[thegmanifesto]

I think a lot of you are familiar with Five Flag Theory or Three Flag Theory but I don't see any real threads on the topic or any examples of it being done on here by guys.

In case you are not familiar:

Quote:

Five Flag Theory

Perpetual travellers may attempt to organize their affairs around the "Five Flags" theory, arranging for different facets of their lives to fall under the jurisdiction of separate countries or flags. This is W.G. Hill'sown "2 flag" extension of investment advisor Harry Schultz's original "Three Flags" approach.

Whether to minimize governmental interference (via taxes or otherwise), or to maximize privacy, the theory proposes that you arrange for each of the following to be in a separate country:

1. Passport and citizenship - in a country that does not tax money earned outside the country or control actions.

2. Legal residence - in a tax haven.

3. Business base - where you earn your money, ideally somewhere with low corporate tax rates.

4. Asset haven - where you keep your money, ideally somewhere with low taxation of savings interest and capital gains.

5. Playgrounds - where you spend your money, ideally somewhere with low consumption tax and VAT.

Three Flag Theory

The general basis of the Three Flag Theory is:

1. Have your citizenship somewhere that does not tax income earned outside the country.

2. Have your businesses and speculations in stable, low or no tax countries.

3. Live as a tourist in countries where what you do for a living is valued, not outlawed.

In recent times, PTs are revising the Flag Theory and looking beyond planting just a few flags.

http://en.wikipedia.org/wiki/Perpetual_traveler

Is anyone doing this on here?

If so, can you share your experiences?

What would be good countries for each "flag"?

What are some sample situations that you guys like?

(Not sure if this should be in Lifestyle or Travel, feel free to move it if you think it would be better suited there.)

[Suits]

I'm close.

I have citizenship and a passport from a country where you gotta earn a hell of a lot of money than I need to pay tax on foreign income.

I live in two other countries, one where I would pay tax if I earned a lot, but I don't because I go there to study, so on paper I stay below the poverty rate and get a full refund each year. Being a student, I am a non-resident alien.

In the other country, where I work under the table, I would pay decently high taxes, if not for the fact that I do everything off the book. Legally, I'm a tourist, but I pull a decent income doing little consulting and teaching gigs. Everything is on too small of a scale to draw attention to me, but altogether it adds up to a nice income.

I'm currently working on another leg of the table -- the business end. I will be offering online based services to individuals of countries where I do not reside and therefore am not on the hook for taxes...services for which I would have to pay tax on the income if I had customers within the territory where I do business from (on paper).

Once I got that settled, I'll have a pretty good setup.

The place where I spend most of my time residing has a very low cost of living by Western standards, but close proximity to a Western standard of living, geographically speaking.

[presidentcarter]

I enjoy reading the Simon Black and Sovereign Man stuff on this and would like to be in a position to get dual citizenship at some point. The flag theories are smart.

[Technics]

Good post. I have been thinking about this for a while now, and especially now due to the NSA spying scandal and the other post about the IRS trawling the internet for information regarding us.

As many here already know, executing this is a bit problematic for those with US citizenship because the US is one of the only countries which makes you declare income and assets ANYWHERE in the world, regardless of whether it has anything to do with the USA. Also, only a maximum of 90 some thousand earned outside of the US is tax-free, and only under certain circumstances.

Just from my preliminary reading, If one were not American or to abandon American citizenship, I've thought that a good start would be citizenship in an EU country (for work and residency access to the entire EU), but not in one of the high tax EU states (France, Germany, England), combineed with either citizenship or residency (for business base or legal residence) in the UAE (no personal income tax) or Singapore (low income tax rates).

[thegmanifesto]

(06-18-2013 03:58 PM)Suits Wrote:  

I'm close.

I have citizenship and a passport from a country where you gotta earn a hell of a lot of money than I need to pay tax on foreign income.

I live in two other countries, one where I would pay tax if I earned a lot, but I don't because I go there to study, so on paper I stay below the poverty rate and get a full refund each year. Being a student, I am a non-resident alien.

In the other country, where I work under the table, I would pay decently high taxes, if not for the fact that I do everything off the book. Legally, I'm a tourist, but I pull a decent income doing little consulting and teaching gigs. Everything is on too small of a scale to draw attention to me, but altogether it adds up to a nice income.

