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Does Flag Theory works/ perpetual Traveler?
- Thread starter Cyprustr
- Start date
Flag 1-> Second Passport -> Any Caribbean country passport
Flag 2-> Business Haven -> Singapore , Hong Kong
Flag 3-> Playgrounds -> Maldives, Seychelles, Monaco, Mauritius
Flag 4-> Legal Residence -> Dubai, UAE
Flag 5-> Asset Haven -> Switzerland, Liechtenstein, Luxembourg
If all your asset tied to company bank account this scheme works like a charm. Only personal account in Dubai .So you do not need tax residence certificate.
Dubai require only one visit per six month.
You can travel whole year without any headache.
Flag 2-> Business Haven -> Singapore , Hong Kong
Flag 3-> Playgrounds -> Maldives, Seychelles, Monaco, Mauritius
Flag 4-> Legal Residence -> Dubai, UAE
Flag 5-> Asset Haven -> Switzerland, Liechtenstein, Luxembourg
If all your asset tied to company bank account this scheme works like a charm. Only personal account in Dubai .So you do not need tax residence certificate.
Dubai require only one visit per six month.
You can travel whole year without any headache.
Is it necessary that scheme? Because I don't have all tjose flags.
Wouldn't it possible to saty in the following countries less than 183 days? Without any second passport, business haven, legal residence and asset haven?
- 4 months Spain
- 4 months Portugal
- 2 months Andorra
- 2 months Italy
Let's say that I get my money from the stock market and my passport is from European Union. And my broker account is in a third country. Is that possible?
Wouldn't it possible to saty in the following countries less than 183 days? Without any second passport, business haven, legal residence and asset haven?
- 4 months Spain
- 4 months Portugal
- 2 months Andorra
- 2 months Italy
Let's say that I get my money from the stock market and my passport is from European Union. And my broker account is in a third country. Is that possible?
Honestly speaking I also not big fan of this "Flag Theory", It is too much . Just tax free residency is enough .
As You mention flag theory that's why I point out five flag.
Only UAE residential visa is sufficient , If you do not want any company registration headache.
It is called remote working visa.
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Use any of this broker transfer all of your fund here.
Transfer dividend/interest income in UAE bank , use UAE bank account for your daily expenses.
No company setup, no headache nothing you just need three things
1) Remote working visa of Dubai
2)Bank account in Dubai for daily expenses
3)any broker account mention above
Only you need to come in Dubai for once in six month.
Hope this help
Do not hesitate ask any quetion
Depending on your individual circumstances, if you spend 2-4 months in the countries you mentioned above, especially if you are a citizen of one of those countries, it is absolutely possible that they will consider you tax resident.
The tax inspector will laugh right in your face when you explain to them that you should pay taxes in Dubai (where you spend 2 days per year) instead of Spain (where you spend 4 months per year, even more so if you're a citizen or have close family there).
Of course it's not very likely that they will find out, but for any stays of more than 2-3 months at least, you should always check the local tax laws, especially if you don't spend more time in any other country.
Having no tax residency at all is generally risky because it's a bit of a grey area - it may open you up to tax claims from countries. It's better to have a proper tax residency somewhere.
It may also allow you to pay less tax on dividends.
And, for example, when you open a brokerage account, you will be asked for your tax residency for reporting under CRS/FATCA and to determine how much tax to withhold on dividends. You can't leave that field empty. Some countries also don't even "let you go" as a tax resident, unless you can prove you have a new tax residency.
Dubai can be an option for tax residency, but there is significant risk of trouble if you only spend 2 days per year there and a lot more time elsewhere.
Considering that you only have passive income, there are so many legitimate options for you. For example, consider Portugal's NHR system if you like Portugal. Or Malta or Cyprus.
Don't go for some stupid fake residency if you want to spend time in some other country for 2-3 months or more, it will only create problems later on.
It is completely irrelevant in which country your broker is registered. Your passport doesn't matter either.
The only thing that matters is where your tax residency is - unless there are some specific tax laws for your citizenship/former tax residency. So you always need to talk to an expert.
The tax inspector will laugh right in your face when you explain to them that you should pay taxes in Dubai (where you spend 2 days per year) instead of Spain (where you spend 4 months per year, even more so if you're a citizen or have close family there).
Of course it's not very likely that they will find out, but for any stays of more than 2-3 months at least, you should always check the local tax laws, especially if you don't spend more time in any other country.
