Flag Theory and the Power of Perpetual Travel
|June 12, 2018||Posted by admin under Uncategorized|
The term ‘tax evasion’ has become one affiliated with multi-millionaire sports stars, celebrities and media personalities, who are advised to ship their money to offshore accounts and to move abroad where possible so they can avoid paying as much tax. It’s often seen as a negative and borderline dirty phrase, but let’s be honest, a lot of that boils down to personal jealousy. After all, wouldn’t everybody like to pay less tax?
Fortunately, there is a way for those who may have flexibility in their work to use similar tactics to get a helping hand in this arena, without being a superstar millionaire. It’s called Flag Theory, and it involves something that everybody likes to do: Travel.
What is Flag Theory?
Each and every time you visit a new country and base yourself there, you are essentially planting a flag in the sand. What flag theory does is enable you to use this to your advantage, by setting roots in various countries and their tax schemes, instead of doing what everybody else on earth does, and has been told to do from day one, including:
- Be born, grow up, work and die in the town/city/country you were born in
- Have bank accounts and savings accounts in the town/city/country you were born in
- Own houses and/or businesses in the town/city/country you were born in
- Have one countries passport in your possession from your first day to your last.
The common theme here: Everything is rooted to the spot. Flag theory allows you to keep on the move, planting roots in other countries and taking advantage of their banking and tax laws, making a better life for yourself and your family as a result. Being a perpetual traveller (or PT) can help you to achieve all the finance goals you’ve ever dreamed of setting yourself, and you get to see the world at the same time.
Perpetual travelling is a way of life that means that you don’t have a set PO Box to receive letters to. Instead of having a permanent residence like the majority of people in the Western world, PT’s travel around the world, flag planting in villages, towns, cities and countries all over the map. In order to do this successfully, you need to identify and learn the visa restrictions from each country that you step into, so you can ensure that you won’t outstay your welcome and get moved along, or find yourself in a legal jam.
You can create a truly exceptional life as a PT with a plant a flag mentality, and have the comfort of a residency in multiple countries, instead of just one, where the government will take their slice and you will live the same life as countless others. Don’t you feel like you deserve better?
History of Flag Theory
According to people who know about flag theory, the idea originated with Harry Schultz in 1964. Schultz’s novel, “How to Keep Your Money and Your Freedom,” identified three flags related to dual citizenship, multiple passports, tax havens and diversified assets.
Later, W.G. Hill set up the idea of the perpetual traveler and identified two more flags related to flag theory.
Most people who are familiar with flag theory would agree that today, the idea has expanded beyond the five flags of Hill, and into additional areas involving digital assets. For example, cryptocurrency is an opportunity and an issue that was not included in either Schultz’s or Hill’s frameworks, since it didn’t exist until just a few years ago.
As flag theory evolved, it became more popular. Globalism in the twenty-first century has been a real driver for flag theory as traditional barriers to the free transfer of people, money and business assets have vanished. The Internet – cloud computing – big data environments – and even undersea transatlantic cables – all of it supercharges our ability to use flag theory to improve our lives. Digitization is all about the free flow of information, and adding that to the free flow of people and assets really gives the modern citizen an edge.
Why Use Flag Theory?
To ask yourself this question, you have to look at the upsides, and to see how the flag concepts have evolved since they were originally conceived by the novelist Harry D Shultz, in his novel How to Keep Your Money and Your Freedom back in 1964. Conceived as the ultimate ‘spy-like’ lifestyle, not unlike the world’s famous spy, Mr. James Bond, the original flag theory consisted of the following three flags:
- A second passport
- A safe location for your money and assets outside of your home country
- A legal address in a tax haven.
Originally conceived as an almost-romantic view of how people should live in the world, the motto for flag theory was originally “Go where they treat you best”, which is almost how everybody thinks when they book a vacation or trip away. But imagine if everybody decided to follow this as a lifestyle. Would the governments of the world sit up and take notice, and start looking after everybody equally? It was certainly some of the thinking behind flag theory.
