so you don’t pay tax on it.

Die—When you die, your heirs inherit the shares with a “step-up in basis”—meaning the cost basis of the shares is reset to their market value at the time of death. All unrealized capital gains disappear. Shares purchased for a hundred dollars, worth a million at death—heirs can sell them for a million and pay zero capital-gains tax, because their cost basis is a million, not a hundred.

Sound abstract? Consider a concrete example.

Warren Buffett, the fourth-richest man in the world, has publicly acknowledged that he pays a lower effective tax rate than his secretary. How? Buffett takes virtually no salary from Berkshire Hathaway (a dollar a year). He doesn’t sell his Berkshire shares. He doesn’t instruct Berkshire to pay dividends (the company has never paid dividends to shareholders). His wealth grows by tens of billions of dollars annually—but to the I.R.S. his income is essentially zero.

When Buffett needs cash, he borrows against his shares. Given his credit rating, banks lend to him at rates close to the Fed’s benchmark rate.

The result? Between 2014 and 2018, Buffett’s wealth increased by twenty-four point three billion dollars. His total income tax during that period: twenty-three point seven million dollars. His effective tax rate: 0.1 per cent of his wealth growth.

Offshore Personal Holding Companies: How Not to Own Your Own Wealth

The second strategy, particularly popular in Europe, involves not owning assets directly. Instead, billionaires create complicated holding-company structures that formally own the assets.

Research from the E.U. Tax Observatory reveals dramatic differences between the U.S. and Europe in the use of this strategy. Why? Because the United States, as early as 1921, introduced anti-abuse provisions known as the “accumulated earnings tax”—a special penalty tax for companies that hoard profits instead of distributing them to shareholders. In 1937, it added the “personal holding company tax”—another penalty tax for companies that are essentially personal piggy banks for wealthy individuals.

Europe never introduced equivalent provisions. The result? European billionaires systematically use personal holding companies as tools for avoiding personal income tax.

Studies show that in countries with weak anti-abuse rules (most of Europe), billionaires effectively pay almost zero personal income tax thanks to these structures.

Tax Residency: The Art of Being Nowhere

If the “have no income” strategy isn’t sufficient, you can always apply the “be no one’s tax resident” strategy.

Most tax systems around the world are based on the hundred-and-eighty-three-day test—if you spend more than a hundred and eighty-three days a year in a given country, you’re its tax resident and must pay tax on your global income. Sounds simple? But what if you never spend a hundred and eighty-three days in any country?

The “Trifecta” strategy involves spending about ninety to a hundred and twenty days in each of three countries per year. The math is simple: three times a hundred and twenty equals three hundred and sixty days. You’re a resident of nowhere. So where do you pay taxes? Theoretically, in the country where you have your “center of vital interests” or “place of management.” Practically—nowhere, if you structure things properly.

Research shows record tax mobility among billionaires. In 2025, a hundred and forty-two thousand millionaires (not billionaires—millionaires, a much lower threshold) changed their tax residency. The most in history. Where are they migrating?

• The U.A.E.—Dubai has become a magnet for European and Asian billionaires. Zero income tax, excellent infrastructure, strategic location between Europe and Asia. In 2024, the number of billionaires in the U.A.E. rose by eighteen per cent.
• Monaco—the classic choice for European ultra-high-net-worth individuals. Problematic French rules for French citizens (France treats French citizens as tax residents for three years after they move out), but ideal for other nationalities.
• The Bahamas—a Caribbean option with the added benefit of proximity to the U.S. without being a U.S. jurisdiction.

Countries with special regimes for the wealthy:

• Italy—a flat tax of a hundred thousand euros annually for new high-net-worth residents, regardless of the size of their global income. Additionally, you can pay twenty-five thousand euros for each family member covered by the regime.
• Greece—a similar program, a hundred thousand euros flat tax annually for foreign investors becoming residents.
• Switzerland—the famous “forfait fiscal” (lump-sum taxation)—the ability to pay tax based on living costs rather than actual income. Effective rates rarely exceed one per cent of wealth.
• Portugal—the Non-Habitual Resident program offered zero taxation on foreign income for ten years. After its elimination in 2024, many billionaires moved to Spain or Italy.

But the real magic happens when you combine residency strategy with offshore structures.

