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Where To Diversify Your Investments, Your Assets, Your Business, And Your Banking Offshore

27 May
Where To Diversify Your Investments, Your Assets, Your Business, And Your Banking Offshore

Planting Flags

I’m reviewing and clarifying my ideas related to the Five Flags theory of diversification in preparation for my opening remarks at the Wealth Retreat I’m hosting in Panama next month.

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.

Panama: One Of The Best Five Flags Countries

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 47 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 47 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.

What Other Jurisdictions Should You Be Looking At?

We’ll discuss the best choices for second passport right now in more detail at the upcoming Wealth Retreat. Here’s a short list to help focus your thinking in the meantime:

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 next month in Panama. This very private retreat will be a chance for a small group of readers to spend four days together with my personal corps of global and offshore advisors.

Lief Simon