I'm currently working on another leg of the table -- the business end. I will be offering online based services to individuals of countries where I do not reside and therefore am not on the hook for taxes...services for which I would have to pay tax on the income if I had customers within the territory where I do business from (on paper).

Once I got that settled, I'll have a pretty good setup.

The place where I spend most of my time residing has a very low cost of living by Western standards, but close proximity to a Western standard of living, geographically speaking.

Do you mind sharing which countries you are using for each "flag"?

----

Anyone else know which countries are good for each flag?

Even hypothetically?

[Big Nilla]

Took a hit on my income, but still working on this. I'm still making a lot, but not what I used to make. I'll go for the homerun shot first, dropping American citizenship by buying a Dominica economic citizenship. Just don't want to pull the trigger on it until I have $400,000 in the bank first. I probably should've done all the little flags first and then I'd easily have that $400,000 now. Progressive income taxes are great.

At the very worst, hopefully I can get the first $95,000-190,000 tax-free for living outside the USA in the 2014 tax year if I can't get the citizenship sometime next year.

[worldwidetraveler]

G, would you give up US citizenship? I don't see how this would be feasible with US citizenship.

[Spike]

As a dutch citizen i'm really fucked, once I get a second passport I loose my Dutch citizenship. There's just no way in hell i'm doing that unless some serious 7 figures would be involved. The benefits of being Dutch are far to good to give up. No matter what happens in life I will always have right to at least a 1000 dollar a month. Life long. That is if you play your cards right.

The fucking irony is that foreigners can get Dutch passport and keep their own. 1 in 10 has a second passport in Holland (at not from countries that benefit Holland)

Permanent residency is a good alternative for real Dutch people. I've read that Paraguay is a good option. So are Uruguay and Chile.

[Vacancier Permanent]

Neil,
Keep your Dutch passport, it's one of the most valuable out there.
Renouncing the US citizenship is no easy feat as you'd have to pay a penalty, extra tax before they take your passport. The fee is based on your total worth and what they deem you'd make in the future. So all in all, a large sum to pay. Paraguay is a great inexpensive alternative, as well as HK or SG for anyone who has some money. That's what I"m working on now, to get an HK or SG. A Brazilian passport would be sweet too.

[OSL]

-

I'm close as well. The US passport is causing 90% of my problems.

[LeBeau]

I don't have experience with this myself, but I read that "Emergency" book by Neil Strauss.

He breaks down how he basically bought a 2nd citizenship in St. Kitts.

Also a bit of info about how some of his wealthier friends are preparing for worst case scenarios.

Lots of other interesting parts about surviving societal collapse, tracking animals in the wilderness, first responders for disasters, etc.

Worth a read, but his attempt to create a mini sub plot about his girlfriend gets annoying.

Ironically similar to Tim Ferris needing to remind us in his 4 Hour Chef book that he also has a girlfriend, even when it's not relevant.

Apparently it also took Ferriss a whole year to woo her over or get the bang, depending on how you interpret his writing.

Thankfully that's only a small complaint.

I googled looking for summaries, came up with this review:

http://survivalcache.com/emergency-book-...l-strauss/

And here's an excerpt from the book:

http://www.fourhourworkweek.com/blog/200...g-borders/

[booshala]

Panama and Uruguay are places that are well known in the community for second citizenships. 5 flags just seems way too expensive and logistically unfeasible unless you have something like 7 figures liquid in the bank.

I've done some pretty extensive research on Uruguay and have looked into setting up bank accounts in panama. Not a bad way to go and much less expensive than the Caribbean islands normally touted. If you're super balling, Singapore is a great route too as they're very pro-business and don't ask many questions if you patriate money into their country.

[Sultan of Swank]

(06-18-2013 02:25 PM)thegmanifesto Wrote:  

I think a lot of you are familiar with Five Flag Theory or Three Flag Theory but I don't see any real threads on the topic or any examples of it being done on here by guys.

In case you are not familiar:

Quote:

Five Flag Theory

Perpetual travellers may attempt to organize their affairs around the "Five Flags" theory, arranging for different facets of their lives to fall under the jurisdiction of separate countries or flags. This is W.G. Hill'sown "2 flag" extension of investment advisor Harry Schultz's original "Three Flags" approach.

