Now that you know more about Flag Theory and its origins, it is time for you to learn about the new concept and the six flags that go with it. Just what is the new concept and how is it different from the old one?
The New concept of flag theory
The new concept of Flag Theory is still based on the same premise as the old one. It allows young business owners and entrepreneurs to make the most out of their money without having to give up a large chunk of their savings to the government.
Flag theory was originally designed for the ultra rich, which is the reason why it is so interesting to explore this topic. The new concept aims to be easier to follow for ordinary small business owners who have an open mind and just wants to grow their business, increase their freedom and legally decrease the taxes that they pay.
“But in this world nothing can be said to be certain except death and taxes.”
– Benjamin Franklin
About the six flags
The original concept had three flags, with two more flags added by WG Hill. A lot of people are going to tell you that Flag Theory is illegal. They are wrong. Strategies explained here are 100% legal. Here is everything you should know about each of the six flags:
Flag 1: Second passport
A common myth associated with getting a second passport is that it is illegal. This is not at all true. Most countries grant their natural born citizens the ability to obtain dual citizenship, making it easier for everyone involved to move to another country, start a life and eventually gain citizenship.
Each country has a different way of allowing you citizenship. For instance, many European countries offer ‘citizenship of descent’ programs that opens up the door for people whose family originates from a certain country.
In South America, some countries will give you a citizenship simply by paying a fee, and fill out some paperwork. Note that this ‘fee’ you need to pay can very substantially from country to country. If you own a business, you can kill two birds with one stone by setting up your company in a country like New Zealand, Australia, Singapore, or Ireland, and then be granted residency and eventual citizenship.
Flag 2: Residency
Seeing countries like Singapore or Hong Kong, which charge very low income tax on their residents, it really starts to make you wonder what your government is doing with all the tax money they collect. These countries know how to attract businesses, and wealth is abundant, which means that they are not after their residents’ money.
The goal of setting up residency is to lower or completely eliminate your income tax. This is why choosing countries like Monaco, Singapore, and Hong Kong makes a lot of sense.
Before choosing where you want to plant your residency flag, take the time to read about that country’s policies and talk to experts. Knowing everything there is to know will help you avoid any trouble in the future, and can help you take home more of your own money.
Flag 3: Offshore Company
Getting residency and citizenship is just one part of the job. Another important step is to establish your business in another country. If anyone has ever told you that forming an international company is illegal, they are wrong again. It is very much legal and is almost essential in some cases.
Remember to abide by the laws set by the country you are planning to establish your company in. Before you do anything, it is best to do your homework. Know the laws, know the taxes, the fees, all the red tape that needs to be crossed. Make sure your entire operation is 100% safe and by the book. What you want is to protect your assets, not get arrested because you failed to know that part of your operation is apparently illegal because you did not bother to find out.
The major Asian financial centers Hong Kong and Singapore are popular places to incorporate offshore, and also offer a sound legal framework, solid banks, and stable political conditions. Other options include certain Caribbean and Pacific Islands, such as the Cayman Islands, British Virgin Islands, or Belize.
Flag 4: Offshore Banking
Remember when you were a kid and you would store your money all over your room so that no one could find it? This is the same premise as offshore banking is based on.
Offshore Banking gives you the opportunity to keep a portion of your money safe in another bank in another jurisdiction so that you can always be sure you have it in case anything happens in your home country, be it inflation, capital controls imposed by the government, or worse.
Switzerland has traditionally been the go-to country for all kinds of offshore banking needs. However, the trend for offshore banking has also been moving east recently, more specifically to Singapore and Hong Kong. These places are the new safe havens for smart entrepreneurs and investors from around the world looking for international diversification, offering high degrees of privacy, the most solid banks in the world, and very low fees on international wire transfers.
Flag 5: Physical Land
Buying property is a milestone in most people’s life. It indicates that you are ready to settle down, have kids, and that you’re in a good financial situation. However, having physical land can be more than that.
