In this missive, Edmund presents a true story of how a personal friend  lived and grew a business tax free -legally- from paradise. If you haven’t already, please consider becoming a paid subscriber to the PT newsletter, and you’ll receive a free copy to Edmund’s book on immigration and 2nd-citizenship.

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Ever dream of having your business accrue profits offshore (legally) as you hang out in paradise? See the infographic below.

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Thailand is one of the most amazing places on earth. Long live his Majesty the King. Every time I set foot in Siam, I feel a wave of  joy as I enter a land of Buddhism, amazing food, incredible people, and unique society unlike anywhere else.

However, as much as I have a deep and profound respect for The Kingdom of Thailand and HMTK, I have a love/hate relationship with the tourist traps of Thailand, namely Phuket.

Phuket (Patong Beach in particular) is basically a giant party and anytime I’m there, I can’t help but feel distanced from the tourists getting drunk and picking up bar girls.

I’ll step down from my high horse in a second, but let me vent for a moment on why Thai’s think foreigners are Bah (crazy).

Dress Like Idiots

Oftentimes foreigners in Thailand dress like idiots. Tank tops and flip flops tend to be standard.

I’m not sure if the Farang realize that Thai’s are hyper conscious of how people look, and outward appearances are important. Thai ladies that are “hi-si” wouldn’t be caught dead without makeup, heels, and a dress or long pants. Thailand is a place where you can easily identify the class of citizen someone is by observing what they are wearing.

Thais assume that all foreigners are essentially idiots, and oftentimes treat you as such until you’ve made an impression.

Its difficult to overcome the stereotype of being a westerner – and extremely hard to do business as a foreigner.

Immigration always asks what it is I do in Thailand when they see my Business Class Visa.

• If I tell them I’m here for business. I get more questions.
• If I say Pom Nak Muay an dur ai. (I’m a dangerous Thai Kickboxer) I get a smile and my passport back. 

I guess this is to be expected. I don’t fit the criteria of a typical Thai businessman. And very seldom do you meet any foreigners at all who are running a business, but trust me they are there, particularly in Bangkok City…

Indeed - most people (if they are lucky enough to ever make it to Thailand) experience the Kingdom as a tourist. Living for a bit, oftentimes less than a month, and going home with pictures of Elephants they can upload onto facebook. This is a shame, as Thailand has tremendous opportunity for those willing to take the plunge and do business. Just make sure you wear a nice shirt

Anyway, I felt like just about the only Farang doing business in Phuket this weekend, and despite the crowded city I couldn’t help feeling a bit alone. It has been nearly two years since I was on the Island of sin – and despite the constant construction, not much has changed. There are lots of new buildings, but Bangla road is still one big party.

Tourists still flock to Koh Phuket in droves, and there is always an underlying presence that people are up to no good in Phuket. There is a tension not present in some other area’s of Thailand where things are more mai pen rai (relax, don’t worry about it).

In any event, you have to go there to experience it for yourself.

Thailand is a great country to plant a flag –and start a business. 

I wouldn’t recommend someone to set up a company and start a business in Thailand – but relocating or expanding an existing business to Thailand (particularly one run on this internet) could be a prudent move that could save you millions.

How?

By establishing tax residency in Thailand, (which doesn’t tax profits abroad) and proper utilization of transfer pricing of Intellectual Property, with combined use of an offshore company and a Thai Company Limited by shares.

Thai Companies are high tax (~37%) but by proper utilization of an offshore headquarters, and outsourcing – you can dramatically lower your effective tax rate – while doing everything completely legal and above board.

This is the story of how one PT did just that.

[INFOGRAPHIC] – The ultimate tax free set up in Paradise

That is the basis of the Set up. If you haven’t already, consider becoming a paid subscriber. Everything you read here is the information I can post publicly on the web.

Imagine what lies hidden in the secure, members only section

You can read more about the PT community here…

Further Explanation of above [INFOGRAPHIC] continues below..

Flag 1: Citizenship

You must have a citizenship which doesn’t tax residents on a worldwide basis. In this example, my friend Mattius (name changed for privacy) is a Canadian citizen who lives in Thailand, and no longer pays taxes in Canada (because he has established a new tax residency, and filed the proper forms with the Canadian authorities)

Jurisdictional tax regime

Flag Two: Residency

I’ve written specifically on the 2^nd flag of flag theory, residency – at length in the past. For Flag Theory to function properly and fully above board, you must establish

A tax residency in a new country that has low tax, no tax, or a territorial tax regime.

