June 18, 2010
Madrid, Spain

Long haul flights from South America generally tend to leave in the evening, usually between 7pm and 1am. The airlines do this so that you arrive first thing in the morning and can catch any connecting flight you may need… which is nice for travelers.

The flight schedule does make things a bit inconvenient prior to departure, though.  Even with a late hotel check-out, you’ll have about 5 hours to kill before heading to the airport.

This happened to me yesterday in Rio, so I took the opportunity to work on my tan a little bit on Ipanema beach. Even though it was just a normal winter weekday afternoon yesterday, you would think they were having a supermodel convention at the beach given the abundance of bronzed beauties.

It’s no wonder why Brazilians are so carefree about life… how can you feel despondent when you’re immersed in warm weather, sunshine, mountains, the ocean, and gorgeous, friendly people?

After the 11-hour Iberia flight (average business class, in my opinion), I now find myself in Madrid, where I’ll spend the day before heading to London to meet up with some friends and Atlas 400 colleagues.

I’ll have more to follow on my plans next week; you may be interested in what I have in store regarding passports later this month. For now, let’s move on to this week’s questions.

Starting off, I got a chuckle from a comment by Garth this week when he said “the rose colored classes are on,” in response to an article about Rio. I thought I should take a moment and explain something about myself.

Here’s my confession: I am an unabashed optimist. I tend to see the good in everything– people, situations, and countries.  Even in the midst of chaos, my natural instinct is to see opportunities. There’s too much negativity in the world, and I’m weary of cynics who dwell on it.

You can always count on me to be candid about my thoughts, but don’t expect me to obsess over the negative aspects about a country. I will acknowledge them, and then move on… if a country’s issues are so serious that I don’t think you should consider planting a flag there, then I won’t even bother writing about it.

I recognize that people potentially base major life decisions on the information provided in this letter; this is a responsibility that I take very seriously, and I have a few simple rules that I follow which guide me as I write.

First, I won’t ever suggest a country that I wouldn’t recommend to my own mother. Second, I only discuss multiple flag tactics (banks, passport programs, corporations, etc.) that I have first-hand experience with and can vouch for.

Third, I won’t negatively bias someone’s opinion about a country simply because I don’t personally like it… I realize that not everyone shares my taste. As such, I tend to focus on the good points. If there’s not enough good points to consider, then it won’t be on my list. Simple.

Moving on, JT writes, “Simon, what are your thoughts on renouncing US citizenship?”

Renunciation is a decision that more and more people are making each year. The movement is still embryonic, but I expect the coming years that there will be great waves of Americans taking this step.

For most people, the chief reasons are generally financial– they no longer feel comfortable making Uncle Sam a 40% partner in everything they do around the world.

One thing’s for sure– no one should make this decision for emotional reasons because they hated Bush or hate Obama. These guys are as ephemeral as last night’s meat loaf. The decision should be made pratically with a well-reasoned financial analysis.

It is absolutely possible to mitigate or defer tax liability by properly planting multiple flags (i.e. business structured in one location, consumers in another, banking in another), but the ultimate tax break will come only when you renounce.

If you take this step, you have to pay a one-time tax to Uncle Sam as if you had liquidated all of your assets and taken the capital gains. Sammy gives you a $600,000 tax-free allowance and taxes you on the rest.  I’ll have more on this in a future letter; it’s definitely a topic worth discussing.

Next, Deiter asks, “If one were to disclose the existence of a foreign bank account, wouldn’t that make it accessible to frivolous lawsuits?”

Great question. One of main benefits of planting multiple flags is diversifying your sovereign risk so that your assets are no longer exposed to government agencies, tax authorities, and the court system.

Just because you disclose your assets, either due to government regulation or in a court-ordered discovery process, doesn’t mean that your assets are exposed. Let’s say you own property, for example, and you lose a court case… the judge decides that your property should be awarded to the Plaintiff.

Well, if that property is located within the court’s jurisdiction, then the judge can simply have the title conveyed to the other party. If the property is located overseas, far away from the court’s jurisdiction, then they have no power or authority to forcibly convey the title.

The same thing goes for bank accounts, gold stored overseas, etc. When you move assets overseas, you are effectively removing those assets from the jurisdictional authority of your home country.  Disclosing those assets as required by law does not eliminate that benefit.

Lastly, Dave asks, “Simon I’m curious. As a PT, what do you do for postal mail?”

Does anyone still use postal mail? My banking/credit card statements are all email, and if I need a parcel sent to me, I usually just give the hotel address where I expect to be staying by the time it arrives.

If you get a lot of postal mail, you could try the Swiss Post Box service. They’ll receive your mail, scan the envelope, then forward/shred/scan the contents upon your instructions.

That’s all for this week, have a great weekend.

June 16, 2010
Rio de Janeiro, Brazil

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May 27, 2010
Chicago, IL, USA

Uruguay is one of the countries that generally receives a lot of praise and positive commentary in the expatriate blogosphere. It’s often referred to as the “Switzerland of South America,” or compared directly to Paris… probably by people who have been to neither Switzerland nor Paris.

The truth is that Uruguay is a very pleasant country in many respects. It’s relatively clean, quiet, safe, and not very corrupt. Punta del Este, more specifically, is a great town with a hip and sometimes chaotic nightlife for a few months out of the year.

Other parts of the country can leave a bit to be desired… the poverty, blight, and disrepair are more noticeable, and a ridiculous array of taxes and high import duties ensures that only the wealthiest residents have access non-basic goods.

More importantly, though, Uruguay’s reputation as a tax haven and offshore financial center is completely undeserved. I’ve been saying this for a while, most recently on February 26th of this year. It appears that the government is now trying to put an end to the argument altogether.

It started in 2007 when the government imposed a personal income tax. Over the last few years, the country has laid down for the OECD, reducing its attractiveness as an offshore banking center.

Now, Uruguay’s left-leaning government, led by President Jose Mujica, recently unveiled draft legislation to tax all residents on their worldwide income, as well as a wealth tax on the $8 billion worth of assets that Uruguayan residents hold outside of the country.

As the vast majority of Uruguayans have no income or assets outside of the country, the new tax code changes only affect wealthy locals and foreign residents… a small minority in this country of 3 million people.

While the Uruguayan culture is typically not one of blood-sucking socialism at all costs, the enormous demographic gap between those with assets overseas (a small minority) and those without (the majority) suggests that the bill will likely become law.

In my book, this knocks Uruguay off the list of countries where someone should live as a declared resident. It may still be a great place to spend a lot of time, though it would be much more advantageous to do this as a perpetual tourist.

Specifically, one could establish permanent residence in a place like Panama or the Bahamas, then live in Uruguay as a tourist. US, Canadian, and EU citizens are allowed to stay in the country for 90-days at a time; once the 90-days are up, you can hop a 1-hour flight to Buenos Aires, spend the weekend, and fly back to Uruguay.

It’s unclear right now whether Uruguay’s new measures create a tax liability on the worldwide income of non-resident Uruguayan citizens; if not, an Uruguayan passport may still be a reasonable document to acquire… as long as the applicant doesn’t plan on living in the country.

For example, one could travel to Uruguay, establish permanent residence, pay the taxes for 3-years, acquire Uruguayan citizenship, then leave the country for good.

Overall though, I think there are much better options– Paraguay, Brazil, Chile, and even Belgium.

More to follow.

May 26, 2010
Chicago, IL, USA

If you’re shopping around for a tier 1, first world second citizenship, you might find a solution in Canada (unless of course you’re a native Canadian).

In my view, Canada offers two key advantages. First, a Canadian passport is an incredibly valuable travel document– Canadians are generally greeted around the world without stigma or significant visa requirements.

Second, Canada has a very reasonable tax scheme for non-resident citizens who sever their resident ties to the country… usually by selling their home and moving to another country with all family and dependents. In this case, a non-resident Canadian is only subject to taxes on income sourced from within Canada.

As a Canadian citizen, you could live in a place like Panama or the Bahamas and never pay taxes ever again… but still have visa-free travel around the world, including to the European Union and the United States.

Similar to our discussion earlier this week about an Israeli passport, though, there are drawbacks to being Canadian.

First of all, taxes for resident Canadians are a real bear. You can easily pay north of 40% of your income to the government. If you harmonize the wages and cost of living, Canadian marginal tax rates rank much worse than the United States, and slightly more than rates in the UK and Australia.

Second, US citizens should be cognizant that Canada will absolutely be the first country to hop in bed with Uncle Sam. So if you end up on some three letter agency’s list in the US, you can be sure that you’ll eventually hear about it from the Canadian authorities.