Once you have achieved financial independence or have a location-independent source of income, you might want to go travel and experience many different places and cultures. Don’t be surprised if you then find yourself falling in love with a particular place that just feels like a home away from home.
However, before you purchase land, you have to choose wisely. Make sure you choose to buy your property in a country that respects private ownership rights, and that there is good access to enough resources like food and water. Property can be used for yourself to live in, or for you to rent out and make money that way. Many countries in Eastern Europe, as well as certain places in South-East Asia, offers affordable properties that could become extremely profitable investments over the next few years. Another increasingly popular investment is to buy high-yielding farmland in countries like Chile in South America or New Zealand.
Flag 6: Data Security
In today’s day and age, with hacker attacks and various government agencies that keep track of everything that is written online, data security is becoming increasingly important for people, and rightfully so. In fact, these algorithms and machines may even go through private emails in order to find out more about for example your earnings.
This is why the data security flag is is a very important one in flag theory. You should take the effort to learn about encryption and other ways to protect yourself from anyone who is trying to breach your data security. In some cases, you may even want to consult with professionals, who can give you advice and help you protect yourself from these dangers.
The data security flag is simply the jurisdiction where you host for example your business website online. Jurisdictions known for strong data security and privacy laws include Norway and Iceland.
International diversification is key
Proper international diversification happens when several of the flags mentioned above are combined into a tailored strategy for your specific case. There are many resources online that aim to help you with so-called offshore strategies and second passports, but bear in mind that not all of them are reputable, so make sure to do your own due diligence when researching this topic.
Flag theory, second passports, tax laws and tax treaties between countries can be complicated matters, meaning it is highly recommended to seek professional advice before taking action on your own. If you do this, Flag Theory can potentially save you lots of money while dramatically increasing your freedom in a 100% legal way.
Featured image from Shutterstock
Legally Slash Your Taxes with Flag Theory – Part 1
Legally Slash Your Taxes with Flag Theory – Part 1
There are lots of different ways to earn money. You can get a job and set aside part of your paycheck every month, for example 33% as we advocate here on Hacked. You can also set up your own business and create something of lasting value for yourself. But what if your country doesn’t respect your right to keep your hard-earned money? With the power of freely available information online these days, you can legally avoid these high taxes and even grow your money through the use of Flag Theory.
What is Flag Theory?
Flag Theory is a concept that allows open-minded and forward-thinking entrepreneurs to increase their income all while keeping their assets safe from unreasonable taxation, declining currencies, and inflation. It is essentially taking your business and establishing it in a place where you are “treated best”.
A ‘flag’ is a place in the world where you have setup a part of your life, and the goal of this is to diversify your affairs, both personal and financial, so that not one country has control over you or your money, thus keeping them safe for your own personal use.
An advantage of this is that if you put parts of your wealth in different locations around the world, you will not be tied down to one government who can control how you spend your money. Instead, as a foreigner in the country your money is held, you will not be liable to pay their taxes and other fees, allowing you to keep your savings intact. This will give you the freedom to choose what you want to do with your hard-earned money.
The concept is indeed not a new one, but with power of the internet, cheap travel, and globalization, it has become increasingly relevant for ordinary people with small businesses who want to maximize their freedom. In this two-part series, we will explain how you can take advantage of this concept previously known only by the millionaires and billionaires of society.
History of Flag Theory
The term ‘Flag Theory’ was originally coined by the famous American investor Harry Schultz. His book Tax Exile was controversial when it first came out as it advised people on how to legally skirt around the tax laws implemented by the US Government.
The original theory started out with three flags, and the idea got picked up and popularized by an author hiding behind the pseudonym William G. Hill through a book series published during the 1980s and 90s. These books were sold through classified advertising through The Times in order to avoid any backlash.
Later in the 80s, Hill together with Schultz published a book called: PT: A Coherent Plan for a Stress Free, Healthy and Prosperous Life without Government Interference, Taxes or Coercion. This book had seven editions throughout its publication.
