With the continuous crackdown on offshore
wealth protection, along with the new laws, regulations, and agreements that
make wealth protection harder, those who want to protect their hard-earned
fortune are running out of options.
Sure, offshore banks, shell companies,
offshore trusts, and other offshore wealth protection schemes will continue to
stand the test of time; but you need to be creative in your endeavour.
One creative strategy that some of us have
executed is called the flag theory. In
this article, we’ll learn about the basics of flag theory and how implementing
it is the way to go for wealth
protection in the year of 2017. Read
What is flag theory?
Are you familiar with the board game Risk?
Or, are you a history buff who’s fascinated in the war of the world? If so, you
know that wars are about conquering territories. The more territories you have compared to
your enemies, you have the biggest chance to win the war. Planting flag is one common way to mark your
territory, telling everybody that you’ve won it.
Of course, wars are not that simple; but
you get the point: The more flags you
plant, the better; you can move yourself and resources freely within the
territories conquered, and you’ll have your influence – and wealth – in the
That is pretty much similar to the concept
of flag theory: You “plant flags” in your personal finance aspects. The goal is more or less the same: To
increase your freedom, wealth and everything else related to both.
To formalize a bit, let’s define flag
theory as a process to internationalize your personal finance by planting your
‘flags’ in countries that are defined as “the places where you’re treated
Reasons are all that matters. This holds true when it comes to adopting the
The idea of doing all the hassles mentioned above is for obtaining freedom, i.e.:
- Paying taxes at the fairest rate... even zero percent;
- Protect your assets at the most secure jurisdictions;
- Invest in the most lucrative jurisdictions;
- Not being controlled by one government – you’re free to choose the one that treats you the best;
- Travel the world and live & work wherever you want;
- and so on.
...and protection yourself, your loved ones and your assets from, i.e.:
- Failing economy and politics of your country that causes personal safety issues (e.g. Civil unrests);
- Unfair taxation;
- Hyperinflation that causes massive drop in the value of your home country’s currency;
- Asset confiscation;
- and so on.
How to implement flag theory
To start applying flag theory, you need to
identify the flags. The best way is by
learning from authoritative figures in this field. One of them is W.G. Hill,
the author of P.T.: “Perpetual Traveler.”
Hill introduced the concept of Five Flag
Theory several decades ago, and although it’s considered as “collector’s item”
by Goodreads with
questionable information relevancies, the concepts are still very much relevant
in today’s situation and condition.
The five flags are as follow:
1. Passport and citizenship in a country that doesn’t control citizens’ actions and tax overseas income;
2. Legal residence in a tax haven;
3. Business base in a country with low corporate tax rates;
4. Asset haven in a country with low taxation on savings and capital gains;
5. Playgrounds (e.g. where you
spend your money) in a country with low consumption tax and VAT.
Tactically-speaking, you “plant your flags”
by adopting various methods: Opening offshore
bank accounts, setting up
offshore companies, obtaining residency status overseas and/or a second
in overseas real estate, and so on.
For more information about flag theory
implementations, check out this resource:
Implementing flag theory is quite
challenging, but may be not as complex as you think. What you need to do is by
assembling a team, because DIY can put you at risk.
You need the help of internationalization
experts who have the hands-on experience – e.g. Andrew Henderson, Doug Casey,
and other experts – as well as from your lawyers who are well-versed in
International tax laws and agencies who have helped many protect their assets
And, of course, you need to do your own
research: Learn as much as you can about the flag theory and PT, as well as the
jurisdictions that can help you achieve your internationalization
Good luck with your internationalization journey in 2017!