Imagine: you’re a resident of the U.A.E. (zero income tax). Your assets are held in a Luxembourg holding company (zero tax on dividends within the E.U.). The holding company owns shares in operating companies in various countries, which pay dividends to the holding company. The holding company reinvests that money. You, as an individual, receive no income (so even if you were a resident of a country that taxes global income, you’d have no income to tax). And when you need cash, the holding company lends it to you (a loan isn’t income).

The result? You effectively pay zero personal income tax despite controlling wealth worth hundreds of millions or billions.

Golden Visas and Citizenship by Investment: Buying Passports

Tax mobility requires the ability to legally reside in the destination country. Enter “golden visa” and “citizenship by investment” programs.

This sounds like corruption, but it’s completely legal and official. Dozens of countries offer residency or citizenship in exchange for investment. For the ultra-wealthy, this isn’t a cost—it’s an investment in tax optimization that pays for itself many times over.

Why does someone richer than Croesus need a passport from a Caribbean island? Plan B. When your primary country of residence introduces unfavorable tax changes, you have the option of immediate migration. A second passport is insurance against changing political climates.

The British learned this painfully in 2024. For decades, the United Kingdom offered “Non-Dom” (non-domiciled) status—live in the U.K., pay taxes only on British income, foreign income isn’t taxed if it’s not remitted to the U.K. In 2024, the new Labour government abolished this status. The effect? Ten thousand eight hundred millionaires left the U.K. in 2024—the largest exodus in history. Where to? Dubai, Singapore, Switzerland, Italy, Spain. Each had a Plan B already in place.

Private Foundations: How to Be a Philanthropist and Optimize Taxes Simultaneously

Bill Gates and Warren Buffett have publicly pledged to give away most of their wealth to charitable causes. Sounds noble? It is. But it’s also remarkably tax-efficient.

Private foundations and trusts in the U.S., and similar structures in other countries, offer a unique combination: tax breaks, control over assets, the prestige of philanthropy, and long-term tax optimization.

Why the ultra-wealthy love offshore trusts:

Asset protection: In many offshore jurisdictions (Nevis, the Caymans, the Cook Islands, Belize), the standards of proof for creditors seeking to pierce a trust are extraordinarily high. A creditor must prove “beyond a reasonable doubt” that the trust was created for the purpose of fraud—this is a criminal standard, much higher than civil. In practice, nearly impossible to achieve.

Tax planning: Many jurisdictions don’t tax trusts of non-residents. Cyprus—zero inheritance tax or gift tax, exemption from tax on foreign income for non-resident beneficiaries. The Caymans, the B.V.I.—zero taxation of trusts.

Privacy: Unlike corporations (which often require beneficial-ownership registers), trusts in many jurisdictions don’t have public registers. The composition of beneficiaries, the value of assets, the structure—all of it remains private.

Succession planning: Dynasty trusts allow the transfer of wealth across multiple generations without paying estate tax at each transfer. In the U.S., about thirty states allow perpetual trusts (trusts in perpetuity, with no time limit). Nevada, Delaware, South Dakota compete for the most trust-friendly laws.

C.R.S., FATCA, and the End of Banking Privacy: How the Ultra-Wealthy Are Adapting

The Tax Information Exchange Agreements, Common Reporting Standard (C.R.S.) and FATCA theoretically ended the era of offshore banking secrecy (see our article International Tax Cooperation: The Complete Legal Framework – 2025). Practically? The ultra-wealthy found ways to adapt.

Traditional strategies no longer work:

• Swiss numbered accounts—over
• Caribbean accounts without reporting—over
• Offshore structures without beneficial-ownership disclosure—over

New strategies:

1. Shift to assets not covered by Automatic Exchange of Tax Information AEOI:

• Real estate (not financial accounts, not subject to C.R.S.)
• Art (the art market is still the Wild West when it comes to regulations)
• Cryptocurrency (CARF—the Crypto Asset Reporting Framework—doesn’t take effect until 2026, and self-custody wallets may remain outside the system)

2. Use of pass-through structures: Studies show that more than thirty per cent of ultra-high-net-worth foreign assets are held through partnerships and other pass-through structures (not corporations). Why? Because C.R.S. and FATCA focus on entities with legal personality and accounts in financial institutions. Partnerships often remain in a gray area.