The duo was not done, and in 1993 published another book titled: PT2: The Practice: Freedom and Privacy Tactics: A Reference Handbook. What these two books had in common was that they were aiming to help people plan their finances a lot better than what was perceived to be ‘normal’ at the time.
Why should you use Flag Theory?
Before you decide that Flag Theory is not for you, think about this; with Flag Theory, you can achieve goals you have never thought possible. This can include legally decreasing or even eliminating the taxes you pay, allow you to move freely around the world, reclaiming your privacy and preserve and even generate more wealth from your business.
Original Three Flags
In the original theory, there were three flags that were meant to help people accomplish these objectives:
- Flag 1: Second passport. Find a country that does not tax income earned outside of their borders and establish your citizenship there.
- Flag 2: A safe and secure place for key assets. Establish your business in a stable, low or no tax country to help you maximize your profits.
- Flag 3: A legal address in a tax haven. Property in said country.
Later on, WG Hill added an additional two flags and came up with the term “Flag Theory”. The additional flags were:
- Flag 4: Asset Haven. This is where you keep your money. Ideally a place where there is relatively low to no taxes on capital gains.
- Flag 5: Playgrounds. When you have money, you are free to spend it however and on whatever you like. Playgrounds can refer to a place or country that will allow you to spend your money how you see fit, without having to pay ridiculously high consumption taxes like sales tax or VAT.
In the next part of this series, we will cover the modern concept of flag theory and how young entrepreneurs from all over the world right now are taking advantage of this to grow and protect their money.
Featured image from Shutterstock
Invest, Trade or Create? What Gives You the Greatest Return?
I’ve done both professionally for more than ten years.
One of my first endeavors included selling cookies and toys on a stand outside my mom’s apartment when I was 10. When I joined the school band at the age of 8, I played the clarinet outside the local store to raise money (I brought with me a friend that played trumpet). At the age of 15, I started a clothing line called LJ (Limitless Juggernaut) which was sold in a local store in Tønsberg (a small town in Norway). When I was 18, I started a phone company in Norway selling imported phones from China. I made some big bucks at that time (2000 USD a month) while I went to high school in 2008. When I was 19, I joined BI Business School (just like a US business college), and started on a bachelor degree in Entrepreneurship and Business. At that time I founded MyGoodAct.com which I ran for more than five years. It raised more than 1.5 million USD to social causes worldwide (but failed in the end due to low operational cash flow).
As I’ve previously written, I started CCN.LA in 2013, that’s the time I entered the bitcoin market. I made some big bucks on that as well, and withdrew it all (I took the profit). I would have had a lot more money if I didn’t sell all the bitcoins, but at least I was able to sleep well at night after I had secured some profits.
And then I’ve earned some and lost some making different margin investments with CFD (which I do not recommend anyone to start with).
What I’ve learned
There is one clear answer to whether you should invest your money, or use them to create a small business:
Focus on creating. Don’t let trading nor investing become your entire life. If you fail at trading or investing, you won’t have anything left.
What I mean: If your only job is investing or trading, you take the highest risk of us all. If you lose your money, you won’t have anything else to do. You could try to apply for a job – but you will not have an attractive CV. You won’t have any specialized knowledge, except the knowledge of how to lose your money in the markets. I wouldn’t want to be in that position. And be honest with yourself: Do you really want to spend your entire life watching numbers go up and down? Is that your life’s purpose?
Focus on creating
It gives you much more to create rather than trade. You will inspire friends and family; you will become a role model for other people. When you focus on creating a new solution, a new business, a new service, you immediately start to acquire new knowledge. Knowledge that you can use in other ventures if your first venture fails.
And when you succeed with a business, you will be so high on “adrenaline” because your entire life situation will change. Maybe you can leave your regular job to focus entirely on your new startup. Maybe you can hire employees to help you on your new entrepreneurial journey?