Third, once residence is approved, an applicant must keep both feet planted squarely on Canadian soil for 3 out of 4 years in order to qualify for citizenship. Canadian immigration authorities will literally count the days in your passport. If you travel frequently, or hate cold winters, you’ll be out of luck.

For me, it’s these last two reasons that I have long rejected the idea of becoming Canadian, but I recognize that it might appeal to others.

So how do you go about doing it?

First you need to establish permanent residency. Assuming that you’re not a refugee (which Canada absorbs en masse), there are a few different ways. One approach is for entrepreneurs– if you’re looking to start a business, you may be able to get approved for residency in Canada.

Canadian immigration requires entrepreneurs who can demonstrate successful business experience for at least two years to have a minimum net worth of C$300,000 in order to qualify. Additionally, you must submit a plan demonstrating the viability of a new business that will hire at least one Canadian full time equivalent.

This process is transparent and well-documented, but it’s highly bureaucratic and can take more than a year. Plus, upon approval, you actually have to move to Canada, live in Canada, operate your business in Canada, and pay resident taxes in Canada.

Given the requirements, I think Singapore is a much more attractive option for entrepreneurs who are willing to move.

Self-employed individuals, including artists, performers, writers, and athletes, can also be accepted for residency if they meet basic financial qualifications.

The main problem with this approach is that applicants are scored based on pre-defined selection criteria: education, experience, age, etc. These criteria can change frequently, as well as the minimum score required to pass, so fundamentally an applicant’s approval is subject to the immigration officer’s opinion.

Furthermore, this approach generally only applies to individuals that can make a significant contribution to cultural activities, not self-employed professionals.

To me, the most attractive way to become a Canadian is as an investor. The government presently has a scheme detailed in section 94 of the Income Tax Act that provides a 5-year tax holiday to new residents.

Through this program, an approved applicant must move assets to an offshore trust prior to moving to Canada. Passive income and capital gains from assets within the trust are not subject to Canadian taxation for a 60-month window. During this period, the applicant can also qualify for citizenship.

At the high-end, an individual qualifies by investing C$400,000 with the government. This amount is returned after 5-years with 0% interest paid. As an alternative, some Canadian banks will invest the C$400,000 on your behalf as long as you pay them a substantial fee of C$120,000.

Overall, Canada may be a good option if you:

1) Have substantial assets that you can move into an offshore trust, don’t mind paying C$120,000 for residency, and don’t mind staying put in Canada for 3 straight years.

2) You’re desperate to leave your home country and want to relocate to an English-speaking, Americanized country; you are willing to live in Canada full time and don’t mind paying the high taxes and high cost of living.

Otherwise, I think there are better options out there for you, Singapore, Brazil, Uruguay, and potential ancestry options.

May 24, 2010
Chicago, IL, USA

Are you Jewish? Do you want to be? If so, you’re entitled to an Israeli passport.

In Israel, the “Law of Return” provides means for all Jews, and individuals of Jewish ancestry, to acquire Israeli residency and citizenship. Israeli law defines Jewish ancestry as having at least one Jewish parent or grandparent.

In the event that you don’t fit the ancestry definition, the law also provides the ‘right of return’ to all converted Jews of all denominations, and the conversion need not take place in Israel in order for it to qualify.

In either case, the onus is on the applicant to provide adequate documentation proving either Jewish ancestry or conversion to Judaism… the Israeli authorities won’t just take your word for it, they will check.

Additionally, the Israeli government will conduct a brief background investigation to determine if the applicant is a fugitive, convicted violent criminal, or known associate of any enemy of the state.

Once accepted, the applicant is entitled to immediate citizenship. For the first year, a temporary travel document is issued in lieu of a passport. After the first year, the government issues a standard passport.

Israeli citizenship carries many advantages including visa free travel to the European Union and extended visa quotas for the United States. Moreover, Israeli citizens who obtain residency in certain EU countries have reduced requirements to eventually obtain EU citizenship.

Additionally, in 2008, the Israeli government passed several new tax incentives that apply specifically for new immigrants under the Law of Return. The new tax rules include a 10-year holiday on foreign source income and tax exemptions for foreign-based companies owned by new immigrants.

As you can imagine, though, the disadvantages of Israeli citizenship are significant. All males must serve in the Israeli Defense Force for three years after age 18, and remain as a reservist until his mid-40s. There are exemptions made, however, on grounds of religious or philosophical objection.

Furthermore, Israeli citizens find themselves a target, perhaps even more often than US citizens. The State of Israel is still not recognized in some parts of the world– if you have ever been to Saudi Arabia and looked at a map of the Middle East, the boundaries of Israel do not even exist on the map!

All in all, while I’m not advocating that anyone change his/her religion specifically to obtain a passport, I think that Israeli citizenship may be among the fastest, most cost effective citizenships to acquire if you have no other means available.

If you’re interested in getting started, the best place to get answers is your nearest Israeli consulate; they’re accustomed to fielding these questions all day long.

April 27, 2010
St. Michaels, Maryland, USA

Yesterday I told you about the official way to go about obtaining residency and citizenship in the Dominican Republic– essentially, it takes about four years from start to finish until you receive your passport, though you may be expedited for investing $200,000 in the local economy.

As I mentioned, though, the country is [in]famous for shady practices like issuing passports that do not conform to official procedure. Local bureaucrats accept personal payments to backdate applications and residency permits, and higher level politicians play ball for a piece of the pie.

To be clear, this is illegal, even in the Dominican Republic. If you are a US citizen, it is also a violation of the Foreign Corrupt Practices Act… so effectively you could be in technical violation of the law in two countries.

Obviously, the FCPA is a ridiculous and naive law that puts Americans at a disadvantage. Bribery and corruption make the world go ’round… yet in the US, these hallmarks commerce are only reserved for the political establishments.

Regardless of the insanity of this law, however, it’s generally not worth taking the legal risk and putting yourself in a situation where you could be fined, imprisoned, or have your shiny new passport confiscated.

The other thing thing you have to consider is that, most of the time, these illegitimate passport options have substantially higher risk of being fraudulent. I’ve come across this in the Dominican Republic in particular.

To paint a clear picture, I asked a friend of mine (non-US person) who is in the weeds of the illegitimate passport process in Santo Domingo to describe her experiences. This is what she had to say:

“Dear Simon– A few months ago, I found a Dominican Republic passport facilitator online; after several conversations, I agreed to pay him $10,000 up front, and $10,000 once the passport is issued.

Since I really wanted to test the process, I went ahead and sent him the money to get the process rolling.

When I arrived in Santo Domingo a few months ago, the facilitator met me there. He seems like a nice enough guy, but my gut tells me that putting blind faith in him was a big mistake.

He took me to the local immigration office where I met with some of the bureaucrats who were handling my backdated residency work. One of them is a former judge and prosecutor whose English is reasonable and seems like a valuable resource.

The other lady was the office manager; she didn’t speak a word of English, but I could easily observe that she had the power to make anything happen at the grunt level.

As part of the requirements, I had to take a blood test, urine test, get papers stamped, pictures, chest X-ray, etc. I was told that I would have my residency within 30-days, and a passport a few months later.”

Simon again. That was almost 3-months ago. My friend still does not have her residency permit, and the facilitator has gone largely silent. This sort of thing is unfortunately all too common.

This is why the only way to acquire a second passport is through official, legitimate means… unless you have an absolutely trusted source.

We have already talked about Brazil and Paraguay, as well a as few other options in this letter. I’m testing some other solutions that I plan on bringing to you soon.

April 26, 2010
Santo Domingo, Dominican Republic

For most people, there are really only three reasons for going to Santo Domingo, Dominican Republic:

The first is to transit to some other, ‘nice’, part of the country.

The second is for sex tourism, which is in incalculable abundance here for both men and women.

The third is to establish residency in the hopes of eventually obtaining a passport from the Dominican Republic.

I’ve spent the last few days here investigating the third.

Local law states that a foreign person may become a naturalized citizen of the Dominican Republic after continuous residence for two years. Obtaining residency, the first requirement, is a fairly straightforward process which the local bureaucrats have been dealing with for years.

Applicants must fill out several forms, provide a letter of guarantee (usually from your immigration lawyer), a police record, health certificate, evidence of financial health, and a few other odds and ends.

3-4 months after filing the application, a provisional residence is granted that lasts for one year. After the first year, the applicant may request permanent residence… which isn’t exactly ‘permanent’ since it must be renewed every three years.

The fast-track investment program to obtain residency in the Dominican Republic is to contribute a minimum of US $200,000 towards certain real estate, financial assets, or local companies.

Officially, once initial residency is approved, it takes two-years of residency in the country before you can apply for naturalization.

While the law is technically unclear, most people are granted citizenship without actually being present in the country for that two-year period. In fact, many applicants only show up twice– first to apply for provisional residency, and second to apply for permanent residency.