Just by reading the three flags above, you can start to see the upsides of the flag theory, and why so many people – entrepreneurs, real estate moguls, celebrities and sports stars – opt for this lifestyle. Its super cool, exciting and best of all: Completely legal. Ever wondered why so many celebrities live (or have residences) in Monte Carlo and Switzerland? These are tax havens. Safe places to put their money where they won’t have to pay as much tax as many people do in their own countries, staying in one place.
The original three flag theory lead to the concept of the perpetual traveller, somebody who is seen to the world as ‘just passing through’ by not allowing themselves to stay in one place for any amount of time, whilst still setting their PT flag in the sand with the three flags mentioned above. By doing this, you are exempt from paying tax and other civic duties, and giving yourself a real shot at living a life of globetrotting luxury.
You may not be saving the world by tackling Goldfinger or using gadgets to take down international criminals whilst hopping from one country to the other, but whatever your aspirations might be as a perpetual traveller, they are at least within reach in your embrace and use the three flag theory as your guide to living in complete freedom.
The Original Three Flag Theory
The original three flag theory pioneered by Harry Schultz was relatively simple compared some later models.
It had just three points:
- Be a resident in a country that doesn’t tax foreign income
- Find a state tax haven in which to place a legal business address
- Live in whatever country suits your lifestyle and has a low tax rate
In order to understand the original three flag theory, think about where a person lives and where he or she works.
In the vast majority of cases, those places are the same. In fact, many people never even leave the town they were born in. But you hear a lot of these people regretting that they seem stuck in a particular place – there might not be a lot of economic opportunity in their hometown. Tax rates in certain communities can soar. It may be hard to start a business in a saturated market. All of these can actually stifle even the best laid plans of a business person intent on success!
The original three flag theory explodes these ideas by helping the entrepreneur to realize that he or she doesn’t have to restrict business activities to the place where he or she was born.
In flag theory, the perpetual traveler essentially lives as a tourist – by setting up more than one home country – by putting flags all over the world – the entrepreneur diversifies business activities while enjoying a much freer lifestyle.
You may be working in Dubai one day starting a restaurant, skiing in the Alps the next day, and paying a visit to family in the United States or the U.K. the day after that. What many of these flag theory plans have in common is two things – freedom and reduced taxes.
Every nation has its own tax laws. The way to use flag theory is to pick and choose the tax laws that suit you – by being able to move and scale businesses in different environments.
Flag theory talks about “playgrounds” and places of business. The more an individual discriminates between places that he or she happens to be, and places that suit a business model, the more that person benefits.
We’ll learn more about flag theory in the subsequent five flags and seven flags models.
The Five Flags Theory
For another look at flag theory, let’s look at W.G. Hill’s five flag concept.
Again here are the first three flags:
- Passport or citizenship in a country that doesn’t tax nonresidents
- Business based in a foreign country
- Legal residence in a tax haven
The additional two flags are as follows – flag four: an offshore bank account in a stable country – and flag five: “playgrounds” where you spend your money.
Essentially, the idea of business bases and playgrounds has been a fundamental pillar of flag theory for many years now. It’s the idea that you can have these places of residence – your playgrounds – where you live and enjoy your time, while your business bases are in a whole different set of countries entirely.
Here’s an excellent example – an entrepreneur wants to run multiple businesses. Traditionally, he or she opened one shop and then built out from there in a particular local area, or in his or her country of origin.
These days, though, globalism means it’s entirely feasible to start each new business in a new country. Maybe a certain market is saturated, and you can get more bang for your buck creating companies overseas. Maybe you want that diversity that’s so central to flag theory.
While some view the idea of playgrounds as outdated, and argue that the concept should be changed to fit the modern definition of flag theory, it’s still a very valid idea.
In opening up W.G. Hill’s five flag theory, you see how perpetual travelers can have various areas of operation that coincide or coexist – and that gives them an enormous level of personal and business freedoms.