Having no tax residency at all is generally risky because it's a bit of a grey area - it may open you up to tax claims from countries. It's better to have a proper tax residency somewhere.
It may also allow you to pay less tax on dividends.
And, for example, when you open a brokerage account, you will be asked for your tax residency for reporting under CRS/FATCA and to determine how much tax to withhold on dividends. You can't leave that field empty. Some countries also don't even "let you go" as a tax resident, unless you can prove you have a new tax residency.
Dubai can be an option for tax residency, but there is significant risk of trouble if you only spend 2 days per year there and a lot more time elsewhere.
Considering that you only have passive income, there are so many legitimate options for you. For example, consider Portugal's NHR system if you like Portugal. Or Malta or Cyprus.
Don't go for some stupid fake residency if you want to spend time in some other country for 2-3 months or more, it will only create problems later on.
It is completely irrelevant in which country your broker is registered. Your passport doesn't matter either.
The only thing that matters is where your tax residency is - unless there are some specific tax laws for your citizenship/former tax residency. So you always need to talk to an expert.
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Please read the question and answers and don’t just google and paste here.
As @JustAnotherNomad pointed out, you must declare a residency when open a brokerage account, or bank account, etc. Otherwise, everyone will be eternally traveling just to avoid taxes.
It mostly depends on your citizenship and your previous tax residency. If both of those are OK with you being not tax resident anywhere else then there's a good chance it will work for you.
Exactly. For example, if you are an American who lives overseas and runs an offshore business you can pay zero federal income tax on a salary of up to about $108,000 under the Foreign Earned Income Exclusion (FEIE).
Your overall effective income tax rate above that amount, and including the FEIE amount, can be as little as 10% to 15% if you structure things properly. Of course, that is now all subject to change under the current socialist regime.
The great thing about the American system is that there is no need to prove a tax residency outside of the U.S. You can simply live outside the U.S. for at least 330 days to meet the Physical Presence Test to avail yourself of the FEIE.
The point is that there is no simple answer because the tax laws of each country are different. Yet, people seem to keep asking this question over-and-over again.
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That's a Gold nugget you should follow! Don't be foolish this guy has just provided you with a piece of invaluable information.
Just to be clear, a broker will usually only ask for a utility bill for their KYC. So it's easy to lie. Of course if you go for a fake Dubai residency (which will cost you several thousand dollars every year), you can say you're resident there and probably no one will ever find out.
But WHY would you do that when there are so many countries where you could just live tax-free since you're living off capital gains? Why would you go for some dodgy setup?
Yes, having no tax residency can work in theory because you'd be "falling through the cracks".
But in practice, all banks, all authorities, everyone always assumes that you must have some place where you live.
The concept of perpetual travel is not something that really exists in the law, so there is always some risk that one day, some country will say: "Well, if you don't live anywhere else and you spent more time in our country this year than in any other country... Then you're now tax resident in our country!"
Simply because not all countries have clear rules for tax residency (substantial presence). Many countries just have a rule like "If you spend 183 days in our country or if your center of life is here". Then if you spend 4 months there every year, there is some risk that they say it's your center of life, especially if you don't have an official tax residency elsewhere.
So just take your pick, Portugal, Cyprus, Malta, Georgia, whatever, some country where you want to spend 2-3 months every year. Make that your official base and sleep well at night. You can still travel as much as you like. But you will have a proper home and everyone will understand that that is where you should pay your taxes.
For a full PT-only lifestyle (with or without some "artificial" residency), I wouldn't recommend you to spend more than 2 months in any country, and even then there is some remaining risk.
But WHY would you do that when there are so many countries where you could just live tax-free since you're living off capital gains? Why would you go for some dodgy setup?
Yes, having no tax residency can work in theory because you'd be "falling through the cracks".
But in practice, all banks, all authorities, everyone always assumes that you must have some place where you live.
The concept of perpetual travel is not something that really exists in the law, so there is always some risk that one day, some country will say: "Well, if you don't live anywhere else and you spent more time in our country this year than in any other country... Then you're now tax resident in our country!"
Simply because not all countries have clear rules for tax residency (substantial presence). Many countries just have a rule like "If you spend 183 days in our country or if your center of life is here". Then if you spend 4 months there every year, there is some risk that they say it's your center of life, especially if you don't have an official tax residency elsewhere.
