While majority of populations people are pinned down in one country, while some find a way out moving abroad to seek freedom and new opportunities. The Flag theory is a very interesting concept, very much applicable to today’s global citizens, entrepreneurs and nomads who do not wish to spend too long in one place, under the belief that they can reduce taxes, avoid social security, jury, military and civic duties increasing personal freedom. It was first introduced by investment pundit Harry Schultz’s in 1970’s with three flag idea, later picked up by Scope International Limited under WJ Hill adding two more flags to five. The Revised seven flag theory further expands to include digital security and digital assets. The Flag theory has brought a global shift in the way how we live, travel, work, invest and spend money. It essentially decouples citizenship and residency with strategies to lessen your burden. The Times newspaper, 1994 published an advertisement “Secrets revealed” – How to legally obtain second foreign passport to avoid taxes and government examining the secrets of dual nationality of 100 countries.
Each flag represents one of the legal jurisdictions under which the perpetual traveller operates. The flag theory proposes you to remain as a “tourist/backpacker” not considered a legal resident of any country. There are 7 continents in the world out of which you plant a minimum of 5 flags in each continent to meet the requirements a flag theory. The theory most importantly proposes that each of the following flags should be in a separate country. The Flag theory is used by many HNWI clients for diversifying assets offshore to attain maximum financial independence.
The Flag theory must be an important strategy for all interested investors applying for citizenship by investment schemes. Citizenship by investment programs make it easy to establish first flag in tax haven. You can have multiple citizenship and passports in your collection coexisting with Plan B strategy.
Why apply Flag theory?
- Start a new life offshore.
- Preserve wealth and diversification
- Asset protection for families
- Global travel with visa free mobility.
- Increase personal and financial freedom
- Lower tax burden
- Avoid government obligations
- Increase business opportunities
- Invest in real estate without restrictions.
- Privacy and confidentiality
For example you are born in UK, living in Malaysia, doing business in US, own a property in Spain with your digital footprint in Japan. Your children might be pursuing education in Australia.
Here are the seven flags which are the main pillars of the Flag theory. You can add as many flags you want specific to your requirement depending on your purposes..
Passport and citizenship – in a country that does not tax money earned outside the country or control actions. It should be in a country where there is no citizenship based taxation and no personal income tax from income abroad. Examples are caribbean island countries, pacific countries
There are number of ways to get second citizenship through ancestry, marriage, birth, naturalisation or military service. These countries run investor citizenship schemes will offer you a golden passport in a matter of months: St.Kitts & Nevis, St.Lucia, Dominica, Grenada, Vanuatu, Turkey, Malta, Montenegro, North Macedonia if you could shell out hundred grand or more.
Legal tax residence – in a tax haven. This should be a non-CRS country do not share tax information with other OECD countries. US is one of those countries does not participate in CRS. This place where you buy a home to live at peace, free from any wealth and inheritance taxes. Perhaps a warm country with 300 days of sunshine and geographically close proximity to your home with excellent flight connections.
The most common ways to get a residency abroad is forming new business, marriage, research, employment or overseas education. Take a look at golden visas granted for property investments by Portugal, Greece,
Business base – This is your corporate base to earn business profits, ideally somewhere in a business friendly nation with low or zero corporate tax rates on offshore income. A skilled and english speaking workforce is also important. One example Ireland distinctly shines for tech companies in EU.
A number of countries fit the criteria of pure tax havens. Cayman Islands, Bermuda, Bahamas is the top favorite among corporations and financiers who enjoy 0% corporate tax. Tax havens such a St.Kitts, St.Lucia, Vanuatu, UAE do not levy tax on foreign income. Well known European countries have lowest corporate tax in the world Hungary 9%, Montenegro 9% . Puerto Rico is a popular tax haven for americans (no federal tax, no dividends, no capital gains) and income tax only 4%.
Asset haven – This is where you park money, ideally somewhere with low taxation of passive income and capital gains with good investment climate. A place for venture capital investment fund, real estate portfolio etc with stable financial system, strong currency and political climate.
The countries that do not impose a capital gains tax include Bahrain, Barbados, Belize, Cayman Islands, Isle of Man, Jamaica, New Zealand, Sri Lanka, Singapore, and others. Jersey has attracted a significant number of venture capital, private equity, mezzanine, real estate, infrastructure and hedge funds.
Playgrounds – where one spends one’s money, ideally somewhere with low consumption taxes. One trick is if you are a tourist you can get your VAT refund back for all your spends. Bermuda, BVI, Cayman, Guernsey, Gibraltar, USA, Qatar, Kuwait, Turks Caicos do not impose any VAT, essentially vat free countries.
Digital data storage – A territory where you store digital data, guaranteeing high levels of data protection and privacy laws. These countries have the highest data privacy laws in the world..
- Denmark. …
- Norway. …
- Canada. …
Digital currency – A crypto friendly country with low taxes supporting new innovations. Singapore, Malaysia, El Salvador are a crypto tax haven for both individuals and businesses which does not have capital gains tax on crypto earnings.