Thailand taxes its residents and citizens on a territorial tax basis, meaning that profits derived from outside of The Kingdom do not need to be paid. (not tax advise, just a laypersons understanding of the law)

Any profits derived from within Thailand, with a Thai company, will be subject to tax. Furthermore, there are certain businesses that can receive tax breaks if they are established within certain sectors.

This makes offshore companies a powerful tool as a headquarters and IP holding company.

Flag 3: Company

BVI Company

BVI companies tend to be the weapon of choice for doing business in Asia, or setting up a corporate bank account with an offshore account in Asia. I’ve written at length on BVI in the past in this article. How to set up a company in BVI.

you could also substitute the BVI company for any number of different offshore jurisdictions, or a…

Labuan Company

An alternative to a BVI company would be proper utilization of the Tax treaty Thailand has with Malaysia (link to treaty). Furthermore,  a Labuan company run from Malaysia faces a 0% tax rate (in Malaysia) as long as the transactions are cleared in a foreign currency, and no customers or business is done in Malaysia. See this article about my trip to Malaysia.

Transfer Pricing

The idea of this type of HEADQUARTERS / REGIONAL OFFICE set up is to keep as much of the profit as possible in the offshore company in a low tax jurisdiction. Obviously operating costs will need to be covered in Thailand – but tax within Thailand can be kept to a minimum while satisfying authorities that everything is being properly reported and accounted for.

Flag 4: HK Bank

You can easily set up a Hong Kong bank account with a BVI company, and get a corporate credit card in Hong Kong. Unfortunately you will need to travel to Hong Kong in order to set this up. I would highly recommend you do this, otherwise you might be giving someone else power of attorney, and they could easily make themselves a signatory on the account. Fly to Hong Kong, and bring the proper paperwork with your BVI company.

Forms needed to set up a HK bank account with BVI company:

• Certificate of incumbency – Apostilled
• Certificate of good standing – Apostilled
• Memorandum and articles of association – Signed and Stamped

Other various forms may be needed including a directors resolution to open a bank account. Furthermore, these sometimes have to be verified by a Hong Kong Chartered Accountant. I know an excellent accounting firm in Hong Kong. They are a bit expensive, but they are the best.

(Flag 5 and flag 6 not covered here, as they have little to do with the strategic imperative of minimizing taxes)

Thai Company Capitalization

An Integral component of this set up is a Thai Company, obtaining a B-Visa and a work permit, and legally establishing a tax residency in the Kingdom of Thailand.

Two important/difficult aspects of the Thai company formation are the capitalization aspect, as the company needs to reflect an initial capitalization of 2M Bhat – about $67,000.

However – put the cart before the horse – you will normally not even be able to open a company bank account with signatory control until after you have a work permit. This means that at the point that you apply for the work permit, there is no bank account. Where is that 2,000,000 baht at this point?

The money should be recorded on the company’s shareholder record page (Form Bor Or Jor 5), and must show 2,000,000 baht capital per work permit to be sponsored, with all shares divided among at least three shareholders.

What to Do??

The column BOJ5 should indicate that 100% of share capital has been paid up.

One could, hypothetically, record the 2,00,000 baht as paid up in cash - and then loaned back out, in cash, to a “related party”, commonly referred to as a “loan to director”…

If you want to learn more, consider becoming a PT member. 

Thai Tax Residency

Thai residency for tax purposes (as identified or defined by a foreign government) and Thai permanent residency are two separate and distinct things.

You must be a taxpaying resident for several years in order to be eligible for Thai Permanent Residency. This means you have a:

• work permit
• business visa
• bank account
• make regular payments to the tax authorities
• live and work full time in Thailand for at least 3-4 years.

Normal processing time can be between 5 and 10 years. It can help if you can speak Thai, have a Thai spouse, or you are a respected member of the community.

Thai Permanent Residency

Establishing Thai permanent residency, and obtaining a green book – is a much, much more difficult process and can take years. I spoke with a gentleman who it took 7 full years (this is after 11 years of living and doing business in Thailand).

Thai Citizenship?

