How To Plant Your Five Flags Offshore

Five Flags Geography

Nov. 13, 2012, Panama City, Panama: The Five Flags strategy is about diversifying your life in five key areas: residency, citizenship, banking, assets, and business.

Dear Live and Invest Overseas Reader,

I'm reviewing and clarifying my ideas related to the Five Flags theory of diversification in preparation for my opening remarks tomorrow at this week's Offshore Summit in Panama City. If you're new to the idea, the "Five Flags" are to do with residency, citizenship, banking, assets, and business. Not everyone needs all five flags planted in different jurisdictions, but the goal should be to plant whichever ones you do need in different jurisdictions. Moving to another country and taking all your cash, investments, and business activities with you to that new country doesn't achieve the real goal of going offshore.

Fortunately, different countries shine for different reasons. Some are better for banking, others for investing, some for residency, and yet others as places to incorporate your business. No country gets A ratings on all fronts.

Panama is one country that gets close. Banking options are great in Panama, with more than 80 banks operating here. Most won't open a consumer account for you unless you have a "connection" to Panama either through residency or because you own real estate in the country. Private banking accounts are easier to open, but require high minimum balances, from US$25,000 to US$1 million at the high end. You can also open a corporate account if you open a Panamanian corporation. Investment opportunities in Panama are mostly related to real estate--rental investments, timber, land banking, and development.

Using Panama as a base for incorporating your business can make sense as the country doesn't tax entities that aren't operating in Panama. You can set up a business in Panama and have an office in the country and still pay no Panama taxes if all your income is derived from outside Panama or if your business qualifies under the rules of one of the incentive areas of Panama Pacifico or the City of Knowledge.

Panama offers many options for residency, including the new "Specific Countries" residency visa that has been expanded to include 47 countries. If you hold a passport from one of these countries, residency (and I mean permanent residency) is straightforward. If you don't hail from one of those 47 countries, you still have a dozen other residency options, including a very easy retirement residency option.

Even though Panama offers good choices related to nearly all the Five Flag agendas, you don't want to plant all your flags here. Choose one or maybe two to base in this country and then look to other jurisdictions for the others. If you decide to live in Panama, then you'll want a local bank account, but plant a banking flag in another country, too. Don't bring the bulk of your assets with you to Panama if you plan to live here. And incorporate your business here only if you need a local company for operations.

What other jurisdictions should you be looking at? We'll discuss the best choices right now in more detail at the conference later this week. Here's a short list to help focus your thinking:

  • Banking - Belize, Uruguay, Singapore
  • Residency - Uruguay, Ireland, Malaysia
  • Citizenship (through residency) - Ireland, Uruguay, Dominican Republic
  • Citizenship (through ancestry) - Dictated by where your family is from
  • Economic Citizenship - Dominica, St. Kitts
  • Assets/Investment - for real estate: Colombia; for farmland: Uruguay; for a brokerage account: Denmark
  • Asset Protection - Belize, Cook Islands
  • Incorporating Your Business - Singapore, Nevis

 

Of course, coming up with a personal strategy for which jurisdictions are best for you is more complicated than simply picking countries for each flag. Still, this list will get you started.

This is where we'll start our discussions tomorrow for this week's Offshore Summit. With the help of more than three-dozen of the world's leading offshore experts and advisors, I'll walk attendees through the thinking that should go into customizing your own Five Flags diversification plan.

If you're unable to join us, don't worry. Kathleen Peddicord will be attending as journalist-in-residence. She'll report from the scene in real time each day.

In addition, each day's sessions, including every presentation, every workshop, and all Q&A, will be recorded. We'll make the complete bundle of recordings and speaker materials available as part of our new Offshore Summit Home Conference Kit, which you'll be able to purchase starting tomorrow for a discounted pre-release price. Meantime, you can register your interest here to be sure to be eligible for the pre-publication discount.

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