After the two year timeline, it can take up to another two years to obtain the President’s signature for naturalization, get published in the ‘Gaceta Oficial’, and be issued a passport.

Unofficially, there is no shortage of bureaucrats working within the government offices that, for a fee, is willing to backdate residency permits and issue a passport within 3-6 months.

This practice has become so widespread and without any discretion whatsoever that the value of Dominican Republic citizenship has eroded substantially.

Passport holders now have heavy visa requirements all over the world, even including countries like Aruba, Jamaica, (oooo I wanna take you), Bermuda, Bahamas… seriously, it’s not just the song. Dominicans care barely go see their Caribbean neighbors, so forget about Mexico, Brazil, the US and EU.

I wanted to address this issue because so many people have asked me about the Dominican Republic; here’s the bottom line:

Taking steps towards Dominican Republic citizenship would not be a terrible idea… frankly, I think second citizenships should be on everyone’s mind, and there are definitely cost effective ways (in some cases nearly free ways) to go about it.

However, since the clean, ‘official’ route in the Dominican Republic can take over 4-years, not to mention possibly tie up $200,000 in a banking system that I wouldn’t want any part of, I believe that there are far better alternatives out there that I’ll be discussing with you soon.

April 2, 2010
Panama City, Panama

It’s been a great week so far in Panama. Each time I come back to this country I become even more sure in my conviction that Panama has a bright future.

For the next few days, though, I am going to set aside market forecasts and expatriation strategies… you see, my friends from the Atlas 400 club are starting to arrive, and I’m looking forward to a few days off at the very exclusive Tropic Star fishing lodge in Panama’s Darien province.

The cast of characters attending this event is really impressive– and I’m excited that several members of our own community will be there.

I’ll tell you more about it when I return on Wednesday. For now, though, let’s move on to this week’s questions.

First off, Jeff in Ohio asks: “Simon, thank you for the clarification about the new H.I.R.E. Act, I was really confused and concerned.  Why do so many people continue saying that this new law is the same as capital controls?”

It’s easy to overreact and say that the sky is falling.  To be fair, a layman’s reading of the bill makes it seem like the government is imposing a 30% tax on foreign bank transfers… but that’s exactly why I had my team of tax attorneys and CPAs analyze it– I wanted to know the truth.

The truth is, the H.I.R.E Act is an administrative enforcement of tax reporting; it’s bad news, but it’s no more capital controls than the qualified intermediary rules or withholding requirement for some payments to foreign companies.

The big problem is that this new law provides a disincentive for foreign banks to work with US customers… more and more, Americans are simply not worth the hassle for foreign banks.

There are still solutions, though. Americans who want to open a foreign bank account (as everyone should) ought to consider larger multinationals that already have a US presence. They’re accustomed to the paperwork already and are less likely to turn you away.

There are, of course, other jurisdictions that frankly don’t care much about the H.I.R.E. Act, and we can discuss those more in the future.

Steve writes, “Mr. Black, is Panama still self-reliant and independently wealthy if income from the Panama Canal drops off?”

This is a good question. Panama is heavily dependent on the Panama Canal, just as Saudi Arabia is heavily dependent on its oil supplies.

Fortunately, Panama has been able to diversify its economy away from transportation and trade– banking services, real estate, tourism, customer service, and others… but the Canal still generates the preponderance of external economic activity.

If global trade were to take a major hit (as it did in 2008/2009), Canal revenues would certainly decline and Panama would suffer economically… but bear in mind that Panama still posted positive economic growth last year.

I suspect that major economic pain would come only with a cataclysmic reduction in Canal usage, either due to another economically viable transportation route in the western hemisphere (unlikely) or a total collapse in global trade.

Mark writes, “Simon: I am a 65 year old disabled retiree.  Later this year I will have about $30,000 per year to reside on. Can you give me several ultra low-cost living places to consider that have SOME civilization?”

Everyone has different personal tastes and circumstances, but here are some ultra cheap countries that are safe and reasonably civilized: Malaysia, Ecuador, Thailand, Sri Lanka, the Philippines, Egypt, India, Paraguay.

There are more, but this should be a good start.

Anonymous asks, “Simon, if I have a civil judgement ruled against me, would that disqualify me from a second passport?”

No, not in most cases. Most countries require a medical exam and a criminal background check. If you have a felony conviction, that’s a red flag. Civil judgments are usually not problematic… you’d undergo more scrutiny testing positive for syphilis.

That’s it for this week. Remember, I will be at the closed-door Atlas 400 event for the next few days in the middle of the jungle, so you will more than likely not be hearing from me until next Wednesday.

March 25, 2010
Tokyo, Japan

About 20-years ago, many of the world’s sovereign nations started down an interesting path.  Region by region, governments formed supranational free trade blocs in order to facilitate economic growth.

Supranational organizations were nothing new… from the failed League of Nations after the Great War to the UN and NATO, large multi-country blocs had been formed in the past, but usually for political purposes or military alliances.

Conceived in 1989, the Asia-Pacific Economic Cooperation (APEC) was among the first international forums specifically designed to boost trade and enhance economic growth in the region, politics be damned.  After APEC came MERCOSUR in South America, NAFTA in North America, the EU, and finally the African Union.

A few years into the new millenium, most of the world was covered in trade blocs that were supposed to throw politics out the window… today, though, only APEC remains as a pure financial body, and the rest of the world could learn some valuable lessons from that region.

Aside from reduced trade restrictions that are standard for these organizations, APEC has come up with a few really brilliant ideas. Their goal is to make it easy for businesses to engage in commerce with each other– and by facilitating business at the individual level, more deals get done, and more wealth is created.

One of the ways that they’ve done this is by creating a program called the APEC Business Traveler Card (ABTC).  It’s literally a small plastic card that entitles cardholders to visa free travel for at least 59 days throughout the APEC sphere, as well as expedited immigration clearance at airports and other ports of entry.

At major airports in the region, for example, you’ll see signs all over the place for “ABTC FAST TRACK” which gives priority clearance at customs, immigration, check-in, and security to ABTC card holders.

Actually, in many cases, the ABTC is as powerful and useful as a diplomatic passport, but without the cost… and since APEC includes several countries like China and Vietnam that normally have a stringent visa process, the additional travel freedom is substantial.

This is a great tool for PTs and anyone who does a lot of business in Asia.

So how do you obtain one?  You need to be a passport holder from one of the participating countries– so if you’re from Australia or New Zealand, for example, I highly recommend going through the application process; check your respective country’s immigration website.

If you’re not already from the APEC sphere, you need to obtain another passport… which you should be thinking about already.  Of the participating APEC countries, the most straightforward ones to obtain are Chile, New Zealand, and Singapore, as well as Hong Kong permanent residence.

With each of these countries, the residence and naturalization process takes anywhere from 2-7 years, and in each case, the process is unmistakenly clear and leaves very little to subjective interpretation.

For example, obtaining a Hong Kong permanent residence card (which qualifies for the ABTC program) requires 7-years under one of the various residency schemes, such as the investor visa or professional worker visa.

In Singapore, citizenship can be obtained in as little as 2-years; it’s 5-years in New Zealand, and 5-years in Chile.

Frankly,I will need to write entire letters specifically on the subject of second passports from these countries; for now, though, you should definitely be thinking in that direction– and if you’re interesting in eventually planting a residency flag in Asia, those are the countries you should consider for second passports.

Stay tuned.

March 19, 2010
Pattaya, Thailand

My time here in Thailand is finally coming to an end, at least for now. On Monday morning, after I stop by the US embassy to pick up my renewed passport, I’ll be headed to Hong Kong.

I should briefly mention something about passports. Starting in 2007, the US government began manufacturing all new passports with RFID chips– small devices which record and transmit data.

Malaysia was actually the first country to issue RFID passports back in 1998; since then, most of the developed word has adopted them. The data which is collected/transmitted varies by country but generally includes some personal information as well as some travel data.

The RFID chips have a range of up to 10 meters, and many countries do not have encryption devices.

I’ve spent the last year searching around the world for an embassy in some remote country that hasn’t moved to RFID yet. Unfortunately, I was unsuccessful, so from now on I’ll be walking around with a passport that transmits my personal information.

My understanding is that there are passport ’shields’ available which absorb most of the transmissions, and I will definitely be looking into this more closely.

On to this week’s questions…

William says, “Simon, thank you for the IRA information this week. I know that Congress has changed the law– do you think that now is a good time to consider the new IRA structure? Can I use it to move my retirement funds overseas?”

Great question. First of all, I must apologize because this only applies to US citizens.

