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SOVEREIGN MAN

Questions about Open Opportunity IRA, Net worth, and more

June 25, 2010
Barcelona, Spain

It’s early in the morning here in Barcelona– the part of day they refer to as ‘madrugada’ in Spanish… near dawn.  I’m just wrapping a few things up here before heading out on a long drive.

My weekend plans entail meeting up with a rather eclectic group of bankers, investors, and diplomats in a remote location high up in the mountains. We’re gathering at an old monastery that’s been converted into a luxury boutique hotel… one of those places that you’ll only find in Europe.

Before I get going, I want to take a minute to thank you for taking the time to fill out yesterday’s survey.  People from over 60 countries provided their valuable feedback, ranging from the Tanzania to Croatia to Afghanistan to Bolivia. It’s amazing how diverse our group is.

I’m still going through all the responses, but so far I’m really encouraged by what I’m reading, and I hope to be able to make our publications more beneficial for everyone.

Regarding this week’s questions, I want to spend a few minutes making some clarifications. On Wednesday, I wrote what was probably among the most important letters that I’ve published about the British government’s overnight tax code changes.

This is really important because it provides a clear example for the rest of us to start taking action now… politicians have the power to make changes, literally overnight, so that we all wake up in the morning to a completely different reality.

Planting multiple flags is a great way to take action.  Every country has some merit, something good that it offers. One country may have a great banking system but terrible courts (Panama). Another may be great for citizenship but bad for tax residency (Italy).

The idea is to pick and choose the best parts about each jurisdiction and apply those benefits to your life.

Protecting yourself from tax code changes, such as what happened in the UK, could mean a variety of different strategies. For many nationalities, it may mean holding assets in a foreign structure, and never repatriating those profits.

For other, less fortunate taxpayers (specifically from the US), offshore tax shelters cannot be employed without serious penalty. In this case, one of the best solutions that I outlined in Wednesday’s letter is the self-directed, tax-deferred structure known as an Open Opportunity IRA.

Through this structure, you have the flexibility to invest in alternative assets (physical gold, foreign property, etc.), plant multiple flags, and be in complete control of your own money.

This is a completely legitimate strategy, just as much as a 401(k) or traditional IRA– you can read about it yourself in the tax code. There are some basic rules, however, and you need to follow them in order to maintain the integrity of the structure.

Regardless of which strategy you pursue, the time to take action is now… as I outlined in Wednesday’s article, these massive changes can occur overnight. I encourage you to re-read Wednesday’s article to learn more.

Moving on, Keith asks “Simon- My grandmother was born in Switzerland in the late 1890s and lived there until she was 95 years old. I know some countries allow you to acquire a second passport from grandparents, is Switzerland one of those countries?”

No. If she were Italian, Lithuanian, Polish, or a few others, you would be in luck. Unfortunately, Switzerland’s nationality law does not pass on generational blood lines for individuals who do not have significant ties to Switzerland.

To make matters worse, being naturalized in Switzerland as a permanent resident is also an extremely long and difficult process. I know people who have been living there for nearly 20-years and have not become citizens yet.

The bottom line on Switzerland– there are a lot of great aspects about the country, but you shouldn’t consider planting a citizenship flag there.  Look at better options like Belgium in Western Europe, Brazil or Paraguay in South America, or Singapore in Asia.

Lastly, Dirk asks, “Simon– I have been following your letter with growing fascination over the past weeks; can you recommend a certain threshold over which you should start looking to plant multiple flags– is there a minimum net worth?”

There is no net worth requirement for planting multiple flags. You can be flat broke and still plant an electronic flag with a foreign email provider to safeguard your privacy. Furthermore, many people may find that planting business flags overseas could be a path to creating wealth.

The truth is that it might be easier to make your fortune outside of your home country, in a place where economies are moving forward rapidly and your skills can be of great value. After all, everyone has something that he or she excels at, and there are several places in the world where those skills are in demand.

As for planting certain financial flags, it really depends on the situation. A young entrepreneur, for example, may benefit from creating a foundation of offshore bank accounts and structures, even though s/he does not have much money or income at present.

Others who might not have significant assets but steady income from a job may also benefit from establishing a foreign bank account to safeguard their growing savings.

The important thing is to have a firm idea about specifically what you need, and why. Don’t haphazardly plant flags that make no sense in your life, i.e. there’s no need to establish a foreign company if you don’t expect to operate a business or understand the tax implications. Don’t open a foreign brokerage account if you have no investment capital or prospects of building investment capital.

When planting flags, think about your own situation and what makes sense. Once you do I’m sure you’ll see planting flags as I do… not just a way to hedge your bets or protect your assets but as a way to really live your life through deep, rewarding experiences and unimaginable opportunities.

About the author: Simon Black is an international investor, entrepreneur, permanent traveler, free man, and founder of Sovereign Man. His free daily e-letter and crash course is about using the experiences from his life and travels to help you achieve more freedom.

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Comments on this entry are closed.

