We all have a flag – the country that holds our passport and our heart – Flag 1. But there are other “flags” that make it possible to be a PT – Permanent Tourist, Perpetual Traveler, “Prior Taxpayer.” With credit to Nomad Capitalist, the logic of the 5 Flag Theory is this: you may go where you are treated best. Every time you base a part of your life in a new country, you plant a “flag.”
What parts will you base?
- citizenship (and associated taxes)
- residency (with few/no taxes)
- income generation (and the need to manage taxes)
- asset management (like vehicle registration, real estate)
- lifestyle (like healthcare, adventures, charity)
According to the 5 Flag Theory or Nomad Flag Theory, you need to hold:
- A passport (Flag 1) or citizenship in a country that does not tax non-resident income or control your actions. With many stipulations, Canada has allowed me to become a non-resident citizen, thereby disqualifying me from residential taxation. I have become “permanently residence-free” – which has it’s own set of money and communication management challenges. Without a “residence visa” there is no post office box for mail delivery; no street address for courier delivery; no system for a vehicle registration or driver license, no bank account or credit card. Accounts accumulated over time and good friends have me covered for now.
- Either legal residence in a tax haven (which addresses the money and communication challenges in #1, e.g., Malaysia My Second Home), or continuous travel. If your circumstances allow (e.g., no criminal record, few dependents, no property demands, high mobility skills), you can live as a tourist (Flag 2) in a country (or many countries) with considerable freedom and reduced taxes. Many countries allow passport holders from certain countries to enter without a visa, and to stay anywhere from 3 to 6 months. But you need to travel light and reduce all your belongings; for this, I take inspiration from the “minimalism” theory of reducing clutter from my life.
- Business base and income-generation in country or countries where you don’t pay taxes. This means being able to work anywhere (Flag 3), but getting the payment for work deposited into a recognized, non-taxable bank account. This is related to the “digital nomad” movement – people with skills to work online from anywhere – something I unwittingly started doing 20 years ago living on a small island in Canada. Now I have set myself up as a Visiting International Professor for the mobility and adventures that it offers. And I’m thinking of getting a TEFL certificate so that I can drop anchor and teach English for a while anywhere, hence, moving from permanent tourist to short-term residency. It is the ultimate mobility employment certification.
- Offshore bank account for financial management (Flag 4) in a country with stable banking. Offshore means non-taxable because it is not associated with any one country and neither are you. Stable means an efficient judicial system, good interest rates, and stable banking conditions. It is not easy to set up and use an offshore account, but I am assured by expat financial expert Graham Foxwell, it is worth the effort. I am still working out how to get an international credit card.
- “Homes of convenience” where you enjoy (Flag 5) adventures, get medical treatments, avoid unpleasant weather, or manage assets like real estate and vehicle licenses – where you spend your money, preferably with no sales tax or VAT. My doctor is in Dubai, my drivers license is from Qatar, I adventure with friends in Sri Lanka and Malaysia, China and EVERYwhere! My little “home” where I unpack and repack my suitcases is in Oman.
According to Nomad Capitalist, to maximize your freedom, you need to plant flags in as many countries as possible. In many ways, Flag Theory promotes “world citizens.” The goal is to distance oneself from being “owned” by one country, and to keep more of your own money.
People ask me: how do you do it? Just travel and work and see the world? Without really meaning to, I have implemented the Nomad Flag Theory to live as a PT – permanent traveler. And this website – kcbarker.com – is a record of my adventures, my endless curiosity and continuous learning.