32 million Americans will need to make a decision this year; it’s a unique situation because, this year alone, there are several things coming together: first, the IRS has changed the rules, making it a smooth process to switch from a traditional to Roth IRA.

If you combine that with the devaluing rules, and the concept of an Open Opportunity IRA, you’re looking at a potentially enormous tax savings… but only for a limited time while the IRS keeps this window of opportunity open.

Also, once the structure is established, it’s really a fantastic vehicle for moving cash overseas, or even buying foreign property in many instances.

If you want to plant a flag overseas with your retirement savings, this is really the best way to do it, and the time to do it is now while you can still save on the taxes.

Sarah asks, “Simon- you stated that you would report on Malaysia. I’m more interested in establishing a non-US flag there than in Singapore.”

Malaysia is really a wonderful place… it’s Singapore without the costs, and Thailand without the chaos. I’ll dedicate a whole missive to it, but briefly here’s what you should know:

Malaysia is an easy place to plant a residency flag. You can stay in the country for 90-days without a visa, easily renewable for another 90-days. If you want to stay longer, the “My Second Home (MM2H)” program is one of the best economic residency programs in the world.

MM2H provides a 10-year visa for foreigners who meet basic qualifications– people under 50 have to deposit roughly $90,000 in a local bank, half of which can be withdrawn after 1-year for the purchase of a home. People over 50 need to deposit about $45,000 or prove a $3,000 monthly pension.

Like the Panama pensionado program, the MM2H visa entitles you to a variety of discounts and benefits with things like vehicle purchase and education.

The program is also very streamlined. Like Singapore, you can begin the application process online and check the status of your application on the government’s website, www.mm2h.gov.my

Ralph asks, “Dear Simon, Could you give us your opinion on the best country/countries to incorporate a business in? Thanks for your informative E-letters. Looking forward to the next.”

This is a tough one because it really depends on many factors– your home tax country, what do plan on doing with the new business, where you plan on living, etc.

In fact, the most important thing you should understand about offshore planning is that there is no “one size fits all” solution.

For example, a manufacturing company owned by a US citizen may want to look into Ireland because of the comprehensive tax treaty with the United States.

An IP holding company owned by an expat Australian, Brit or Canadian, on the other hand, may want to strongly consider Labuan, Malaysia. Malaysia has a tax treaty with Australia, Canada and the UK, but not the US.

In the Western hemisphere, a lot of people tend to look into Panamanian structures. For a passive holding company, this might make sense… but for an operating business, I would stay away from Panama because it’s not a common law country.

The bottom line is– always seek the right advice from a tax professional in your home country who understands proper overseas structures. I have contacts in the US and UK if you need.

Lastly, Libero asks, “Simon, you mentioned not so long ago about a special clause for Italian citizens somehow being able to obtain Panamanian citizenship. Can you provide more details?”

The governments of Italy and Panama signed a bilateral treaty several years ago that entitles citizens of one country to obtain RESIDENCE in the other… so an Italian citizen can obtain Panamanian residency, and vice versa.

This treaty only grants residency, not citizenship. To be clear, there is no fast track Panamanian citizenship program, at least not a legitimate one.

Panamanian naturalization is a long, difficult, and muddy process… I know some people who have been living in Panama and married to a local for 20-years, and they have been denied citizenship.

If you’re looking for second citizenship, I would suggest somewhere other than Panama. Try the southern cone countries that I wrote about a few weeks ago.

Have a great weekend.

March 12, 2010
Pattaya, Thailand

Greetings once again from the land of smiles.

First of all, I really appreciate all the responses after yesterday’s letter in which I announced that I will be speaking at the upcoming Casey Research Crisis and Opportunity Summit. I’m really looking forward to meeting with so many of you in Las Vegas.

For some reason, a few subscribers had difficulty with the link that gives more information about the event, so I want to re-post it here in case you’d like to join us:

http://www.caseyresearch.com/crpmkt/crpSolo.php?id=181

And with that, let’s move on to this week’s questions:

Stephen asks, “Simon – I don’t recall you mentioning the Seychelles as a potential offshore banking location? Any reasons not to incorporate there and/or open a bank account?”

Seychelles has a reasonably developed financial infrastructure and is a decent choice for offshore merchant processing… but I find it to be expensive to set up a company, and the due diligence requirements are fairly strict.

More importantly, though, I am generally mistrustful of very small countries that rely almost completely on their offshore industries. If the government has a string of bad years, they won’t think twice about imposing new taxes and fees on all the entities incorporated there.

Russ asks, “Simon, I know you’re busy, but I have a quick question regarding GoldMoney.com.  Is this account something that must be reported to the IRS as a foreign financial account?”

That’s a great question… a lot of people have asked it, and the bottom line is that there is no clear guidance one way or the other.

On one hand, GoldMoney should not be regarded as a financial account because it exists outside of the banking system and deals strictly with precious metals, which are not regarded by the government as a monetary instrument.

On the other hand, the service is clearly designed to be a banking substitute, and as all administrative and storage facilities are overseas, it certainly could qualify.

Jim Turk, the founder of GoldMoney.com, is one of the people who thinks that it does not qualify as a foreign financial account. Your best bet is to talk to your accountant and decide how you want to proceed.

Robert asks, “My father is Italian and based on my lineage, I am entitled to Italian citizenship.  I have already done most of the leg work, aside from getting the required apostilles, but I have been hesitant to complete the process as I live and work here in the good ‘ole USA.  In your expertise, would you find this to be a good option for a second passport?”

Western European passports are extremely valuable for most people– they entitle the citizen to live and work anywhere in the EU, and they’re fantastic travel documents, even better than a US or Canadian passport.

With any second passport, though, there are a few things that you really need to watch out for:

First, military conscription is a very real issue in many countries, including Italy. I believe the maximum draft age in Italy is 25, which means that anyone who obtains Italian citizenship between the ages of 18 and 25 must serve briefly in the military.

Second, you should also watch out for tax consequences. At the moment, Italy does not tax worldwide income, but as the economic situation there continues to deteriorate, it is entirely possible that the Italian government may start taxing its expats.

Christina asks, “Simon you’ve written before about the marquee international hospitals in Thailand like Bumrungrad International. Do you have any experience with ‘tier 2′ hospitals? Is there a major step down in quality?

I recently had the pleasure of carting myself off to the emergency room here in Pattaya. I’ve been to the ER in many countries, including in the United States, and as I think anyone could attest, you spend more time waiting around the ER than being treated.

Here at Pattaya International Hospital, though, I was literally being treated within -seconds- of my arrival. As soon as I showed up, I was met in the parking lot by two nurses who took me straight to a bed in the back where they triaged me.

The doctor came within 5 minutes, and he spoke flawless English, having studied in Canada.  To me, this speed is a major differentiator in quality and one of the reasons I routinely tell people that, in case I get sick, I really hope that I’m in a country like Thailand.

That’s it for this week! Thanks for bearing with me while I recover.

March 5, 2010
Kuala Lumpur, Malaysia

Greetings from Malaysia, where I’m spending an extended weekend before heading briefly to Singapore on business.  I’ll tell you more about the country next week… but if you’re interested in Asia, it should definitely be on your radar.

Before turning to this week’s questions, I wanted to give you a quick update on the job posting from a few weeks ago.  Ordinarily, Matt and I would have made a decision by now, but the applications keep rolling in… I lost count after a few hundred.

To expedite our decision, we’re going close the posting at 11:59pm EST, Monday night March 8. No other applicants will be considered after that time.

Please remember, since there have been so many applications, my staff and I will not be able to respond in order to confirm receipt. Rest assured, if you sent us an email, we received it.

On to this week’s questions:

Tom writes, rather emphatically “Simon, I left the US over a year ago. I now need a 2nd passport as I am almost out of pages on my current one. Problem is, I can’t go to the embassy due to some legal problems back home, and I don’t have $50k to spend on a new passport. What can you recommend?”

Tom has an interesting and unfortunately all-too-common case. I don’t know what he’s done or if he’s guilty of any wrongdoing, but a last-minute second passport is no panacea for criminal troubles.

(to be clear, I don’t equate ‘law’ with morality, but this is a different subject altogether)

Why? Because even if you’re completely innocent of some trumped-up charge, any new country that would consider accepting you for citizenship would first do a background check, and if you’re in hot water, they probably won’t take you.

Conversely, if you actually have done something immoral, you should probably just face the music. After all, the cosmic forces of the universe have a way of working these things out.

Regardless, I think this underscores the importance of taking action. If you have the means, going through a second citizenship process NOW, before it becomes a critical need, is a smart thing to do.

I discussed a few cost effective second passport options last week, and I will continue to do so in future letters.