From Three to Seven: The Expansion of Flag Theory
As flag theory took off during the height of the spy novel and as the world suddenly became a smaller, more accessible place for those who wanted to branch out and see it, a further four flags were added to the PT flag theory. Here is a breakdown for the full list of seven:
Flag 1: Citizenship and Residency
The first flag is all about getting that all important second passport. If you have dual heritage (your mother and father are from different countries, e.g. one was born in Australia and the other in the United Kingdom), this one becomes slightly easier, but if you don’t have this, you should certainly look to gain a passport from another country. Some do not tax citizens who live outside of their country, which will allow you to travel around and pay less tax as you work.
Flag 2: Residency Taxation
The second flag is all about getting tax residency. You should have an official residency somewhere, even if you don’t spend much time there. In order to take advantage of the tax breaks, your residency should be in a country that doesn’t tax income earned overseas, meaning that you won’t have to file tax returns wherever else you visit in the world.
Flag 3: Offshore Company
If you want to conduct business all over the world, an offshore company will allow you to do this, and take advantage of various tax breaks, whilst also allowing you to take out bank accounts, gain citizenship, buy property and assets, and generally expand your wealth beyond what you can do as an individual.
Flag 4: Offshore Banking
Getting an offshore bank account will enable you to take advantage of various tax breaks from having your funds and assets in another country. Chances are you have heard the term ‘Swiss bank account’? This is one of the most famous tax havens for business people and celebrities who want to hold onto their money without paying ridiculous amounts of tax on what they earn.
Flag 5: Physical Assets
These days, the people who keep hold of their money are the ones who acquire offshore assets, either purchasing property, land or materials (such as gold) that can be kept out of their country of residence, whilst still gaining money without being savaged by the tax man. These are usually in countries that you don’t spend too much time in, but when you do, you’re going to enjoy yourself.
When buying property and/or land, do your research into which areas/countries are likely to see growth in the next few years. You may find that a property you purchased in 1999 in Dubai is now worth several times the amount, due to the growth in that section of the world. Do plenty of homework, and speak to a financial advisor if you’re not entirely sure yourself.
Flag 6: Digital Security
The internet has enabled people and businesses to move their money around the world online, rather than physically moving it from country to country. But in order to do this safely, you need to ensure that your financial information, passwords, national identification number and even digital currency is protected, and can’t be stolen.
Ensure that your online servers, web domains and all other online assets are protected and bought from a reputable source. There are all kinds of online criminals and hackers around, searching for ways to steal identities and money. Think carefully about your security and invest in it. After all, it’s for your future.
Flag 7: Digital Assets
Digital currency is all the rage now. From Bitcoin to any other of the alternative digital currencies available, you can pay for goods and services and control your assets via the web so easily now that it has become second nature, and you can control your finances and digital assets on the web in seconds, transferring it across borders without restriction or the need to gain permission.
Advantages of Flag Theory
If you’re still wondering why people utilize flag theory to maximize their freedoms and reduce their tax burdens, here are some of the specific advantages of flag theory that get talked about a lot when professionals are explaining how to use this revolutionary model to improve both your business and personal life.
1. Lower Business Taxes
There’s an inherent contradiction in the idea that local communities are trying to attract businesses with lower tax burdens, while many national systems inherently tax these businesses beyond what the business owners would prefer.
With flag theory and perpetual traveling, you essentially choose the tax rate for your business by locating it where you want to.
2. Lower Personal Taxes
The same is true for income tax and sales tax rates. Income tax is often tied to business tax – but sales tax is tied to where you buy a particular item. This is where you might want to utilize a lower tax playground when you go to purchase commodities or products or services.
Just being able to shift your buying models in this way can save you enormous amounts of money in both your business and your personal life. It’s one of those simple points of flag theory that gets so much attention when people figure out why this works so well.
3. Beating Inflation
Inflation is one of the great economic bugbears of our times.
