Planting Flags And Diversifying Internationally
I’m reviewing and clarifying my ideas related to the Five Flags theory of diversification in preparation for my opening remarks at the Wealth Summit I’m hosting in Belize in October.
If you’re new to the idea, the “Five Flags” are to do with residency, citizenship, banking, assets, and business. Not everyone needs all five flags planted in different jurisdictions, but the goal should be to plant whichever ones you do need in different jurisdictions. Moving to another country and taking all your cash, investments, and business activities with you to that new country doesn’t achieve the real goal of going offshore.
Fortunately, different countries shine for different reasons. Some are better for banking, others for investing, some for residency, and yet others as places to incorporate your business. No country gets A ratings on all fronts.
Planting Flags In Panama
Panama is one country that comes close. Banking options are great in Panama, with more than 80 banks operating here. Most won’t open a consumer account for you unless you have a “connection” to Panama either through residency or because you own real estate in the country. Private banking accounts are easier to open, but require high minimum balances, from US$25,000 to US$1 million at the high end. You can also open a corporate account if you open a Panamanian corporation. Investment opportunities in Panama are mostly related to real estate—rental investments, timber, land banking, and development.
Using Panama as a base for incorporating your business can make sense as the country doesn’t tax entities that aren’t operating in Panama. You can set up a business in Panama and have an office in the country and still pay no Panama taxes if all your income is derived from outside Panama or if your business qualifies under the rules of one of the incentive areas of Panama Pacifico or the City of Knowledge.
Panama offers many options for residency, including the new Specific Countries residency visa that has been expanded to include 48 countries. If you hold a passport from one of these countries, residency (and I mean permanent residency) is straightforward. If you don’t hail from one of those 48 countries, you still have a dozen other residency options, including a very easy retirement residency option.
Even though Panama offers good choices related to nearly all the Five Flag agendas, you don’t want to plant all your flags here. Choose one or maybe two to base in this country and then look to other jurisdictions for the others.
If you decide to live in Panama, then you’ll want a local bank account, but plant a banking flag in another country, too. Don’t bring the bulk of your assets with you to Panama if you plan to live here. And incorporate your business here only if you need a local company for operations.
Top International Jurisdictions For Planting Your Flags
What other jurisdictions should you be looking at? Here’s a short list to help focus your thinking:
Banking: Belize, Uruguay, Singapore
Residency: Uruguay, Ireland, Malaysia
Citizenship Through Residency: Ireland, Uruguay, Dominican Republic
Citizenship Through Ancestry: Dictated by where your family is from
Economic Citizenship: Dominica, St. Kitts
Assets/Investment: My focus, of course, is real estate. In this context, I recommend Colombia and Panama for yield and Uruguay, Colombia, and Brazil for farmland
Asset Protection: Belize, Cook Islands
Incorporating Your Business: Singapore, Nevis
Of course, conceiving a successful personal diversification strategy is more complicated than simply choosing where to plant your various flags. Coordination and integration are key if you want to protect your assets, minimize your tax burden, and leave as much as possible for your kids (as we all do, of course). Still, this list will get you started.
This is the big idea behind the unique event I’m planning for October in Belize. It will be a chance for a group of like-minded readers to spend three days together with my personal corps of global and offshore advisors.
“Lief, I would like to move some money offshore. Most of it is in a retirement fund. Is there any way to move it and keep that status, without paying the taxes until I actually withdraw it? Or would it be better to open a new account and start putting money in it. I am a divorced female about to retire and just don’t want the government to take the retirement funds if they feel they need it more than me.
“Thanks. I appreciate your honest straightforward answers!”
Yes, you can legally achieve what you’d like to do with your retirement funds if they are held in an IRA, 401k, or other retirement account, as I’m assuming they are.