Speaking of second passports, I made a mistake when I mentioned something about Polish citizenship last week– my thanks to “anonymous” for sending along this correction:

“Simon, you said that a Polish citizen could establish permanent residence in another European country like France or Italy and  become eligible for citizenship there after 7-10 years.  The EU rule is that local citizenship can be applied for after 4 yrs residence, though it’s much faster with marriage.”

She is absolutely correct, my apologies for the oversight.

Stephanie in New York writes, “Simon, thanks for the great information on opening a foreign bank account this week. As a US citizen I understand that I need to file a form to the Treasury Department each year– what are the details on that?”

First- standard disclaimer: check with your tax advisor for any updates. But the current rule is that US taxpayers must report foreign bank and financial accounts on form TDF 90-22.1 each year by June 30.

According to the IRS, A “financial account” includes any bank, securities, securities derivatives or other financial instruments accounts, including any savings, demand, checking, deposit, or any other account maintained with a financial institution.

As of now, you do not have to file the form if the aggregate value of all of your foreign accounts was less than $10,000 for an entire calendar year. If the aggregate value of foreign accounts exceeded $10,000 at any time during the year, you are obliged to file the form by the following June 30th.

James asks- “Simon- you’ve been in Thailand for a month but you haven’t said anything about the nightlife or social scene!”

That’s because you can read about Thai nightlife anywhere. I figured you’d be more interested in the hydroponics plantations where I buy organic vegetables than a review of the Go-Go bars…

… but to put it briefly, you can find whatever you want in Thailand. Sex, drugs, and rock n’ roll are as pervasive as Buddhist monks and the works of Shakespeare. If there’s interest, I’ll write a dedicated post about this, just let me know.

Lastly, Pat asks: “OK Simon- I owe $136k on a house that I bought 4 years ago; it’s now “worth” about $70k, tops.  I make plenty of money, but the payment is slowing me down.  Would it be immoral to jump ship and go rent somewhere else?”

Personally, I have an immensely open mind to not judge people for the way that they live. I only broadly repudiate things based on very few moral absolutes– for example, genocide and pedophilia are clearly ‘wrong’ in my book.

Walking away from your mortgage does not make my list.

If you do decide to walk away (and I’m not encouraging you either way), just bear in mind the single universal law of causality… there will be consequences from your actions, and you must be prepared to accept them.

That’s all for this week; enjoy your weekend, and we’ll talk again on Monday.

February 23, 2010
Pattaya, Thailand

Throughout our conversations, we have routinely discussed the importance of planting multiple flags.

If you live, work, bank, invest, own a business, and hold your assets in the same country of your citizenship, you are putting all of your eggs in one basket, and once that basket heads in the wrong direction, you can kiss your assets goodbye.

There are nearly infinite possibilities that pose substantial risks to your wealth and security, including taxes, litigation, confiscation, inflation, regulation, and good ole’ fashioned social decay.

Making the effort to move assets overseas, diversify your currency holdings, buy foreign property, set up foreign structures to operate a business, etc. are all major steps in the right direction to preserve your livelihood and safety.

If you have executed only a few of those steps, you are ahead of the 99% of the population. You will be safe while others watch their freedoms, their wealth, and their critical thinking be eroded by corrupt bureaucrats and the mainstream media.

One of the ultimate tools in preserving wealth, freedom, and security that we have touched on before is acquiring a second passport. This tool provides additional freedoms of travel, possible tax advantages, banking convenience, an escape hatch, and security.

After all, nobody hijacks a plane and threatens to kill all the Lithuanians.

Most importantly, when your home country starts heading in a catastrophic direction, a second (or third, fourth, etc.) citizenship provides you with options… and that’s what real freedom is all about– the power to choose.

Even without a cataclysmic event in your home country, a second passport pays big dividends. With a second passport, suddenly you find that you can open bank accounts and travel much more easily.

In my case, since I travel so much, the money that I have saved on visa fees alone has more than offset the cost of acquiring a second passport.

So how do you go about obtaining one?

For starters, if you’re a member of the lucky bloodline club, you may have been born as a second or third generation citizen somewhere. Many countries have programs which grant citizenship to descendents of emigrants– Ireland, Poland, India, and Italy are examples.

If, for instance, you could prove your lineage to Irish grandparents, you would have a case to apply for Irish citizenship. There are many more countries which have such programs, but I’ll save that topic for another time.

Second, there are a handful of countries where you simply pay for citizenship, either through an official program, or an unofficial program.

In terms of official programs, most people who have done even the most cursory research have read about Dominica and St. Kitts, both of which charge about $200,000 to $450,000 for citizenship.  These are the most famous, but there are others, including Austria and even the United States.

If I have my way in this part of the world, there will soon be one more.

Yesterday I mentioned that ousted former Thai Prime Minister Thaksin Shinawatra is traveling around the world on passports from Nicaragua and the Bahamas… and not because those countries have official programs for ordinary investors, but because Thaksin used his connections to make compelling donations.

Clearly, unofficial programs generally come down to knowing somebody of significant influence in the government. In most countries, the head of state has the authority to naturalize a foreigner at his/her discretion, and this happens frequently in small countries that have been assisted by the actions or donations of a particular individual.

Now… assuming that you don’t have any heads of state in your rolodex, aren’t descended from Polish grandparents, and don’t want to swallow a $250,000 pill for St. Kitts citizenship, the next category applies to you.

I call it ‘connected’ citizenship, in which an individual can become naturalized through some sort of connection to the country.  Typically this can be a combination of residency, marriage, adoption, religious affiliation, and of course, birth.

Obviously we can’t go back in time to change our place of birth, but the others may be well within our control, particularly residency.  In fact, most countries provide a means for naturalization through residency, including the United States and Canada.  But there are three important factors that determine whether a residency program is worthwhile:

First, how long do you have to be a resident in order to be eligible for citizenship? If you have 8 to 10 years to kill, you may want to consider putting the time in for France or Italy. But most people want something much faster, 1-4 years at most.

Second, how hard is it to actually obtain residency? In the United States, for example, residency applications are scrutinized and generally rejected– hence the inordinate number of undocumented workers. In practice, America now sends the tired, poor, huddled masses back where they came from.

Contrast that with, say, Singapore, where anyone with a good idea, strong work ethic, or investment capital is a strong candidate for residency through an easy, painless, transparent selection system.

Third, do you actually have to live there? Many countries’ naturalization regulations require an applicant to spend the preponderance of his/her time in that country. Canada is a great example… if you become a Canadian resident and spend too much time out of the country, you render yourself ineligible for citizenship.

For the next two days, I’m going to discuss two such countries that fit these requirements that I think you should strongly consider if you’re interested in second citizenship.

** Note, I only plan on releasing this information to email subscribers and will not be posting either article on the website. If you want to receive these articles, make sure you sign up for the daily e-letter here before tomorrow.

February 22, 2010
Pattaya, Thailand

I was in the back of a black sedan on Friday morning speeding along Highway 7 from Pattaya to Bangkok when my driver’s phone rang. He picked up, jabbered for a few seconds, and then said to me:

“Sir, my friend call me from Bangkok; he say big protests in city, we need to go around.”

“No chance–” I replied. “Let’s go see how serious they are this time…”

Here in Thailand, you have to be living under a cave to not know what’s going on in the political scene. It starts with former Prime Minister Thaksin Shinawatra, who was ousted by the Thai military while he was out of the country in 2006.

He’s one of the richest men in Thailand having amassed a fortune in the telecom industry, and among other things, Thaksin has been accused of corruption, tax evasion, censorship, and human rights violations.

About half of Thailand loves him, the other half hates him… it just so happens that the current administration falls on the side of hating him, and they have issued several warrants for his arrest.

In fact, shortly after the 2006 coup, the new government set up a commission to investigate Thaksin’s financial holdings; it was ruled that he accumulated an unusual fortune during his time in office, and roughly $2.3 billion of his assets were frozen pending further investigation.

Years later, an official legal judgment has yet to be made about Thaksin’s frozen assets… until this week.

This Friday, February 26, is known as Judgment Day in Thailand because a high court will finally rule on the fate of his assets.

Did he evade taxes? Did he use public office for personal gain? Or did he follow the letter of the law and become victimized by Thailand’s notoriously corrupt politicking? The verdict is set to galvanize the country as many Thais regard it as a referendum on the corruption of their political institution.

There have already been mass demonstrations leading up to the decision by a group known as the “Red Shirts,” who in many ways are like the Tea Party protesters in the United States.

Like the Tea Party, the Red Shirts are commonly unified by their desire for acute political change. They despise the current administration and everything it has done to their country, yet many of the Red Shirts are undecided about Thaksin… sort of like Sarah Palin.