3. Complex ownership structures: Instead of a simple structure (person → account), create: Person → Family office (U.S. L.L.C.) → Delaware statutory trust → Cypriot trust → B.V.I. company → Financial accounts

Each layer adds difficulty for tax authorities trying to identify the beneficial owner. Formally, everything is reported, but after tracing through five or six layers of structures in different jurisdictions, practical identification becomes very difficult.

Cryptocurrency: The New Frontier of Offshore Wealth Management

Bitcoin and other cryptocurrencies offer something that the traditional banking system no longer offers: the possibility of true financial privacy.

A self-custody Bitcoin wallet is actual ownership without intermediaries. No bank knows you have it. No government can freeze it (as long as they don’t know your private keys). No international organization can enforce reporting (as long as you don’t use centralized exchanges).

Enforcement Mechanisms: Why Governments Are Losing

The fundamental problem in enforcing taxation of the ultra-wealthy is the asymmetry of resources and motivation.

On the side of the ultra-wealthy:

• Unlimited budget for the best lawyers, tax advisers, structuring specialists
• Financial motivation measured in millions or billions of dollars in tax savings
• Global reach—they can move between jurisdictions
• Long-term planning horizon—structures created for decades

On the side of tax authorities:

• Limited budget (the I.R.S. in the U.S. is chronically underfunded)
• Institutional motivation (civil servants on salary, not commission)
• Jurisdictional limitations—one country’s law doesn’t work in another
• Short-term political pressure—each administration has four years

The result? Tax authorities win against small taxpayers (who can’t afford to defend themselves) and lose against the ultra-wealthy (who have unlimited resources for defense).

There’s also a lack of full international coördination—each country has an individual incentive to be a tax haven (Malta earns from gambling licenses, Cyprus from trusts, Luxembourg from holding companies), but everyone loses when everyone does it.

What This Means for the Rest of Us

According to the E.U. Tax Observatory, if billionaires paid taxes proportional to their economic income (7.5 per cent annual return), tax revenues would be two hundred to two hundred and fifty billion dollars higher annually. From billionaires alone—we’re not talking about the hundreds of thousands of multimillionaires using similar strategies.

Two hundred and fifty billion dollars annually is more than the budget of most countries in the world. It’s enough for:

• Free higher education in all O.E.C.D. countries
• Or coverage of health-care costs for hundreds of millions of people
• Or massive infrastructure investments
• Or tax reductions for the middle class

Instead, that money remains in the wealth of the ultra-rich, where it grows at 7.2 per cent net annually (7.5 per cent return minus 0.3 per cent effective tax), expanding wealth and income inequality to levels unseen since the Gilded Age.

The system isn’t broken by accident. It’s designed exactly as it functions. Lobbyists for the ultra-wealthy systematically block reforms. Countries compete for wealthy residents, lowering taxes and creating loopholes in the system. Intermediaries (lawyers, accountants, financial advisers) earn billions maintaining this system.

Can this change? Theoretically, yes—it requires international coördination on an unprecedented scale. Practically? History shows that the ultra-wealthy have a remarkable ability to survive every wave of reform.

The question, perhaps, is not whether the system can change but whether those who benefit from it will ever allow it to.

Robert Nogacki

Founder and Managing Partner of Skarbiec Law Firm, recognized by Dziennik Gazeta Prawna as one of the best tax advisory firms in Poland (2023, 2024). Legal advisor with 19 years of experience, serving Forbes-listed entrepreneurs and innovative start-ups. One of the most frequently quoted experts on commercial and tax law in the Polish media, regularly publishing in Rzeczpospolita, Gazeta Wyborcza, and Dziennik Gazeta Prawna. Author of the publication “AI Decoding Satoshi Nakamoto. Artificial Intelligence on the Trail of Bitcoin’s Creator” and co-author of the award-winning book “Bezpieczeństwo współczesnej firmy” (Security of a Modern Company). LinkedIn profile: 18 500 followers, 4 million views per year. Awards: 4-time winner of the European Medal, Golden Statuette of the Polish Business Leader, title of “International Tax Planning Law Firm of the Year in Poland.” He specializes in strategic legal consulting, tax planning, and crisis management for business.