Make investing your second priority
I’m not saying you shouldn’t invest your money, money that you earn from other ventures. I’m just saying that you should focus on creating a more fixed or stable cash flow. And only invest money that you don’t need, money that can be lost. If you got enough money flowing from your venture, then there’s no reason that you shouldn’t invest some of that money. But always keep your ventures your first priority, and your investments your second.
Exactly what I do
I’m focusing on creating. Create new businesses, new services. Nothing is more important than to increase your cash flow on a monthly basis. Investments and trading are fun, but you can lose as much as you earn. It isn’t stable enough. To reach my goal of $1 000 000 I’m primarily focusing on increasing my yearly revenue, so should you.
What’s positive with creating?
- You create a more stable monthly cash flow
- You won’t lose money (as you can control expenses)
- You will gain knowledge and become attractive in the job market (entrepreneurs are HOT these days)
- You will get new ideas for other ventures
- You will inspire and help other people to do the same, start a small business and become financially independent
What do you think? Do you already have a business? Are you only focusing on investing?
One Thing is Certain, You Will Lose Your Job
Are you an employee? Do you have a full time job? One thing is certain; You will lose your job.
Some professors and researchers claim that the rapid growth of automation will create new jobs for humans, just like the industrial revolution did. I even have a book called “Robots will steal your job, but that’s OK” explaining that we do not have to worry about automation. We will still have enough jobs.
I have a totally different view of what is taking place in our society:
AI and automated robots will make a vast amount of the workforce unemployable.
I believe that the industrial revolution is nothing compared to the automated revolution we are now facing. Automation was introduced in the industrial sector for decades ago, but now we are truly witnessing the power of it. Smart automation, software that can create, that can learn, that can outperform the human brain. Just have a look at AI Intuitive Design, creating mindblowing designs that no human can:
Also read: Google’s AI became highly aggressive
AI and automation will only take certain jobs
Then there are the people that claim AI and automation only will take certain jobs, mostly routine jobs where you don’t need to have a creative or thinking human brain. And that could be true, and I too believe that there will be a need for human brain power. Nonetheless, it’s too easy to think that AI won’t become creative, won’t try to figure out problems on their own. We simply just don’t know what AI will be able to do in 10 or 20 years.
Let’s say that AI can’t be creative or take important strategic decisions, we are still making more than half of the work force redundant unless new jobs are created.
Automation, automation, automation
That’s the main concept people talk about in large businesses. Leaders and innovators (like me) are pushing for automation to cut labor costs. I’ve had multiple experiences where people have been fired in Norway due to automation and downsizing of staff. Not because they don’t make money, but because they can – due to new systems – and by doing so, make more money.
The people I’ve seen been fired, are not only new employees, but also employees that have been working for the same company for more than 20 to 30 years. And when you are 50 or 60 years old, and you get laid off, you won’t be the first person one would hire (face the fact).
And I can guarantee, that if you stick to one company for your entire life, you will most likely lose your job unless you become the CEO. It might not happen within the next five years, but what about the next 25?
What can I do?
I believe we will see a lot more freelancers, consultants and entrepreneurs crawling out of the shadows of the corporate world. It is more important than ever to be able to have a side gig or a plan to put in motion when you feel your job is at risk. I would strongly advice that you start planning today and create backup strategies in case your first strategy fails.
Start small on the side. If you are an employee, you got an ideal advantage. You got a salary. Start with discussing ideas with friends and family during your spare time. And when you think you have a good idea, try to put it into action. You can easily add a few hours after work, and spend a few hours or more during weekends and holidays.
Don’t feel bad about trying to create a side gig. You will become more relaxed by knowing that you got something to fall back on if you lose your job. You will be more happy, and you will probably be more energetic in your primary job. You will learn so much by creating your own business, and much of the knowledge could be beneficial for your employer too.
Maybe you won’t lose your job, and you really enjoy working there. No problem; keep grinding for the company you love, nothing is better than that. But never, ever, be without a fall back option.
What are your thoughts?
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