Many regard him as a free market hero who can liberalize the economy, while others find him to be just another self-serving politician… though not necessarily guilty of the charges against him.

The protests on Friday were held by the Red Shirts who shut down several streets and chanted refrains about freedom, justice, and change. I jumped in the thick of it to get a sense of their passions… are they true believers, or simply going through the motions?

I was surprised at what I saw.

The thing is, in Thailand, these sorts of protests and mini political revolutions are about as common as seeing a military parade in North Korea or the Bellagio fountains in Las Vegas– if you miss it, just wait around for another few hours.

Oh yeah, and they sell T-shirts. Lot’s of souvenirs, actually… something like “I went to the revolution in Thailand and all I got was this lousy T-shirt” sort of thing.

It’s widely expected that the outcome of the “Judgment Day” decision will result in nationwide protests and rioting, regardless of the outcome. That makes for a lot of t-shirt sales.

As you could imagine, foreign governments are totally overreacting. The British and US embassies are urging their citizens to exercise caution; and if there are wide-scale protests, you can count on the mainstream media to portray Thailand as a country coming apart at the seams.

Truthfully, Thailand will be just fine. Both foreigners and locals alike are accustomed to political instability… it’s par for the course in Thailand. Government or no government, Thailand is one of the most peaceful places on earth.

Case in point, Pattaya is probably the most international city per capita I have ever been to– Russians, Americans, Canadians, Brits, Germans, French, Thai, Indians, Pakistanis, Chinese, Malaysians, Japanese, Aussies, Arabs, and Jews, all living in one place in complete harmony.

Why? Because they’re here for the same things– ultra-low cost of living, privacy, warm weather, quality medical care, high class lifestyle, and of course, cheap sex.

These factors trump politics any day of the week, and they won’t go away just because of a couple of protests.

If Thaksin is able to engineer a real revolution, he will make his return to Thailand. In the meantime, he is enjoying the fruits of having planted multiple flags and traveling around the world on second, third, fourth, fifth, and sixth passports from friendly jurisdictions in the Caribbean, Asia, and Latin America.

Let’s talk about these later this week. Stay tuned.

If I have been too subtle in the past, let me be absolutely clear this afternoon: the time to do something, the time to take action to safeguard your future and your families livelihood, is NOW.

I’m more impassioned than usual this morning… and with reason.  Reluctantly, I tuned in to Team Obama’s press briefing last night about the ongoing saga of the Nigerian underwear bomber.  Obama’s is clearly trying to cultivate a fear of al-qaeda while simultaneously building blind trust in his government.

After the President’s remarks, his Homeland Security Secretary and Deputy National Security Advisor took the stage to unveil a series of proposals to ‘improve security.’

I’ll spare you the details as you have probably already heard them, but the bottom line is simply more government– a bureaucrat’s ultimate and only solution. This means more TSA, more air marshals, more undercover agents, more gun-toting soldiers, more pat-downs, more scanners, more searches, more scrutiny, more suspicion, etc.

How do you spell police state?

I’m ordinarily laid back about this sort of thing. I can afford to be since I’m a safe distance from all of that stupidity… but in this case I looked down to find that my knuckles were turning white, clenched around my glass of 2005 priorato.

I set my wine down and remarked to my friends who were watching with me, “What is it going to take for people to wake up and get the hell out of town? Do they need legions of storm troopers marching down the street before they realize it’s time to go??”

I was positively exacerbated.  The US is turning into a police state, and I’m not even saying this specifically to Americans living there. Many countries around the world are following close order behind Uncle Sam.

Once again, the time to act is now.  So what should you do?

First, make sure you have access to funds outside of your home country. This is one of the most important flags that you can plant.  You should open a foreign bank account (like I discussed in the Panama Black Paper), and/or consider storing precious metals in a private storage facility overseas.

Later this quarter, I plan on releasing a new Black Paper that contains actionable information to open an account at safe foreign banks that still take US customers.  You haven’t heard of most of them, and would probably never hear about them because it’s actually illegal for foreign bank to advertise in the United States in most cases.

Stay tuned for that.

Second, you should really be thinking hard about foreign property. Why? Because it can be a great investment; it’s an easy, non-reportable way to move money overseas; and it can be your escape hatch when you’re finally ready to hit the eject button.

Remember, I’m not talking about a 50 million euro villa in Monaco; you can pick up cheap land in Latin America for less than $50 per acre, and I’m pretty sure that everyone reading this letter has at least 50 bucks to spare.

Also, as I’ve discussed in the past, you can buy foreign property using your tax-deferred retirement savings, and I plan on revisiting this topic in short order because it is an absolute no-brainer.

Additionally, if there’s interest, I may also explore the idea of building a small, cost-effective, subscribers-only development.  It would likely be on the outskirts of Panama City and include self-sustaining fresh water and agricultural resources.

Third, if you have the means, you should really consider obtaining second (or third, fourth, etc.) citizenship. Second citizenship can be the ultimate emergency exit if things get really bad, and it effectively serves as the most comprehensive insurance policy you could even have.

I have a lot of contacts in this field, and my colleagues and I are currently experimenting with a few options that I plan on bringing to you soon.  I won’t bring you a passport program unless one of us has gone through the process ourselves, so give me some time while we play guinea pig.

Fourth, give serious consideration to your finances; unless you are already independently wealthy or have sustainable income streams, think about what you would do to earn money if you lost your job today.

Think about what skills you have– what problems can you solve that other people are willing to pay you for? What opportunities to you see around you that can be quickly and profitably exploited?

I guarantee you that there is opportunity everywhere around you. For example, a friend of mine is an intelligent, 22-year old girl who lives in Minsk, Belarus– the last bastion of the Iron Curtain.  While Belarus is not the totalitarian state it once was under the Soviet Empire, it’s pretty close.

And yet, despite living under a tyrannical yolk, my friend has become quite a successful entrepreneur, launching a successful brick-and-mortar company and several profitable web sites just within the last few months.

I raise this simply to point out that if an inexperienced but intelligent and energetic young girl can find opportunity in a place like Belarus, then I would wager that there is a plethora of opportunity out there in places like Panama, Abu Dhabi, Chile, China, Angola, Thailand, Bulgaria, and even the US/Europe.

In fact, I know this to be true because I see so much of this opportunity when I travel.

So those are the top four things I would recommend you do in making your own personal preparations. I clearly have a lot of work to do between the real estate, the citizenship programs, and the banking Black Paper… but after seeing the writing on the wall so plainly last night, I will be refocusing my efforts to get these moving quickly for you.

In the meantime, let me know your thoughts– I’m frankly curious to know what you would like to see in a real estate development, and at what, if anything, it would take for you to hit the eject button.

January 4, 2010

Reporting from: Malaga, Spain
Welcome back; I hope you had a relaxing holiday.

I spent 10-days with my family combing through the Italian countryside and drinking some unbelievable wine from a local grape called “Primitivo.” It’s a distant cousin of the California Zinfandel, and is only found in this region. A bottle from the best vineyard will set you back about 9 euro.

For New Year’s Eve, I saw a fireworks show that was simultaneously the most disorganized and explosive I have ever witnessed… so literally for me, the new year began with a bang.

I’m optimistic about 2010. I know a lot of people in the financial community who think that ‘this is it,’ that 2010 shall bear the worst economic cataclysm in history, causing widespread doom and agony.

Sure the conditions are ripe for stock/bond market crashes, a currency crisis, and multiple sovereign debt defaults.  But these are a far cry from a gloomy end of human civilization.

It’s not that I have tremendous faith in world ‘leaders’ (as ridiculous a moniker as that is to use); last month’s debacle in Copenhagen only further underscored how perverse and ineffective the existing political process is, and everyone is really starting to see it.

The Social Contract is deteriorating rapidly, and in the end, the one thing that you can count on is that people will ultimately do what they perceive to be in their self-interest.  This is what drives markets and trends.

As the protracted effects of government stupidity become more apparent, one such trend that I see emerging this year is the rise of the sovereign individual– the rebirth of the multiple flags approach.

I’ve talked about this before and I wanted to start off the year with a quick primer since it is a recurring theme of this letter. To be more specific, I absolutely implore you to plant multiple flags as part of your New Year resolutions.

The idea, originally conceived by international finance guru Harry Schultz, suggests diversifying different aspects of your identity across multiple ‘flags,’ or geographic jurisdictions.

As an example, Schultz coined the term ‘three-flags’ in the 1960s, suggesting that an individual should have citizenship in one country, residence in another, and businesses in another.

Later authors expanded on this idea by adding other ‘flags,’ including places to bank, places to ‘play,’ places to house electronic assets, etc.

