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How can an individual today still remain independent and free from third party intrusions? While litigation and government infringements continue to worsen, what measures can you take to protect what is rightfully yours? And how does an International Trust fit into the picture?
The good news is that for some individuals, freedom from excessive government burdens, unfair taxes, and infringements on personal freedom is a reality. For these individuals, asset protection, privacy and unwanted intrusions are the norm. How do they do it?
What Sovereign Individuals Know
The objective for these forward thinking individuals is to become a sovereign person - a concept of ‘self-ownership’ - defined as the moral or natural right to be the exclusive controller of their life.
The term 'sovereign individual' has different meanings to different people. For some, it means freedom of travel. For others, freedom of excessive government rules and regulations. Or financial independence. Or superior asset protection. Or privacy. And for others, freedom from excessive taxation - or at least reasonable taxation.
The free movement of people and money is a natural right. And laws are not needed to grant these rights. The laws that deny these natural rights are not good laws. And you don't need to be rich to enjoy these natural rights.
One of the themes in Offshore Living & Investing, 2nd edition, is how to live life as a sovereign individual. In a nutshell, a sovereign individual arranges his or her business and personal affairs by unfurling various flags or national ties, and by treating governments as service providers, instead of as their rulers.
One flag is a citizenship flag where a second passport is located - this is where your official residence is located. Another flag might be where you earn income. Another, where you obtain banking services. Another where you earn income, and so on.
Each of these flags is best located in different jurisdictions. That way, you are not bound to any particular country. It doesn’t matter exactly how many nations’ flags you unfurl, as the diversification of nations for different purposes is the key.
The ultimate goal may include not being a tax-resident in any jurisdiction. Or maximum freedom. Or maximum asset protection. Or complete privacy. Or all of the above.
By living in a jurisdiction that does not tax income earned offshore, and making no income where you reside, you can avoid being a tax resident in that venue. Or by residing in a jurisdiction as a temporary, long term resident - or for less than the number of days that satisfies the tax residency status - you can stay out of all tax regimes.
One example, is spending five months of the year in one jurisdiction, five months in another, and a couple of months vacationing, visiting friends or family, or taking a cruise in between. Another example is to reside in one country under a permitted long term temporary residency status. In either case, the tax laws treat you as a temporary resident and not a tax resident, if minimizing taxes is one of your objectives.
And keeping your assets located in one or more offshore jurisdictions other than where you reside can result in low or no taxes on the interest or dividends from the investments, particularly if assets are held in an International Trust. Some countries have non-resident withholding tax rates of only 2% or 10%. Other countries have non-resident tax rates of 0%.
The real beauty is in the simplicity.
Whether you have four, five, or six flags is not important. The key is that you, your assets, your income, your residence, and your citizenship obligations are diversified and segregated from prying eyes.
And you can appear to be from somewhere else. Live and travel in better comfort - and for less money - than it costs to remain where you are. Choose to enjoy places that encourage the lifestyle and social norms you desire.
With some extra steps you could live totally tax free - or at a very low, reasonable tax level.
And yes, if set up correctly, it is perfectly legal.
Owning vehicles, real estate, and liquid assets held in company names owned by an International Trust could allow you to avoid appearing on government databases, with enhanced asset protection and integrated estate planning. Create greater privacy, and avail yourself to opportunities that other destinations offer. The book How to Legally Protect Your Assets, 2nd edition, explains how this works.
The sovereign individual appeals to a wide spectrum of people who dream of being able to live under the radar screen and live life in a manner suited to their needs.
You control your own life. Using the diverse concept of hailing flags from different nations places a significant distance between you and bureaucrats who want to determine how you should live, and what’s best for you.
Your Flags Unfurled
To further identify how and why to use different nations for achieving different objectives, look closer at the purpose of unfurling multiple flags from different nations. For this example, we assume minimal or no tax, asset protection, quality of life, and privacy as the main goals.
The first flag is one or more passports in neutral, respectable countries, in addition to the first passport from your native homeland. The obligation of taxation arising from the passport should be based upon residency within the country. This means the country does not tax its citizens when residing in another country.
All countries in the world have residency based taxation, meaning if you don't reside there, you don't need to pay taxes on worldwide income. The sole exception with worldwide citizen based taxation is the U.S. (and Eritrea, a tiny African country sandwiched between Sudan and Ethiopia on the Red Sea).
Your second citizenship and passport should allow visa-free travel to as many other countries as possible. You don’t need to reside in this country. And so long as no income is earned there, you can generally avoid filing tax returns or paying taxes in this country.
