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.
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