Many writers today talk about ‘five flags’ or ’six flags,’ but frankly I don’t see a limit on the number of things we can diversify geographically: email, citizenship, residence, banking, brokerages, gold/silver deposits, business registration, e-commerce, customer base, phone/fax, financial instruments, postal mail, etc.

So what’s the point? Why should you do this?

Diversifying geographically increases your freedom, your privacy, your sovereignty, and potentially reduces your tax burden. It protects you against bank failures, market changes, litigation, divorce, overzealous governments, and “NGC’s” (non-government criminals).

Perhaps even more importantly, planting multiple flags expands your existing contact base and opens a lot of doors to new opportunities.

Think of it like a life insurance policy– even if the worst never happens, it gives you great peace of mind and in many cases can rank as a significant asset.

While everyone recognizes these benefits of life insurance, no one actually expects to die anytime soon… so they put shopping for a policy on the back burner, sometimes until it’s too late.

In this case, the time to start diversifying internationally and planting multiple flags is now… before it’s too late– before currency controls are imposed, before tax codes change, before the last remaining foreign banks close their doors to foreigners.

I could cite you examples all day long, but I will list just a few hypothetical cases–

Imagine getting sued, losing the case, and having your financial assets commandeered by the court. Now imagine if your assets were safely offshore in another country.

Imagine being investigated by the government and having your email archives turned over to the authorities. Now imagine if your email server were in another country.

Imagine being robbed (taxed) by the government because your business is structured within its jurisdiction. Now imagine if your business were registered in another country.

Imagine having everything in your home country taken from theft, coercion, and litigation. Now imagine having cash and gold locked away in a secure, private vault overseas.

Imagine the social decay in your city getting so bad that riots and violent crime are a common occurrence. Now imagine having property overseas.

I’m sure you get the idea. Putting your assets, your business, your citizenship, your residency, your family’s livelihood under one flag, one government, is putting all of your eggs in one very frail, weak basket.

Technology makes it incredibly easy to diversify, and I see more and more people waking up to that reality each day. It takes only moments to set up an offshore email account, a few minutes to lease a private vault, and just a couple of hours to set up a company in Singapore.

The possibilities are truly endless, you just need to find the right tools and the right flags that work for you. Yes, even if you are a US citizen who is taxed on worldwide income, there are still several options available to live a multiple flags lifestyle.

I will be discussing the options in future letters, as well as individual case studies.

I receive a lot of subscriber questions, and while I cannot answer them all, I wanted to specifically address three of them that key in on recurring themes in this community– second citizenship, investing, international opportunities, corporate structures, banking, and gold/silver storage.

1) Paul asks– “I was wondering what your 1st choice would be in setting up an online business offshore.  Which country would be best for business structure, hosting, and merchant accounts?”

There are a lot of great reasons to have an online business– portability, scalability, maneuverability. You can go from zero to profit very quickly, and the Internet allows people to live and work anywhere on the globe.

Most importantly, though, online enterprises provide a great opportunity to easily plant multiple flags in a cost efficient way; you can live in one country, have citizenship in another, have your business structured in another, process credit cards in another, and have your servers based in another.

This prevents significant influence from any single government over your business. As to the right jurisdiction? This is a tough call because it really depends on your country of citizenship and your country of residence.

The United States, for example, is one of a handful of countries that tax its residents on their worldwide income. Some people with online businesses think they are smart because they structure their business in some Panamanian IBC and/or process credit card transactions offshore.

Then they don’t report the income and hold everything offshore.

Not only is this a completely bonehead move, it’s largely illegal. The IRS has clear rules for what it calls ‘check the box’ entities, as well as how to determine the source of income.

I’m going to be talking about this much more in the future, but for now, the bottom line is simple: with a well-structured plan, it is possible to set up an online business to maximize your personal tax advantage while minimizing sovereign risk.

There is great danger, however, in establishing an overseas structure without performing substantial research into the tax implications of your home country.

I’m going to help you solve this problem in a few weeks– early next year, I will bring you some really valuable information from some top North American tax advisers who specialize in offshore structures; they’ll teach you what you need to watch out for.

For instance, you may want to consider structuring your business in a country that has a comprehensive tax treaty with your home country. Switzerland is a great example that has treaties with both the US and Canada. Zero-tax jurisdictions like Panama or BVI do not have tax treaties.

More to follow on this in a few weeks, it’s an incredibly important topic that merits more than a short-answer.

2) Peter asks: “What do you think about Israel? In spite of all the political unrest in the news, Israel has a growing GDP and has a decreasing trade deficit.”

This is a great question.  My take on Israel is that it’s a great place for second (fairly valuable) citizenship.  If you’re willing to convert to Judaism and live in Israel for a bit, you can obtain an Israeli passport fairly easily.

Other than that, I’m not keen on investing in the country; it’s too closely tied with the United States, and there is no ‘blood in the streets’ discount that you would expect of a nation perpetually at war.

If you compare Israel to a place like Sri Lanka, there is no contest when it comes to value.

3) Stefan asks: “I have an account at DBS (Singapore) but they do not give any information about bankruptcy protection. Do you know anything about this? Do you prefer other Singapore banks? Any idea for a safe deposit box in Singapore?”

I can’t comment specifically on DBS, but you should always, ALWAYS, feel comfortable with the balance sheet of your financial institution. Banks in the US are backed by the FDIC, and this gives some people confidence in their account value.

I am not one of them. I bank overseas because I trust in the financial solvency of overseas institutions, but it means I have to do my homework.

Even the most cursory analysis can say a lot about a bank– what is their ratio of liquid assets to deposits? Does the loan portfolio consist of ticking time bombs? How well are they provisioned against loss?

This is why I wrote about Islamic banking a few weeks ago; based on requirements of their religious law, Islamic banks tend to have higher capital adequacy ratios, providing a greater cushion against insolvency in the event of a financial cataclysm.

There are several Islamic banking institutions in Singapore, though overall I’m quite confident in the country’s financial infrastructure. I rely on it myself.

As for gold storage in Singapore, look at Cisco-Certis. Their facilities have fantastic security, and the boxes are reasonably priced.

I spent the better part of my day today at a small conference attended by many of Shanghai’s wealthy, plus their lawyers and accountants.  Considering the subject material is highly frowned upon by the government, I was surprised that so many were in attendance.

So what was the topic of discussion at today’s event? Second citizenship.  Specifically, the St. Kitts second citizenship program.

Throughout the afternoon, local Chinese listened intently as speaker after speaker extolled the virtues of St. Kitts and its economic citizenship program. 

In case you haven’t heard of the program, it’s one of the oldest economic citizenship models still in existence.  An interested applicant must invest $350,000 (plus government and legal fees) in a government-approved real estate project, as well as undergo a background and medical examination.

If accepted, the applicant will be awarded with citizenship of the Federation of St. Kitts and Nevis.  Since the island-nation is a Commonwealth country as a former British colony, St. Kitts citizens enjoy visa-free travel to the UK and European Union.

There were several developers at today’s conference with lots and homes for sale.  From what I could tell, the average price point was around $700,000.  The locals stared eagerly at the sales brochures, full of Caribbean Sea views and vibrant green tropics, which made for a stark contrast against today’s gray skies in Shanghai.

The St. Kittsians in attendance today were in demand because they can solve multiple problems for wealthy Chinese.

First, wealthy Chinese want to be able to travel internationally with ease, and this is something that is simply not possible with a Chinese passport– there are far too many visa requirements, and staying somewhere for more than a couple of weeks is problematic.  The St. Kitts economic citizenship program would provide an excellent passport for them and their family members.

Second, purchasing foreign property is an effective way to get money out of China because it cannot be forcibly repatriated.  Chinese are normally subject to extreme exchange controls with transfer limits of about $50,000, and moving money requires a litany of stamps and approvals.

Property purchases are slightly less cumbersome, and most buyers are able to more easily execute this by first sending the money to an account in Hong Kong, which has no exchange controls at all.

Third, and most importantly, Chinese want to be able to establish residency somewhere else, preferably in a place where they can send their children to school.  For Chinese families, this is the ultimate priority– to have a western educated child and a place for the family to live outside of China. They start planning these things from the day the child is born.

Overall, I am convinced that today’s event is indicative of an enormous trend.  Chinese clearly want additional travel freedoms and the ability to reside, even if temporarily, overseas. They have the money to pay for it.

Ironically, Chinese are not able to find the answers themselves… many websites that discuss second citizenship programs are blocked, so they need these live meetings to get a better understanding of the opportunity.

Meanwhile, foreign developers and lawyers really want access to the Chinese market.  Their traditional markets from the past several years– wealthy North Americans and Europeans– have dried up.  China represents the next growth market of people who have both the necessary appetite and available capital to acquire foreign property and/or second citizenship.