Whether to minimize governmental interference (via taxes or otherwise), or to maximize privacy, the theory proposes that you arrange for each of the following to be in a separate country:

1. Passport and citizenship - in a country that does not tax money earned outside the country or control actions.

2. Legal residence - in a tax haven.

3. Business base - where you earn your money, ideally somewhere with low corporate tax rates.

4. Asset haven - where you keep your money, ideally somewhere with low taxation of savings interest and capital gains.

5. Playgrounds - where you spend your money, ideally somewhere with low consumption tax and VAT.

Three Flag Theory

The general basis of the Three Flag Theory is:

1. Have your citizenship somewhere that does not tax income earned outside the country.

2. Have your businesses and speculations in stable, low or no tax countries.

3. Live as a tourist in countries where what you do for a living is valued, not outlawed.

In recent times, PTs are revising the Flag Theory and looking beyond planting just a few flags.

http://en.wikipedia.org/wiki/Perpetual_traveler

Is anyone doing this on here?

If so, can you share your experiences?

What would be good countries for each "flag"?

What are some sample situations that you guys like?

(Not sure if this should be in Lifestyle or Travel, feel free to move it if you think it would be better suited there.)

The choices for each flag is very personal so what is good for one isn't necessarily for another. I'm doing this now and my structure is quite complicated due to the nature of my business and the extent that I want to be covered.

Also, here are a couple of things to also note:
1. Passport and citizenship - not only in a country that does not tax money earned outside the country or control actions but also one with a passport that allows visa free entry to the most countries possible.

2. Legal residence - very personal. Néchin and Campeone d'Italia might be good for some people but might not be for you.

3. Business base - I would suggest bases with an 's'. Also depends on what type of business: ad revenue from your blog, online trading, a startup, import/export, etc.

4. Asset haven - I would also suggest havens with an 's'. Don't have your eggs in one basket.

5. Playgrounds - shouldn't be on this list. You go where you want to go.

For ideas on which countries might be a fit for you, check out the list of countries where you can set up a corp or trust at http://www.wwincorp.com

[malc]

(06-18-2013 11:28 PM)Neil Skywalker Wrote:  

As a dutch citizen i'm really fucked, once I get a second passport I loose my Dutch citizenship. There's just no way in hell i'm doing that unless some serious 7 figures would be involved. The benefits of being Dutch are far to good to give up. No matter what happens in life I will always have right to at least a 1000 dollar a month. Life long. That is if you play your cards right.

The fucking irony is that foreigners can get Dutch passport and keep their own. 1 in 10 has a second passport in Holland (at not from countries that benefit Holland)

Permanent residency is a good alternative for real Dutch people. I've read that Paraguay is a good option. So are Uruguay and Chile.

But as a dutch citizen, you have no need to get a replacement passport since if you move away, you wouldn't need to pay taxes there any more. It's a uniquely American problem. Also your country is too small to play empire like the US and nobody really hates your nation. You can do the entire 5 flags thing with your dutch passport alone.

When WG Hill wrote his five flags theory, online businesses and the internet didn't really exist. On the passport control side, money surveillance/laundering side and income side.

#2 is a somewhat important gotcha that people ignore. Almost all governments require a residence of some sort, the place where you receive your mail and the place governments calculate where to tax your personal income tax.

[artur jedi]

(06-19-2013 01:05 AM)booshala Wrote:  

Panama and Uruguay are places that are well known in the community for second citizenships. 5 flags just seems way too expensive and logistically unfeasible unless you have something like 7 figures liquid in the bank.

I've done some pretty extensive research on Uruguay and have looked into setting up bank accounts in panama. Not a bad way to go and much less expensive than the Caribbean islands normally touted. If you're super balling, Singapore is a great route too as they're very pro-business and don't ask many questions if you patriate money into their country.

When I hear Panama for banking, first thing crossing my mind is Noriega, and another thing starting with N - nationalization. I bet its a matter of time when it happens again, and not only in Panama but also in some other Central/South American countries.

Singapore sounds legit. How about HK, is anyone familiar with this matter?

[chinadawg]

1. Passport and citizenship - Citizens of two countries in the EEA, paying taxes in the UK. May move this to the other country as I believe the foreign earnings tax structure is much the same, and the the pension fund is extremely solid and the more tax you pay, the higher your payouts will be at the end. I doubt the UK will have much of a pension fund to speak of by the time I reach retirement age, its currently operating like a ponzi scheme. Need to look into that one.

