Five Flags Theory and trusts

Privacy, low tax rates, and the possibility to thrive in new markets are some of the things that interest investors when looking where to make a profit from their activities while protecting their information and their savings. Some of these benefits are not present in every country, with some governments developing just one of these aspects while abandoning other politics that create interest in this market.

It can be puzzling to find one place where you might be able to enjoy every benefit that you look for in order to run your business and protect your savings. Nevertheless, there is an alternative that many individuals take in order to reduce the taxes that they have to pay for their income, enjoy privacy regarding their investments, and increase their personal freedom.

This alternative is called “Five Flags Theory,” which consist is relocating various aspects of your life and your businesses through five different “flags”, which means that you have to internationalize different aspects of your investments in five countries in order to enjoy the benefits that each territory have to offer. One of the best ways to do this is through our Forever Free package which we describe in detail here. 

Citizenship, tax residence, domiciliation of your business, a place where to save your assets, and defining a territory where you will spend most of your time are the things that you must take into consideration, as you have to do each of these activities in a different country. Let us explain each flag and its importance, as well as which country might fit best with each requirement. Plus, we will also discuss the five flag theory and trusts, which is likely the most important flag.

• First Flag, Citizenship: The first step, is having citizenship or passport as a plan B. Nowadays most of the world´s powers (USA, Europe, Russia) are imposing increasing taxation and in the verge of economical crisis, political turmoil and social unrest. Having a second passport for you and your family in a small nation with less government control and tax friendly legislation, is a key factor of your personal and financial survival. With the coronavirus, this has become more vital than ever. Please read our magazine´s first edition for more information on the current crisis. 

• Second Flag, Tax Residence: For this flag, you must find a country with a territorial based taxation system, preferably the same as your newly-acquired citizenship. With this kind of country being your tax residence, you will not have to pay taxes for the income earned outside the borders of this country.

• Third Flag, Business: In this case, look for a country whose tax system does not involve the type of income that your business produces. Countries like Cyprus are a good option for registering your business as it is a territory with low corporate tax rate (12.5%). Another great option is Panama, which offers special free zone regimes with incredible incentives for different businesses and industries. 

• Fourth Flag, trust: Five flags and trusts are almost synonyms. This is the keystone of any successful family office. You must look for a rock-solid trust that no creditor, spouse, bitter business partner, or invasive authorities can reach. In this part of the process, you have to look for a country with economic and political stability that allows you to save your assets safely. Mundo recommends Nevis as the best trust jurisdiction. 

• Fifth Flag, Where to Spend Your Time: Finally, you should look for countries where you can spend most of your time. To be able to apply the five flags strategies successfully, you have to avoid staying in one territory for long periods of time, as some countries charge taxes according to the time you spend as resident of this territory. Finding a place with low tax rates for citizens or keep traveling so you do not have to spend much time in just one country can be helpful for those who want to run their businesses without having to comply with big tax rates for their income.

As you can see, the internationalization of your business and your personal life can give you so many benefits like enjoying the anonymity of your economic activities, avoiding big tax rates, save your assets safely, and unparalleled levels of freedom like never seen before. Five flags theory is the best option to do business and enjoy your earnings as much as possible.

Contact us