In my opinion, there is a fortune to be made for an entrepreneur who can match the buyers and sellers together. I think this is a very real opportunity, and I’d like to hear what you think… especially if someone is interested.

If you’re presently expecting a child or are planning on having one soon, you should really consider having your baby overseas.

There are many countries, particularly in the western hemisphere, which grant citizenship to all children born within its borders, regardless of the nationality or immigration status of the parents. The legal term is called jus soli, which differs from jus sanguinis, or citizenship by blood/ancestry.

The United States and Canada are two such countries. You are probably familiar with stories of migrants from Guatemala and Mexico who trek across the desert in hopes of surreptitiously crossing the border and having their child on US soil for this reason.

Ironically, if I were expecting, I would probably be heading the other direction across the border to have my kid in Mexico or Guatemala.

Why does it matter? Why consider subjecting your precious cargo to a trip overseas?

Because it’s one of the best ways you can give your unborn child several built-in advantages for his/her entire life.

S/he will be born with 2 passports– yours, and the country s/he is born in; furthermore, the “Place of Birth” field on both passports will list a foreign country, so other people will not automatically assume that your child is from the US or Canada.

Most importantly, though, you can get your child started off on the right foot with the ‘multiple flags’ approach– having citizenship of one country and residing in another. For tax and privacy purposes, it is always best to keep the two separate.

As an example, someone could be an Argentine citizen who owns a Hong Kong based business and spends his time living in Florida, Italy, and Panama… or a citizen of Belize who lives and works in Dubai.

In both of these scenarios, the individual would not be subject to any income tax because he does not live in his home country of citizenship, and his government does not tax worldwide income.

If you live in the country where you have citizenship, you will more likely be subject to tax liabilities. If you never set foot on your homeland’s soil, chances are you’ll never have to stroke that check– so ideally, citizenship should be from a country where you would not want to live but still has value as a travel passport.

St. Kitts, Dominica, and Paraguay are good examples– and a child born in any of these places will automatically be granted citizenship.

Other jus soli countries include Brazil, Panama, Dominican Republic, Argentina, Jamaica, Chile, Nicaragua, Uruguay, St. Lucia, and Antigua… and lest I forget, Pakistan.

If you bear your children in any of these countries, they will be instantly granted citizenship; make sure you do your homework in advance to ensure that you’re not obliging them to military service, or that the law hasn’t changed.

New Zealand, for example, used to grant citizenship to all children born within its borders, but this law was changed effective January 1, 2006. And in the United States, there is presently a bill (HR 1868) with the House immigration subcommittee that would eliminate unconditional birthright citizenship.

It may seem strange to consider future tax planning and private banking issues for an unborn child. Giving your kids a second passport right from the start, however, would truly be one of the most beneficial things you could ever do for them– that, and teaching them a useful foreign language.

Poland– it’s a beautiful, inexpensive country with a stable economy, gorgeous women, and fantastic food… so what am I doing here exactly?

Looking for citizenship.

The country has been dominated, broken apart, and put back together so many times, Poland actually has multiple nationality laws on the books for former migrants, refugees, and their descendants to reclaim citizenship.  The government recognizes that many Poles were coerced to give up their citizenship, or they fled the country as a victim of circumstance.

The 1962 Nationality Law unequivocally states that citizenship cannot be lost involuntarily… so the government carries on as if millions of Poles between 1920 and 1958 had never left and their progeny had been born as natural citizens of the country.

It’s a fairly straight-forward process, but you have to prove your roots. Notice, I did not say ‘easy’.  Just because your grandfather was Polish or your last name ends in ’ski’ does not mean you will automatically be confirmed.

The first thing you need to do is figure out where your ancestors came from; earlier in its history, this could have included parts of modern day Ukraine, Belarus, Russia, Lithuania, and Poland. The man-made lines on the map aren’t exactly permanent.

The most important thing is that your ancestors were citizens during a time when Poland actually existed as a country… remember, it has been wiped off the map multiple times, so this can be a bit tricky. Fortunately they keep good records.

If your ancestors came from modern-day Poland, you will be able to find the official records with the Wojewoda, or provincial government of where they were born.  Once you have the documents in hand, a consul verifies the evidence and an application is made with the Wojewoda for confirmation of citizenship.

You can do the leg work yourself, but there are legal professionals who specialize in naturalization and can handle the application if you think you have a case.  Leave me a comment if you’re interested and I can point you in the right direction.

Polish language proficiency is not required for citizenship… and quite honestly, it’s not necessary in order to spend much time here.  English prevalence is quite strong among the locals, especially in Warsaw where I sit.  And as European capitals go, Warsaw is probably the cheapest among the developed cities.

For a place as modern as Warsaw, I’ve been amazed at the bevy of four and five star hotels for less than 70 euros/night (about $100). I suggest the Jan III Sobieski, Polonia Palace, or Hotel Rialto for anyone who makes the trip out.  LOT, the national carrier sells the business class seat for about $3,000 from New York, economy for as little as $500.

If you don’t have Polish in your blood and are yearning for another passport, fear not. I have mentioned before in this missive that I’m working on what I believe will be the most comprehensive report ever created on obtaining a second passport.

Most of the things on the internet about second passports (and asset protection for that matter) are garbage. I’m creating a specific, detailed, actionable report for people who are actually serious about doing something.

I’ll be honest though, I’m more than a little conflicted about releasing this thing.  I’ve already had more than enough hate mail flung my way from people accusing me of ‘ruining it’ for the real expats out there.

Unfortunately, they may be right in this case– if too many people see this second passport information, some of the better loopholes could be closed… and that’s not good for anyone.

The best solution I can think of is to keep the price high and limit the release in a finite window of opportunity so that only the most serious people who want to take action will come forward. More on this in the coming weeks, but I’d like to hear your thoughts in the meantime.

I’ll tell you why Honduras is really starting to trouble me… I have a few friends left at Joint Task Force- Bravo stationed at Soto Cano Air Base about 50 miles from the capital city of Tegucigalpa, and the situation appears quite tense.

Officially the 500+ US military forces on the ground have been ordered back onto the base and to stay out of sight for the time being… SOUTHCOM, the military command that oversees troops in Honduras, is concerned that the slightest hint of US aggression or influence could result in yet another prolonged conflict.

But while the generals understand that US military forces are sapped and strained, politicians can see a silver lining in the political chaos: finding a reason to invade is a great excuse to raise taxes, dump money into the private sector to support the war, and create another US-friendly state beacon in the region to buffer against Chavez, Ortega, and Correa.

It sounds too perverted for reality, but this is the mindset of policy wonks who are itching to take their PhD dissertations for a test spin in the real world. I’m watching very carefully for signs of a troop buildup at Soto Cano in the hopes that Honduras doesn’t turn into the next Cuba.

(as an aside, I do not expect the situation in Honduras to have any adverse affect on Panama; in fact, it probably makes Panama’s stock rise as the country continues to be a beacon of stability in an otherwise nuttier region.)

My guess is that there’s probably a lot of Hondurans right now who wish they had a lifeboat strategy… remorse is a terrible emotion. There were probably a lot of Rwandans in 1994 and Japanese-Americans in 1942 who thought the same thing.  Being prepared is never about pessimism of fear-mongering, but rather the rejection of the blissfully ignorant notion that ‘it could never happen here.’

It can. And it just might.

I’m not of the camp that geopolitical and economic calamity will get so bad that the entire world will look like a sequel to Mad Max: Beyond Thunderdome… perhaps I have more faith in my species and the free market.  But I am open to a variety of possibilities, and more conspicuously the ‘unknown unknowns,’ to quote the potentially-soon-to-be-late Donald Rumsfeld.  Consequently, I structure my life in a way that allows for maximum freedom and flexibility.

Based on my own experiences, I would suggest the following:

* Find at least one (and preferably several) places outside of your home country to escape to. Strongly consider buying property there.

* Consider a second citizenship program; at a minimum, set up residency in another country.

* Store physical and paper assets outside of your home country, and outside of the electronic banking system.

* Demand privacy.

* Keep some investment capital at the ready so that you can jump on phenomenal deals as they arise

* Look for opportunities for additional income that are not constrained by your geography

More on all of these topics in future issues; after all, that’s what this letter is all about– achieving freedom, and I sincerely hope that this content can help.  On that note, I was really overwhelmed at the responses and positive feedback from Friday’s suggestion to buy Mark Nestmann’s book ‘The Lifeboat Strategy’.  Again, I highly recommend that everyone read it, it’s one of the best ’starter guides’ to internationalization that I have read.

You can find it at MarkNestmann.com; based on popular demand, I’ve contacted Mark to request a short interview and to answer some of your questions in a public forum. More to follow.