  • Eric

    Simon,
    I assume you’re headed in this direction…but release a product with any information on the *current* ideal flag setup for young entrepreneurs who have digital based businesses and I’ll buy it in a heart beat.

  • Mwlarsson

    Dirk had a great question, with a great answer from Simon…but it could be something to expand more on in a future post Simon. I think Americans especially would like to know your thoughts on the following scenario:

    If Marc Faber, Jim Rogers etc. are right that we may have another 5 + years before the collapse is front and center, and “The Snap” is starting to occur – what skills should the “Average Joe” be developing now to become valuable to a foreign company? what would be your 5 year plan for a Middle or Upper-Middle Class individual or family? what is the most valuable language to start learning (Chinese most likely – a tough one)? When I say “average” this may not mean someone with an Entrepreneurial background/ability.

    Just a thought

    Thanks

  • David

    Researching the nationality laws of Central and South America, one little note seems to be continually popping up. Citizenship from Iberian countries (Spain and Portugal) seem to accelerate the ability to acquire citizenship from these nations. Is this true in theory only, and does this happen to apply for recently naturalized Iberian citizens as well?

  • Afkovach

    Thanks to Dirk for asking that question and to Simon for the answers…

  • Paul Turner

    You stated Polish citizenship could be obtained by your family line. My mother has traced her family tree from her birth to my 2nd-great-grandparents back to early 1830s from Poland, Prussia, Preussen. So, I inquired with Polish Embassy in the U.S. regarding the question of validity to obtain citizenship. Their response is below, but, it looks to be an impoosible task for descendents of US immigrants:

    Law provides for the so called “blood” type of citizenship, it is possible even for third-generation to successfully claim the right to Polish passport. The only question that remains is whether one’s descendants were able to pass Polish citizenship to their offspring in a consecutive manner.

    The main principle of our law was and still is the exclusiveness of Polish nationality. Polish law does not recognize dual citizenship of its citizens. While current Polish law does not forbid Polish citizens from becoming the citizens of a foreign state by birth or naturalization, Polish authorities shall recognize that citizens as a Polish citizen only.

    A Polish citizen may acquire foreign citizenship with a full effect under Polish law once he/she receives a permission to renounce Polish citizenship granted by the President of the Republic of Poland. Unfortunately, it was not always like that. When Poland regained independence in 1918 we had to cope with a difficult task to make one state from three partition zones, accommodating many minorities as well. That fact was behind the very restrictive Citizenship Act of 1920. It’s provisions were upheld also by March Constitution of 1921. That law which was in effect until January 1951 provided for automatic loss of Polish citizenship in case of foreign naturalization or service in a foreign armed forces. In practical terms, those who emigrated and get naturalized under that law could not pass citizenship to their children.

    If the ancestors who came to the United States were born while Poland did not existed, before Poland regained independence in 1918, it means that they came to the United States as Polish nationals, but not Polish citizens.

    Since the citizenship is a sort of an artificial concept, it is sometimes difficult to understand why people who emigrated from Poland under partitions had not been considered Polish citizens. However, as Poland did not existed as a state at that time, those Poles who traveled to America, traveled there as citizens of Germany, Austria and Russia.

    Taking the above into consideration such ancestors could not pass Polish citizenship to their children because they were not Polish citizens themselves.

    According to Polish Citizens Act of 1920 only people who lived on territory of Poland in 1920 and not being citizens of other country could be recognized as Polish citizens.

    Under the law of 1962 the President of the Republic of Poland can grant Polish citizenship, but an alien is eligible to apply for the citizenship, only in case he or she has resided in Poland as a lawful permanent resident for the period of at least 5 years. The granting of the citizenship can be a subject to submission of evidence of the loss or renunciation of foreign citizenship.

    Sincerely,
    Consular Division
    Embassy of Poland in Washington D.C.

    • GGG

      Whether it is an “impossible task” or possible depends on individual circumstances. It may well be impossible in your case. However as I understand it (and I am not an expert by any means) if a Polish citizen born in 1920 in Poland has a child born in 1940 (in or out of Poland) whether the child is a Polish citizen depends whether the parent was still Polich on the date the child was born in 1940. In other words, if the Polish parent was naturalized in another country or served in another country’s army prior to the birth of the child, then the child is not Polish. However, if the child is Polish upon birth in 1940, the parent’s naturalization (or service in a foreign army) subsequent to the child’s birth would NOT take away the child’s Polsih citizenship. The child, if born in the US would gain US citizenship by virtue of birth on US soil (NOT naturalization in the US) and therefore the child would not lose his Polish nationality.

  • http://friendfeed.com/mekkar Mekkar

    The media (including public relations people) is a “whore” of the politicians, bureaucrats, & the elites – prostituting themselves out to the highest bidder & attempting “to put” a positive spin on it – so people believe it. They are so full of sh*t!

  • Joe

    What is the best flag to start for a young who just got out of college?

  • Robert Goldman

    I think male descendants of a male Swiss citizen can apply so long as birth was registered with Swiss embassy ( mine wasn’t).

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