Experts point out how inflation has crashed monetary models across the world in each successive decade – you’re essentially playing Russian roulette with your business and your assets when you stay in one place. A country’s economy can be devastated overnight by runaway inflation – flag theory holds that you can expand your horizons so that you can move to where you’re safest at any given time.
4. Freedom from Expensive Healthcare and Education Models
In today’s world, medical tourism is part of the flag theory model. In too many countries, the rising costs of healthcare are passed on to the citizen in ways that create enormous financial burdens.
The perpetual traveler knows where to get cheaper medical care and how to classify oneself to avoid paying out colossal healthcare costs or health insurance costs.
5. Untethering from Entitlement Programs
Many countries also have specific entitlement programs that provide a social network for citizens. The other side of the coin is that they tend to heavily tax working people to pay for themselves.
Again, the perpetual traveler chooses the model in which he or she wants to participate. Someone’s not just born into the model they must live with for their entire life. They look at the economic models of various nations and plan accordingly.
6. Free Travel
Who doesn’t want to enjoy more than one culture or ambience by traveling around the globe?
However, this is practically difficult for many people. They may not have the infrastructure, or the country that they are in may not promote free travel.
That’s another great benefit of having flag theory plans in place. It’s not that you’re fearful of a particular government – it’s just that you want that mobility all the time. Then if something strange starts to happen in any given country, you’re not locked into that system and you simply go elsewhere.
7. Bringing Up Children
Many people disagree about what’s the optimal environment in which to bring up children. But the perpetual traveler can choose. If you are about to become a parent, that can influence the choices that the individual makes in terms of entrepreneurship and lifestyle. A perpetual traveler can move where education is best and where children are valued and have safe and productive lives.
Disadvantages of Flag Theory
To be fair, there can be some disadvantages to flag theory if it doesn’t work for a particular person.
For one thing, there’s a substantial capital outlay required. It’s generally more expensive to travel the globe than it is to stay in one place – but again, what a lot of people have found with flag theory is that it actually increases their gains over time, because their diversified business models easily pay for their jet-setting time.
Another disadvantage of flag theory is that it takes people away from their traditional communities. People who are essentially family-minded and have deep roots in a network of extended family somewhere are less likely to take part in flag theory. However, others who really value success and enjoyment of life may become perpetual travelers and still take time to come back home and enjoy the place where they were born and their family members.
Thirdly, flag theory takes work. It’s not something brainless that you do like so many people do a 9-to-5 job. Flag theory is for self-starters – people who are determined to achieve what they want in life and who relish a challenge. People who only want to trudge along day to day are not great candidates for a flag theory lifestyle. There can be a substantial amount of detail involved – and some paperwork as well.
How Can You Maximise Your Freedom with Flag Theory?
If you needed a quote to sum up the flags concept – whether it be flags for business or for pleasure – look no further than this gem from financial commentator Bob Beckman in 1995, when he was asked about his residence in Monte Carlo (as previously mentioned, one of the most famous tax havens for the rich and famous):
“A long time ago, I was told that the most efficient way for an individual to handle his affairs was to work one place, keep his money in a second place and live in a third place. I live in Monaco. I don’t work here, my money is placed elsewhere, but managed from here.”
The word ‘freedom’ to many people is an international world, and that is what the seven flags that come together to create the flag theory is all about: International freedom. The perpetual traveller is somebody who jumps from place to place, taking in everything they see and do and thinking carefully and strategically about their future, so that they can maximum the potential of their lives.
Make a list of all the countries you want to visit. Start researching their tax laws, business boundaries and the possibility of obtaining passports from those countries. If you can legally plant your flag in as many countries as you wish, why wouldn’t you want this for yourself? Travel broadens the mind, and a mind that wants to travel and see the world can truly live an international life of freedom and success if they seek professional advice and then make the right choices.
Flag theory can give you the life that you deserve, need and aspire towards, and it will be one that only existed in spy novels before now. Take it from fiction to reality, and embrace the flag theory and become a perpetual traveller as soon as you possibly can. The world awaits.