Flag theory – creating a holistic offshore strategy
Four flags for international business, residence, citizenship, lifestyle
The flag theory is a highly vivid concept which has been developed more than sixty years ago. It describes the strategic approach of (in the figurative sense) planting flags in different countries to allocate different aspects of taxation, regulations, and economic framework. The flags separate mainly these four aspects:
- Business: Where to locate the business (headquarters) and its assets under economic, regulatory, and low-tax considerations, including corporate bank accounts and developing a proper structure to reduce the corporate income tax burden and other business taxes, and to protect and safeguard the business assets,
- Tax residency: Where to be individually taxed on wealth (including private bank accounts) and income by selecting the best (territorial) tax regime and tax treaty framework.
- Citizenship, its burden and benefits, including considerations to get a second passport respectively dual citizenship to diversify private risks and to overcome limits on investment opportunities and travel restrictions.
- Private lifestyle: Where to perpetually travel and stay in countries, places, and playgrounds with the most attractive environment, lifestyle, freedom, and privacy protection.
This core concept has been enlarged over the years, pseudo-refined with additional flags, but still provides the best starting point to create a holistic offshore strategy to find more opportunities, freedom, safety, privacy, wealth and lifestyle fun. On all four aspects, going where you are treated best is the pragmatic strategy of the nomad capitalist.
Digital nomads and “promads” in Thailand utilize such four flag theory in a simplified matter that is not always in compliance with Thailand’s taxation regime. With a passport from Europe, USA, or other OECD countries, a raw assembled paper offshore company in Hong Kong, BVI, or else, a personal bank account in Singapore, and tax residency in Thailand. The basic idea is to work in Bangkok, Chiang Mai, or on a sunny Thai island on behalf of the offshore company, to use the foreign bank account as intermediate storage for the proceeds, and to utilize Thailand’s beneficial patchy tax system for a virtually tax-free life.
Go where you’re treated best – after careful consideration and tax planning
Becoming non-resident in the home country, earn money and wealth offshore, arrange the residence in a tax compliance way, and banking overseas in a foreign currency requires experienced tax counsel. The nomad trap, which means leaving the home country without having properly structured the business affairs to legally reduce or eliminate taxes, shows typically up when it is already too late.
It is important to understand, that ignorance of the law is no defense to tax authorities. Doing nearly everything right, can mean doing everything wrong. The well-established principle “never trust a local” means, that a local advisor in an offshore jurisdiction will always recommend his own sales products, without considering the investor’s home country legislation or alternative options.
Location-independent legal and tax advice from Bangkok
PUGNATORIUS Ltd. is the Bangkok-based specialist provider of legal services and tax advice on foreign investments in Thailand’s manufacturing and service industries as well as property acquisitions and developments. Sophisticated solutions in a complex legal environment. Serious legal and tax advice in the land of smile. Flag theory for the nomad capitalist: Go where you’re treated best.
The Bangkok law firm aspires to give clients legal and tax advice from a professional distance to the products, jurisdictions, and offshore agents. It has a long tradition and particular know-how to assist and advice offshore investors and cross-border transactions involving offshore jurisdictions on these seven offshore solutions:
- Offshore legal and tax advice
- Offshore company selection, formation, and maintenance
- Offshore bank account opening and maintenance
- Offshore investment and disinvestment
- Offshore nominee services and its risk structuring
- Offshore FinTech and crypto asset protection
- Offshore search and rescue services – when it is nearly too late
The scope of professional services is further explained at pugnatorius.com/offshore.