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 on.
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 territories.
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 best.”
Reasons are all that matters. This holds true when it comes to adopting the flag theory.
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 passport, investing 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 offshore.
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 goal.
Good luck with your internationalization journey in 2017!