So just take your pick, Portugal, Cyprus, Malta, Georgia, whatever, some country where you want to spend 2-3 months every year. Make that your official base and sleep well at night. You can still travel as much as you like. But you will have a proper home and everyone will understand that that is where you should pay your taxes.
For a full PT-only lifestyle (with or without some "artificial" residency), I wouldn't recommend you to spend more than 2 months in any country, and even then there is some remaining risk.
The problem with UAE/Dubai is that enter/exit into country is strictly monitored. So, the home country / or other country who would want to tax you can easily get enter/exit information and they will see that you only visit Dubai couple times a year and they would not consider such residence as tax residence
The short answer is “yes, it works”.
The long answer is not so easy as it depends on individual circumstances.
Spain is already mentioned as being a challenge. The same applies for almost all Western (European) countries.
To make PT work it is best to go from high tax to low tax to no tax. Especially if you decide to go from high to no tax and not spend the majority of the time in the no tax country.
For instance from Germany to Cyprus to Dubai. After that it’s easy to apply PT and become that Perpetual Traveler, Prior Taxpayer for as long as you want it. Do review your personal and or business set up every 5 years.
The flag theory once worked liked a charm. Now it is a philosophy one could consider to accomplish certain goals. I wouldn’t follow it blindly anymore as it on one side over complicates things and on the other side doesn’t take certain changed tax aspects into account. Use it as a starting point.
The long answer is not so easy as it depends on individual circumstances.
Spain is already mentioned as being a challenge. The same applies for almost all Western (European) countries.
To make PT work it is best to go from high tax to low tax to no tax. Especially if you decide to go from high to no tax and not spend the majority of the time in the no tax country.
For instance from Germany to Cyprus to Dubai. After that it’s easy to apply PT and become that Perpetual Traveler, Prior Taxpayer for as long as you want it. Do review your personal and or business set up every 5 years.
The flag theory once worked liked a charm. Now it is a philosophy one could consider to accomplish certain goals. I wouldn’t follow it blindly anymore as it on one side over complicates things and on the other side doesn’t take certain changed tax aspects into account. Use it as a starting point.
that's peanuts if you speak 6 or even 7 numbered figures, it is all about to weight how much money you can make compared to your spendings.
Yes true,
Without trying to understand what I am trying to say. Some people trying to troll me and put me down.
Believe it or not in reality It works, If you know how system works.
So many people are living life like I said in earlier post.
Just do not conduct any sort of activities in your home country. Close all financial tie to your home country.
Nobody cares, after that , And you can enjoy life as a tax resident of the UAE.
Keep low profile.
P.S. It works If you are not from citizenship base taxation.
It works for sure. The original concept however is difficult to apply now. Keep in mind that the flag theory originally dates from, say the mid to late 70's. It became popular in the 80's when Scope International published about it via WG Hill (pen name). Since late 90's the global situation changed. We had seen the WMD war and were on the brink of global terrrorism. It changed again between 2005 and 2010. After 2010 things change so quickly that it is very difficult to implement the original 3 flag theory / philosophy by Harry Schulz mainly due to the digitalization which is on one side a huge advantage and on the other side a big complicating factor.
The main advantage is that PT became available to a lot more people which is in reality also its biggest complicating factor. Too many people bragging about it at the coffee table and in reality not truly understanding what it requires to live PT.
Keep a low profile rules out the majority of people to implement PT / Flag theory. The lifestyle is appealing yet not for everyone. I dare say not for the majority of the people that get involved with offshoring.
(im of the generation who implemented the 5 flag theory mid nineties. As a result citizenship base taxation isn't even an issue anymore for me. Im gone for too long. If I would have to start now.. I don't think I would be able to pull it off anymore.)
It depends on your citizenship. For UK it's possible to remain non resident if you don't live in your country. Let's say you spend 1 week only in UK and other time travel around world.
For some countries even if you don't spend any day in your home country you can still remain tax resident in your home country if you don't have any other "base" country with residence and tax certificates.
It also may depend on ties to your home country. If you still have property, kids , wife , big chance you remain tax resident in your home country
For some countries even if you don't spend any day in your home country you can still remain tax resident in your home country if you don't have any other "base" country with residence and tax certificates.
It also may depend on ties to your home country. If you still have property, kids , wife , big chance you remain tax resident in your home country
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