2. Legal residence - Currently resident of the UK (legally, not lived there in a while). May change this to Macau if I start earning some decent bread, part of China and income taxes max at 8%. 40% taxes on the casinos at fund this.

3. Business base - I'm about to register my company in Hong Kong. There are various tax benefits for doing this (particularly for US citizens I am told, depending on what your main income streams are), but the main reason is that is pretty easy to send money to Hong Kong (much harder to send outside of China) from China, and from Hong Kong there are no restrictions on what you can do with it. Since I'm importing and need to send money back to the UK to pay suppliers I can do without fucking around on that one. It costs around $1000 to set up with an agency handling all the paper work, and you need to go Hong Kong in person to sign the papers. More info from theelevatorlife boys here.

4. Asset haven - My money making adventures are just starting out, so have minimal assets to speak of.

5. Playgrounds - Again, on the hustle so mainly spending time in China. Places to go for a break are in SE Asia, cheap and short flights. From mine to my mates in Bangkok its around 7 hours door to door which is pretty sweet. Agree that it shouldn't be on the list though. If your making enough money to be worried about these things, you are probably not going to make a travel decision based on the VAT rate in that country.

Also interested to hear what other people use for their various bases.

G on the legal side of things are you solely US based?

[thegmanifesto]

What are some of your guys hypotheticals for the Five Flags?

Practical solutions for the Five Flags?

What would be your dream situations for the Five Flags?

(06-19-2013 04:58 AM)chinadawg Wrote:  

G on the legal side of things are you solely US based?

Yeah, I am a real beginner at Five Flags.

This sh*t confuses me.

I am a US and EU Passport Holder, with biz in the USA.

What do kind of set up would one recommend for me?

------

Also, who is good to talk about this kind of stuff with? (Besides you guys).

I have tried to talk to lawyers, tax guys and accountants about this stuff, and I seem to know more about it than they do (which is sad, since admittedly, I don't know a lot).

[Spike]

(06-19-2013 03:03 AM)malc Wrote:  

(06-18-2013 11:28 PM)Neil Skywalker Wrote:  

As a dutch citizen i'm really fucked, once I get a second passport I loose my Dutch citizenship. There's just no way in hell i'm doing that unless some serious 7 figures would be involved. The benefits of being Dutch are far to good to give up. No matter what happens in life I will always have right to at least a 1000 dollar a month. Life long. That is if you play your cards right.

The fucking irony is that foreigners can get Dutch passport and keep their own. 1 in 10 has a second passport in Holland (at not from countries that benefit Holland)

Permanent residency is a good alternative for real Dutch people. I've read that Paraguay is a good option. So are Uruguay and Chile.

But as a dutch citizen, you have no need to get a replacement passport since if you move away, you wouldn't need to pay taxes there any more. It's a uniquely American problem. Also your country is too small to play empire like the US and nobody really hates your nation. You can do the entire 5 flags thing with your dutch passport alone.

When WG Hill wrote his five flags theory, online businesses and the internet didn't really exist. On the passport control side, money surveillance/laundering side and income side.

#2 is a somewhat important gotcha that people ignore. Almost all governments require a residence of some sort, the place where you receive your mail and the place governments calculate where to tax your personal income tax.

What do you mean by that? Holland is not exactly a tax haven. Income tax is 52% for high earners (the gov takes over half your money! and it used to 60%) and everything is taxed till the roof. How can I do the entire 5 flags there?

[Acute Angle]

thegmanifesto - if you're an EU passport holder, Belgium can have a favourable tax structure depending on your circumstances - eg no capital gains tax, no wealth tax. Not the most exciting country but a good position in Europe with easy access to major airports etc.

[Gallego2006]

I'm probably gonna be too late in getting a 2nd passport the way the world is going now, but I'm hoping to relocate to a friendly South American country for work in the next few years, live there for until I get the requirements met for citizenship, get that done and then figure out what's next. It's a great idea if you can nab a second passport from somewhere.

Another option is to marry a chick from another country, but that, as we all know, comes with many risks.

