Posted July 01, 2021
By Sean Ring
From Second Passport to Five Flags
Happy Thursday!
Keep those messages coming. I thoroughly enjoy reading and replying to your fascinating mail.
I usually give a monthly update on the first day of the month, but Im going to save that for an easy Friday read tomorrow. Today, Ill finish up with our passport conversation for now.
But first, a big mea culpa!
The Latin is Not Strong With This One...
Im well educated, but certainly not classically educated.
So let me correct a few mistakes from yesterdays Rude.
Jure Sanguinis should be Iur Sanguinis for citizenship by right of blood.
Jur Solis should be Jus Solis for birthright citizenship.
I think the principle of jus solis is quite young, after the introduction of the letter j into the alphabet. But I shouldve known about the I in Iur...
I mean, how many times have I watched this movie?
Professor Henry Jones: But in the Latin alphabet, "Jehovah" begins with an "I".
Indiana Jones: J-...
he steps on the "J" and almost falls to his death; he scrambles back up
Indiana Jones: Oh, IDIOT! In Latin, Jehovah begins with an "I!
So please forgive my mistakes. I shall brush up on my Latin once I get through my Italian lessons.
But since weve brought up my favorite archaeologist, lets use him to explore flag theory.
Indiana Jones and The World is Your Oyster
God, I loved Raiders of the Lost Ark as a kid. I still watch it every 3 months or so.
I credit it for my wanderlust and seemingly ridiculous love affair with the Middle East and the Magreb. I think Napoleon was right when he said that if there were to be only one world capital, itd be Istanbul.
Traveling to Abu Dhabi and Dubai remains a great pleasure for me. Marrakech and Tunis are fabulous.
I learned to scuba dive off the coast of Sharm El Sheikh in the Red Sea. St Catherines Monastery was amazing, but the bush was not burning. Cest la vie
Ive not been to Cairo or Petra, but theyre high on my list when things calm down.
Im just an Old World kind of guy, I guess.
This may be the biggest benefit of planting Five Flags. You can do what you want, where you want, while your assets are protected.
Let me lay out what the Five Flags are first.
The Five Flags
A Second Passport
Weve covered this over the past few days. The benefits are numerous. As an American it doesnt protect you from everything, but its a start.One of my friends, a dual American-Italian citizen, used his Italian passport to explore Iran. You cant do that if you only have an American passport. He loved it. I remember him telling us all about the things he saw in Tehran over a nice bottle of red.As Indiana Joness dad was Scottish, he couldve used his British passport to get to places his American passport wouldnt.Business Haven
Set up your business in a country with low corporate taxes. Americas corporate tax is a bit high for my taste, and its only going up under President Sniffy-Sniff.If youre an internet entrepreneur, have an ecommerce business, or are a digital nomad, this is an especially smart option to explore.Perhaps Indy couldve set up a business in a tax-friendly environment like the Cayman Islands to shift those antiquities for greater profit.Playgrounds
Tim Ferriss popularized the concept of geoarbitrage about 15 years ago. Geoarbitrage is the act of earning money in one currency and spending it in another. For instance, you can still earn in USD, but spend your money in, say, Philippine pesos if its cheaper to shop in the Phils.I do that all the time.One of the perks of living in the Philippines is the ability to earn in USD but spend my cash as pesos for holidays, groceries, or anything else I buy. Not everything is cheaper here, but many products are.The same would be true for expats in Central and South America and Eastern Europe, in particular.Choose where you spend your time wisely. Try to live and play in countries with a lower cost of living. There are many beautiful countries in the world to do this.I happen to do it in Southeast Asia. Others prefer to be closer to the States and choose Costa Rica, Guatemala, or Ecuador as a result.If the country has no sales tax or value-added tax (VAT), its all the better.Legal Residence
This goes hand-in-hand with playgrounds.Governments are clamping down on perpetual travelers. Theyre people who dont live in any one country long enough to pay taxes anywhere.Some countries are saying, Well, if you dont pay your taxes anywhere, you should pay them in your own country.Thats why its much wiser to go to a country with low to no income tax and rent there.My signed rental agreement prevents either of my home countries from saying, You must pay tax here. Sorry, but I live in the Philippines and heres my proof.In essence, you need a place to hang your whip and fedora.Lets look at different systems of international taxation. Please keep in mind that if youre American, youll still have to pay Uncle Sam his squeeze:No Income Tax
This includes Monaco, the UAE, and the Cayman Islands, among others. Theres simply no income tax. You dont pay anything to these governments. Nice.Territorial Taxation
This includes Singapore, Malaysia, and the Philippines. Say you live in the Philippines, but all your income is from, say, the United States, you do not pay income tax on the US earnings. You only pay income tax on income earned within the Philippines itself.I love this system of taxation for obvious reasons.Residency-based Taxation
This is most of the world. If you live in one of these myriad countries, you pay income tax on your worldwide income. That is, if you live in the UK and have investments overseas, you pay UK tax on those overseas investments.Not the best choice if youre trying to avoid tax, but it is done this way in most of the world.Citizenship-based taxation
The United States and Eritrea. The only two countries in the world that charge income tax on worldwide earnings whether youre actually living in the country or not.Not ideal for obvious reasons.To have a look at the complete map of international taxation, head here.Asset Haven
Finally, you need a place to put your assets.For me, this was easier, as I was getting shipped around the world for various jobs. It was as simple as opening a bank account in each country to get the ball rolling.Sometimes, youll have to fly to the country to open an account. Sometimes, the initial deposit can be quite hefty.But the most important things to focus on are a great legal system, a stable banking system, and, if you can get them, decent interest rates.If you have any antiquities from your adventures, you need a safe place to store them.Andrew Henderson, of Nomad Capitalist, adds two more flags. One is protecting your digital assets, such as websites and email. The other is prioritizing your social life. Both are indeed important.I can tell you, I cant wait to get back to the West to be closer to my friends. I really do miss them. The spontaneity of just winding up in a pub for a few pints is just wonderful. And it hasnt happened to me in years.So make sure you find a place that you love and can also immerse yourself in. Friends matter in this world. Like-minded friends make it all the richer.If you can get all these ducks in a row, youll have truly found your Holy Grail.Good luck with it!All the best,Sean
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