Flag Theory: How to Cut Your Taxes Legally in 2019

Flag theory is growing in popularity today, as more and more people want to gain freedom from intrusive governments - especially in terms of finances. Flag theory is an internalization strategy, and people putting these strategies in play have the same things in common: they want control over their privacy, freedom, and assets.

There are several components to any successful flag theory strategy. Not everyone will put all these components into play, but if you are able to layer each of these components, then you will have a powerful, successful flag theory game plan, and the results will be even more favorable.

What are Some Parts of Flag Theory?

There are a number of moving parts in flag theory, although the most popular and most effective components include digital assets, offshore banking, getting a second passport, taking up a new tax residency, creating an offshore company, ensuring digital security, and growing physical assets. To some people, this plan will make perfect sense, while others will go their entire lives living within the borders of a single country and living by the laws of the land.

While there’s nothing wrong with that, U.S. residents must keep in mind that no matter how many passports they hold, they will always owe the U.S. based on their income. The U.S. is one of the hardest countries to “get away from”, but once you do, you’ve got a wealth of new opportunities to yield a higher net income.

How Can a New Tax Residency Benefit Me?

Perhaps you’ve considered taking up a second citizenship for some of the reasons we’ve listed above. If so, then you might be wondering how establishing a new tax residency could possibly be beneficial to your bottom line. The truth is that when you create a tax residency in the right location, you can change your personal taxation. There are some countries that have zero taxes on income, which offers a promising opportunity for those who want to get the most from their income. The trick to choosing the right tax residency is finding a jurisdiction that will truly give you the most from your investment.

Using the Flag Theory to Find the Best Tax Jurisdiction

The other components of the flag theory are essential here, including obtaining a second passport and offshore banking. When it comes to finding the right places to put your flags, especially in terms of tax residency, there are a few things to look for.

First, find a country with low taxes on income and foreign-source income. Also, try to locate a country that has a double tax treaty (DTA) with your home country. In the event the country you’re interested in using for tax residency doesn’t have a DTA, you can likely get a tax residency certificate that will let you pay taxes to prove residency and thus receive the benefits of low taxation. It’s also important to find a country that doesn’t have CFC laws. These laws can be problematic because they can cause taxation on income earned in your foreign company.

What Countries are the Best for Tax Residency?

The flag theory imparts strategies that are detrimental for diversification. If you are serious about isolating your finances and protecting them from the control of a single government, these are strategies that will work for you. In terms of finding the right country for tax residency, there are a few standouts.

For example, there are several tax-free countries that could fit seamlessly into your flag theory strategy. Some of these include The British Virgin Islands, Brunei, Vanuatu, The Bahamas, and Monaco. With a tax-free jurisdiction, you’re going to get the very most from your investments.

Of course, there are several appealing low-tax options. While these countries do have taxes on income, they are relatively low, and these countries are notable for various advantages such as strategic industry popularity (Panama is a banking and international business hub) and various forms of income being exempt over a certain period of years (Portugal). Other low-tax countries include Paraguay, Singapore, Costa Rica, Georgia, Guatemala, and Gibraltar.

Takeaway

With flag theory, you would ideally be taking up residency in a low or no-tax jurisdiction, such as the ones listed above, but you’d also want to find a country without an intrusive government. After all, much of flag theory hinges on freedom and security. around the world.