[OSL]

(06-19-2013 05:53 AM)Neil Skywalker Wrote:  

(06-19-2013 03:03 AM)malc Wrote:  

(06-18-2013 11:28 PM)Neil Skywalker Wrote:  

As a dutch citizen i'm really fucked, once I get a second passport I loose my Dutch citizenship. There's just no way in hell i'm doing that unless some serious 7 figures would be involved. The benefits of being Dutch are far to good to give up. No matter what happens in life I will always have right to at least a 1000 dollar a month. Life long. That is if you play your cards right.

The fucking irony is that foreigners can get Dutch passport and keep their own. 1 in 10 has a second passport in Holland (at not from countries that benefit Holland)

Permanent residency is a good alternative for real Dutch people. I've read that Paraguay is a good option. So are Uruguay and Chile.

But as a dutch citizen, you have no need to get a replacement passport since if you move away, you wouldn't need to pay taxes there any more. It's a uniquely American problem. Also your country is too small to play empire like the US and nobody really hates your nation. You can do the entire 5 flags thing with your dutch passport alone.

When WG Hill wrote his five flags theory, online businesses and the internet didn't really exist. On the passport control side, money surveillance/laundering side and income side.

#2 is a somewhat important gotcha that people ignore. Almost all governments require a residence of some sort, the place where you receive your mail and the place governments calculate where to tax your personal income tax.

What do you mean by that? Holland is not exactly a tax haven. Income tax is 52% for high earners (the gov takes over half your money! and it used to 60%) and everything is taxed till the roof. How can I do the entire 5 flags there?

You don't do it IN the country.

You use your Dutch citizenship to be able to travel freely around the world. You then incorporate in jurisdictions like Hong Kong that have territorial tax laws. You thus would not get charged corporate taxes on any profits you make, assuming those profits were not produced from the territory of Hong Kong.

So if you live in Thailand/Vietnam/Berlin/Colombia on tourist visas you will not have to pay local taxes.

Then you incorporated in Hong Kong but all of your profits come from EU/USA, so you do not get corporate taxed on that income.

In this situation, the Dutch/EU passport is your citizenship, your business/finance/asset base is Hong Kong, and your playgrounds are Thailand/Vietnam/Berlin/Colombia.

-

[chinadawg]

(06-19-2013 05:03 AM)thegmanifesto Wrote:  

I have tried to talk to lawyers, tax guys and accountants about this stuff, and I seem to know more about it than they do (which is sad, since admittedly, I don't know a lot).

Interesting. Were the lawyer/tax guys/accountants operating domestically or internationally? If it was the former I would get talking to a firm who operates internationally, for example Harris & Moure. I've never done business with them (again, just starting out), but I have their China Law Blog set as my home page as they consistently come up with insightful information on my chosen market. There was recently a blog post on Apple's tax strategy which caught my attention. I'd imagine their services are somewhat expensive, but if you are at a stage of needing this level of financial advice it would likely be worth it in the long run.

[OSL]

-

http://greenbacktaxservices.com/

These guys have a lot of good information about this topic.

-

[Sultan of Swank]

Quote:

who is good to talk about this kind of stuff with?

Rule #1: do not talk to or procure the services of someone who is US based - or based in your home country for other people.

Rule #2: do not have them mail any documents to your home country's address. The US Postal Service has thousands of trained postal inspectors who routinely go thru mail. Instead, personally pick up documents at your service provider's offshore office and place them in a safe deposit box in an offshore bank that does not have a US presence/office.

Rule #3: minimize any online/internet communications with the provider. Instead, fly to the haven country, go office to office and transact in person.

These rules are most significant for flags 1 & 4.

[Scarecr0w]

(06-19-2013 12:57 PM)Sultan of Swank Wrote:  

Quote:

who is good to talk about this kind of stuff with?

Rule #1: do not talk to or procure the services of someone who is US based - or based in your home country for other people.

Rule #2: do not have them mail any documents to your home country's address. The US Postal Service has thousands of trained postal inspectors who routinely go thru mail. Instead, personally pick up documents at your service provider's offshore office and place them in a safe deposit box in an offshore bank that does not have a US presence/office.

Rule #3: minimize any online/internet communications with the provider. Instead, fly to the haven country, go office to office and transact in person.

These rules are most significant for flags 1 & 4.

I think the best combo is to have a first world country passport and a third world country passport... Uruguay as someone said before is a good option for a safe and friendly country with a good reputation among third world countries