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Flag Theory: Tax Strategies to Keep More of Your Money

So now you’re making money - how do you keep it?

For people who have started their own business or who are earning a higher income, I believe it’s important to know flag theory and some tax strategies in order to optimise for taxes. If you’re like me and make very little money, you won’t need to apply flag theory yet - however learning about it and educating yourself at a young age can only do good.

I’ve done a bit of research, and I find flag theory fascinating, so I’ve decided to write a post about it and add a new section to Adulting called Optimisation 😎

Here we go…

 

What is flag theory?

According to the Flag Theory website, flag theory is:

The art and science of being a permanent traveller

or

Go where you are treated best

This means travelling around the world and planting flags in different countries. The original flag theory had 3 flags:

  1. A second passport
  2. A safe location for assets outside your own country
  3. A legal address in a tax haven

He then added 2 more flags

  1. Where to invest your money
  2. Living in the playground (live where you have fun)

Being a PT used to be something for the ultra rich and wealthy, but thanks to the internet and globalisation, regular people like you and I can use it. There are huge benefits to internationalisation and if you’re smart enough, you can take advantage of flag theory and certain tax strategies. It’s tax optimisation which means looking for ways to legally pay less tax. No one here wants to end up in jail, so everything in this post is 100% legal ✅

The Flag Theory website has revised the original flag theory and created a new version (you can have your own version too if you want):

 

That’s certainly a hard flag to plant

The 7 flags 🎌

Flag 1: Having a second passport

Having a second passport gives you the ability to travel visa free and can give you a worst case scenario insurance. If you’re American and want to stop paying high taxes no matter where you go, a second passport is helpful to travel and set up a business somewhere else. Even as a European - having another passport from outside the EU can be very helpful if the tax system is not in your favour.

You can get a second passport through investment, through residency, through right of blood or through place of birth. Which country would you try to get a second passport from? (🙋 Chile).

 

Flag 2: Residency taxation

Where you are resident is where you pay taxes. This means you want to be choosing carefully where you’ll be paying taxes, especially if you want to be digital nomading an.d living around the world. What many people do is become non tax resident in their original country, tax resident in a low-tax country and then travel the world. Just an option.

As usual, read the laws, get expert advice and all that shebang. But imagine being resident of the Bahamas 😍

 

Flag 3: Offshore company

Contrary to popular belief, offshore does not mean illegal. Offshore literally means ‘off the shore’, so ‘not in your country’. An offshore company means a company that you have set up in a different country than the one you live in.

When you realise that not every country is built the same, you realise that you’re totally allowed to take advantage of other country’s tax laws and set up your company there. This gives you privacy, asset protection, and interesting banking and investment opportunities.

I’ve considered opening up a company in Estonia, where everything is digital and much easier to use - although corporate tax is still at 21%. That’s an offshore company.

 

Flag 4: Offshore banking

As you might have guessed, offshore banking means having a bank account in a different country than the one you live in. Once again, totally legal - although make sure you declare them.

It can be as simple as going to a country and opening a bank account over there - maybe they offer higher interest rates or maybe you just don’t want to have all your eggs in one basket 🍳.

 

Flag 5: Physical assets

Some next level stuff: the country in which you put your gold and buy your land.

Maybe the best place to invest in property is not the UK, maybe it’s Colombia. Maybe you should buy physical gold and put your money in a bank in Singapore, instead of buying gold stocks.

 

 

Flag 6: Digital security

Now that everything is done online and we access investments, savings and important data through the internet, it’s double important to keep it all safe. This means having things encrypted, using VPNs, have an anti-virus software and all the rest.

Here’s a great page on how to keep you digital data secure.

 

Flag 7: Digital assets

Even more next level, why not hold your assets in digital assets such as crypto? More and more altcoins are being created and some of them have some really interesting features - Ripple wants to establish a global standard platform for electronic payments, for example.

Although they aren’t very stable now, they’re secure and private. I’d keep an eye on them and read more on how you can use cryptocurrencies with Flag Theory.

So there you go, the 7 flag theory. It does not mean you need to have all 7 flags planted and that you should aim for every single one - but being aware of these different options and how you can diversify is always great. Because at the end of the day, the essence of the flag theory and the perpetual traveler is freedom. As humans, we want to be able to travel round the world without having people claiming we should pay tax here and there and having the freedom to live where we want.

What if I want to live here 😍

How you can use flag theory

Personally, my head exploded when I first discovered flag theory - it’s a whole new world for me. Once you realise that you are not tied to your country, that you don’t have to live there the rest of your life, and you certainly don’t have to pay them taxes if you don’t want to, your life changes. Even as a twenty year old who’s earning 700€/month, having these ideas in place means I will know what to do once I’m earning more and want to set up a business.

Do you really want to be giving way 40% of what you earn to the government? Do you trust they’ll be putting it to good use? We all seem quick criticise our politicians but are all very happy with giving them our money - so how about we stop complaining and put the money somewhere else?

Anyway, if you’re like me and are just getting started, I recommend reading and learning as much as you can. I also recommend always keeping it legal and consulting expert advice if you want to take action. 👮

Here are some snazzy resources to learn more about different tax strategies:

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