We’ve helped numerous clients and their families legally obtain second citizenship and passports from other countries. For U.S. citizens, the additional passport also provides the opportunity to give up U.S. citizenship, if eliminating all, or most, taxes is an objective. Contact me here if you are interested in learning about obtaining your second citizenship and passport.
The second flag is where you call home…..your 'official' residence. You may or may not actually reside in this country. But this country allows you to reside there as a legal resident without becoming part of the tax regime, or even without local citizenship. The right to live in this venue could arise by virtue of a tourist visa, or a temporary residency visa, without becoming a permanent or tax resident. And if you reside there, it would be a country which does not tax offshore income.
There are actually many nations that fit the definition for the second flag, as outlined in Offshore Living & Investing, 2nd edition. In any case, so long as you don’t earn income in that country, there generally is no need to file local personal or business tax returns.
The third flag is where you spend time for quality of life. This is often an important factor to the sovereign individual. If there are time limitations on how long you can stay in one jurisdiction without becoming a tax resident - or due to visa requirements - it may be necessary to have more than one playground.
It’s your choice as to where and how much time you spend, or how you vary your time between different venues. In any event, staying within the time restrictions can avoid the requirement of being subject to local tax requirements, so long as you do not earn income in the jurisdiction.
The fourth flag is where you earn your money. If you own an existing business that can’t be moved, it may be difficult to legally avoid paying taxes in this venue. However, perhaps the business can be relocated to a low tax jurisdiction, or where plentiful business expenses can legitimately be written off against business income. Today, with inexpensive and quality telecommunications and the Internet, almost all businesses can gradually be shifted somewhere else.
It’s actually much easier than you think. If you earn income with your skills - consulting, sales or marketing, or other service based business or profession - you can easily operate over the phone or over the Internet.
Otherwise, for your fourth nation, choose an offshore financial center as your physical business base that requires little or no taxes against business income earned offshore. In any event, the business should be operated through a company to insulate against personal liability and to enhance asset protection.
Better yet, the company (and other assets) should be owned by an International Trust to put another layer of protection between you and risks.
The fifth flag is where you keep your savings and investments safely locked away from where your business and personal risks are located. This is where your income is earned. This nation should have a high level of respect for privacy, communications, professionalism and stability. Once upon a time you could keep cash deposits in secret numbered accounts, but those days are long gone. Today, banks need to know-their-customer before taking you on board.
In one or more banking venues you can maintain cash deposits, stocks and bonds in a company name you control - with your International Trust owning the company - for added privacy and protection. You can control access to the money through banking relationships via email, or through Internet access. Ideally, you don’t live, play or do much business in the place where the majority of your assets are located to maintain discretion and avoid potential litigation risks.
Admittedly, TIEAs (Tax Information Exchange Agreements) and FATCA are transparency norms today, and privacy is harder to come by. But many low tax jurisdictions for non-residents (either personal or company accounts) offer 2% and 10% withholding tax (or less), and are excellent options with excellent privacy laws.
Consider the sixth flag the Internet. This is where and how you operate your business; communicate with friends, family and clients; and legally move assets around as you need. At one time it didn’t really matter where your ISP was located, since it was basically invisible. Today, there are VPN servers that can place you in a location where you are conducting business, not where you are actually sitting.
It doesn’t matter how many nations or flags you unfurl. Read that sentence again. It's only important to apply the concepts and the number that suits your objectives.
It goes without saying that implementing your planning strategy must be done timely, and legally, particularly if legally mitigating taxes is an objective. This is particularly true for U.S. citizens taxed on worldwide income without regards to residency, or where the income is earned. Unlike all other nations around the world, removing the shackles of U.S. citizenship is first required to fully benefit from all tax aspects. After acquiring a second citizenship, then this step can be maximized.
Still, today, many individuals envision the sovereign individual as their way to break free and escape. This works particularly well if you enjoy international living and a traveling lifestyle. For those with assets, there are greater opportunities for asset protection, and nil or minimal taxation. But even those individuals on a tight budget with limited assets can learn how to benefit too.
How to Get Started
For international planning tips visit us at DavidTanzer.com, which is a good place to begin learning about asset protection and offshore investing and living. International tips are located here.
To learn more about International Trusts for integrated estate planning and asset protection, start with How to Legally Protect Your Assets, 2nd edition.
And to learn more about the correct way to go offshore, read Offshore Living & Investing, 2nd edition.
Our Past Articles page have many good articles to learn more about International Trusts - and much more - right here.
And if you wish to learn how to proceed with a confidential consultation to review your personal situation to accomplish your objectives, then contact me here.
Until next time……
David
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