The following is an introduction to the Five Flags – not legal or financial advice. Enjoy, consider, and talk to a professional if you need to.
If you’re reading this, then the chances are that you’re no longer living at home with Mum and Dad. The expectation is that you’ve fully flown the nest and that you’re now living either on your own or with a partner. Maybe a harem of partners. We don’t judge.
You will already have done this once.
Either you, or yourself and your partner, chose where you would build your home. These things are not left to chance – you probably used a range of criteria such as proximity to where you work, proximity to schools, to family, close to where the good times are. You looked at shopping, supermarkets and all the rest of it. Top of the list, you looked at affordability.
And you probably made sure it was close enough to go and visit family but far enough away for them not to drop by unannounced.
Maybe you’re a big fan of the beach or the countryside, or the mountains. Or you just like being in a city. You chose the best area for you.
The point is that you will have applied certain criteria to the place where you live and ended up living where you do right now.
Once a Third Millennium Man has taken life by the horns and is in charge of his own destiny and has a portable income and secure assets, then he can once again apply the strategy and he can choose where he is going to live.
Only this time, it’s on a completely different scale.
He is not constrained to live within a certain area. He doesn’t have a commute. The whole benefit of a Portable Income is that you can take it anywhere.
Previously you would have looked at different areas when you moved home, carefully considering what each area has to offer. But a Third Millennium Man can look at different countries, each with a different flag, considering each of them on their merits and what they have to offer.
The organised Third Millennium Man can compartmentalise his life and choose the best country for each. Yes, really. And this process even has a name. It’s called The Five Flag theory. And people are actually doing this.
Living your life by the Five Flag theory isn’t easy.
You need a portable income, and you need to do a lot of homework.
But the payoff from the Five Flags is, in every sense, life-changing.
And Third Millennium Man recommends that you consult a Tax Advisor with experience of International tax Planning. See this paragraph? It’s your second warning.
Why bother with the Five Flags?
Because…
- the net is closing in.
- the more wealth and assets you enjoy, the more determined people are to take them off you.
- under some circumstances, the state only has to suspect you of a serious crime to take everything away from you and there’s no guarantee you’ll get it back once your innocence is proven.
- three-quarters of what you earn through your hard work ends up as tax in one form or another, for your Government to waste (that’s a whole other Third Millennium Man article…);
- it’s important for you to diversify and spread your exposure to risk.
- this world has much to offer you and you deserve to experience it.
- there’s absolutely no rule that says you have to live in the country you were born in for your entire life. You’re free to choose a better one.
Be aware of the difference between Tax Evasion and Tax Avoidance.
Tax Evasion is a crime. The authorities will catch up with you and you will go to prison for a very long time. Tax Avoidance on the other hand is just a way of arranging your affairs in an order that LEGALLY keeps your tax bill down. Appreciate the difference between the two and laugh in the face of those who tell you that both are the same thing. Have you noticed that nobody wealthy ever demands that you “pay your share”?
You are under no obligation to pay as much Tax as you possibly can. You can, for example, legally open a Bank Account in a country that does not tax money earned overseas. When you no longer have to pay Income Tax, National Insurance, Corporation Tax, Capital Gains Tax, VAT, Inheritance Tax and all the rest of it, you’ll be surprised at how much money you suddenly have and the lifestyle you can enjoy. Remember whose money it is.
The Five Flags Theory.
Let’s be clear, these are not ‘rules’. Nobody is going to tell you you’re doing the Five Flags incorrectly. Look at the Five Flags as a mindset, an escape from the rat race. It’s an attitude and a philosophy. You can use as many of the five flags as you need.
By carefully applying the five flags, it’s possible to live as free a life as it is possible in the 21st Century. The normal, civilian rules no longer apply to you. It’s possible for an individual to go and live wherever the sun shines the warmest. Where you’re treated the best. And where there is some excellent fishing. Where you appreciate the food and the culture. In short, wherever it suits you.
You can enjoy the kind of freedom that others can only dream about. You can pay as little tax as possible, with savings and assets in the safest and most secure organisations and jurisdictions in the world.
And for the true hedonists with, erm, irregular pastimes reading this – pretty much everything is legal somewhere around the world.
Flag One.
Your first flag is the country where you have a passport and citizenship. This should be a country that does not require compulsory military service from its citizens. It should also be a country that does not tax income earned overseas. Countries in the EU Schengen Area are an excellent choice that facilitate visa-free travel.
This does not have to be the country you were born in, or the country that issued your current passport. Passports from other countries can be reasonably obtained, such as by way of having a close relation who already has citizenship there, living there for a set period, investing in a country (such as purchasing property) or marrying someone.
Holding a passport is not the same thing as Citizenship. You were a citizen of the UK (or wherever you’re reading this) before Mum & Dad forked out and got you a passport. You don’t need a passport to be a citizen.
Malta, Cyprus, Portugal are prime candidates here, and as EU passports grant you access to other EU countries in the Schengen Area. Many smaller Caribbean island nations also offer good deals – in a post-pandemic world, they are falling over themselves to make their own passports more attractive than their neighbours.
Now would seem to be the ideal time to get a second passport for yourself, even if you are at a stage when you’re not quite ready to implement the full Five Flags, as many countries are struggling and desperate for investment. Cyprus was in a bad way just ten years ago, and the road to recovery has been helped tremendously by it’s Citizenship programme. In some cases a $200,000 deposit or property purchase – or even less – buys a passport. You can always sell the house on later if you wish.
Flag Two.
Your second flag is your legal, taxable residency. The first flag is the passport you have; the second flag is where your legal address is – though you may not actually be spending much time there.
Because this is where you are legally obliged to pay Tax, it makes sense that this area should be as tax-free as possible. So look into Tax Havens and identify what each one has to offer.
Many people do this – it’s why the principality of Monaco has, on paper, a record population density of 26,000 people per square kilometre. It would be pretty crowded if they all came home at the same time…
Monaco is somewhere that’s fun and exciting to consider but is incredibly expensive, making it the province of Billionaires and Formula One drivers. People who work in Monaco can’t afford to live in Monaco. Look at Gibraltar (a region that caps the amount of tax you pay, regardless). Puerto Rico would be the choice of Third Millennium Man if we were based in the USA with some incredible tax incentives right now. Consider the Channel Islands too. Panama is a great option for every Flag, but don’t use it for any more than one.
Flag Three.
Your third flag is where your business is legally registered. Of course being a Portable Business it can be run from absolutely anywhere you can get Internet, but it has to be based somewhere. This should be somewhere that you receive the least interference in your business affairs and where the Laws are to your liking. You should also consider any conflict between your business and any state religion or political situation.
Offshore companies based in the United Arab Emirates, Cayman Islands, or Isle Of Man and Vanuatu a handful of others pay no Corporation Tax. The same is presently true in Hong Kong though the oppressive Chinese regime may bring that to an end at some indeterminate point. Also look at island nations such as Turks and Caicos, Bahamas and Bermuda.