To achieve Thai citizenship is borderline impossible unless one of your parents is a Thai citizen, in which case the process is easier and quicker. Thailand has a jus sanguinis basis of citizenship. Being born in Thailand does not make one a Thai citizen, as they do not grant citizenship on a jus solei basis.

How to Start a company in Thailand

I’ve written at length on

• how to start a company in Thailand
• how to navigate visa laws in Thailand

So perhaps read those articles first. If you are serious about wanting to start a Thai company, I can connect you to a Thai Lawyer.

Once you have the Thai company established, you can trade between the Thai company and the offshore company – where the Offshore company will own the IP, and the Thai company can pay a licensing fee. You must abide by Thai transfer pricing laws. I recommend you get an accountant familiar with the laws of Thailand. This is probably not a do it yourself job. All legal documents and accounts must be kept and maintained in the Thai Language.

Thai Personal Bank Account

You can easily get a Thai Bank Account in Thailand.  Some will turn you away if you don’t have a work permit. Others are more… accepting. (hint: try the purple one)

What is Great About This Set Up

Completely Legal

There is no perfect set up in this imperfect world, but this is damn close. For starters, this set up is completely legal, and if you are truly looking to establish a corporate structure and solid foundation for your business, this set up is ideal.

Virtually Tax Free

Any earnings retained in the Offshore company are tax free. Just abide by the transfer pricing laws of Thailand and make sure you file the right forms in the country where you were previously domiciled to establish a new tax residency in Thailand.

Inexpensive Labor

You will have to hire some Thai nationals, so why not make the best of it. Start a grow a team. Thai’s have a particular way they like to work. I’ll let you figure that one out for yourself!

Flexible

If things don’t go well in Thailand – the valuable parts of your business (the intellectual property) is held safely offshore.

What to Be Careful With

Work Permits

You should only “work” in Thailand if you have an authorized work permit. The law interprets “work” on a very broad basis – and if you are caught working in Thailand without a work permit, you could be thrown out of the country, and banned from future entry into the kingdom.Work permits are typically only permitted for work which is specialized foreign labor that most Thai nationals could do do. Furthermore, there are minimum hiring requirements:

• 4 Thai employees – To obtain a work permit in Thailand it is necessary to hire 4 Thai employees and obtain an office, Thai company, register for tax, and other smaller steps that a lawyer can help you with.
• If you have a foreign business partner – you need 8 Thai employees, as the ratio of 4 Thai nationals to 1 foreigners must be maintained.

Transfer Pricing

Is complicated. Period. In broad strokes, transfer pricing refers to laws regarding the sale or trade of goods or services from one company to another – wherein both companies are owned/controlled by the same person/party (also known as trading at arms length).

To discuss the intricacies of transfer pricing would require an entire article (or even book, or course) – and they vary in complexity and enforcement from country to country, but it is well known that certain countries are more lax regarding these laws than others.

Doing Business in Thailand

Doing business in Siam is not as difficult as other places in Asia, but its not as simple as setting up a company in Singapore or Hong Kong. The government here is more restrictive of foreign investment- and they tend to not have the most forward thinking regarding certain areas, such as information technology or startup companies.

The Startup Scene

The scene in Thailand is very, very young – and there isn’t a lot of venture capital roaming around. I would estimate there are only about 2 serious technology capital firms deploying resources in Bangkok. They are cleaning up.

The Thai market is ridiculously social, and mobile applications have the potential to catch on like wildfire. Disposable income is higher than in neighboring countries of Cambodia, Laos and Vietnam where have struggled even with business models as as simple as e-commerce.

Challenging aspects of the Thailand as an Emerging Market:

• Government Regulations
• Venture Capital is rare (only a handful of VC’s)
• Not Many Credit Cards (15 percent of adults)
• Thai’s speak predominantly Thai language, of which there are several dialects

If you Decide to Start a Thai Company

Do your due diligence. I know some foreigners who have been successful when starting a company in Thailand.

DON’T:

• Start a bar
• Use Nominees
  
• Try to own land
• Break immigration law
• Evade taxes
• Do anything with mafia

DO:

• Avoid the Mafia
• Minimize taxes effectively
• Find a Trusted Local Partner
• Know the right people
• Get clients who aren’t Thai companies
• Get on good terms with the police

*Note For Americans.

As The United States is one of the only countries in the world to impose a worldwide tax obligation on its citizens or resident taxpayers – this corporate structure should be properly reported if you are an america.

Also, if you want to have an offshore company as an American, you should read up on subpart F income (which is a lot of reading!) and get an understanding of what is, and what isn’t possible, with regards to retaining profits within an organization “tax-free”.

CFC’s (as well as PFIC’s) are subject to special rules which - in very, very broad strokes and completely layman terms - means that you cannot retain profits tax free in the company, and the income falling within “subpart F” of the US tax code would be taxed at a normal rate.

A CFC is a foreign company that has over 50% American ownership. The Thai Company would most likely be a CFC (controlled foreign corporation), particularly if the American made his company an “Amity Company” which is a special type of company in Thailand available only to Americans under the Amity treaty. This treaty allows Thai Companies to be owned 100% by Americans (as opposed to normal foreign ownership which is restricted to 49%).

There are fewer restrictions on the types of business  which can be conducted by this company, but the capitalization requirements are higher, and the shareholding rules can get complicated. If you need assistance with this, I can connect you to a Thai Lawyer and an American Tax Lawyer, or Thai incorporation service providers.

Reporting Requirements

Make sure that you report the existence of any ownership in a foreign company to the IRS using for 5471, (and also form 8938) as well as the existence of any foreign bank accounts using FBAR form 90-22.1 to the treasury.

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Choke Dee Na Krupt, Korp Kun Kupt. (Good luck! Thank you!)

If you aren’t already, consider becoming a PT member. I’ve got some exciting stuff I’ll be releasing to members in coming months, and the community is steadily growing.

I can guarantee joining will get you answers, allow you to legally live like a PT, and increase your network as an ex-pat entrepreneur or investor.

The next silicon valley?

I’m back from Europe (thankfully!) and made a weekend trip to Vietnam. In this missive I’ll describe the expat spots to network in Saigon, why you should start a development shop here, shocking (or not so much) evidence why socialism sucks, and a detailed breakdown of how to start a company in Vietnam.

Xin Chao Saigon

Hello from Ho Chi Minh City, where business opportunities abound and the lifestyle is incredible. Vietnam is not only one of the most exciting emerging economies in Asia, it is a country where it is an absolute blast to live and grow a business.

If you are an entrepreneur looking to bootstrap to profitability in an emerging market, Vietnam may be the best place in the world for you to set up shop. From physical products to startups in the mobile space – HCMC is absolutely crispy right now. If you don’t have a flag planted there, you are missing out.

Opera House | French Influence

Saigon is Sizzling

As you walk down the street and run into familiar faces, everyone seems to be doing something special. There isn’t a feeling of lamentation and despair like in the west. In Vietnam – shit is happening, and it is happening now.

Where 10-20 years ago there used to be people outsourcing to China, nowadays the money, the manufacturing and the mindshare is spreading to Vietnam like wildfire.

Designers and Code Monkeys

Vietnam is an excellent design and development shop flag. If you are working on a web or mobile projects, this place is hands down – bar none the best I’ve ever seen.

I’ve met with many different design shops, development teams and young startups trying to cut their teeth in a competitive global market – and the low cost of overhead gives them an advantage.

Despite being a socialist economy Vietnam has a good amount of freedom for its citizens at a low level. There is indeed a needless bureaucracy at higher levels (more on this below) but individuals here are eager to learn, and possess a creativity and skill level not found in other more traditional outsourcing locations (I’m looking at you Philippines).

But before we get into how to start a company there, I want to make it obvious why you should. And the reasons are very simple:

Why Start a Business in Vietnam?

1. The lifestyle
2. The Opportunity

Cost.

With a barebones meal for a dollar – or a fine dining experience for under $50, HCMC has something for people of all levels. Grab a serviced apartment for 250 per month and mobile data for $2 a month.

With food and rent at an extremely low prices, and quality of life and entertainment to go around – you can easily see why HCMC has become the Global hub for the digital nomad.

Amazing Food.

Sitting at a Quan Nuong BBQ looking out over the skyline of Saigon, taking in the warm night air as I sampled frog legs, rabbit, goat and venison piping hot off the grill, I came to the realization that it is very easy to live a good life in Saigon. Everywhere I went, the food was awesome, and the local people were accommodating.  I can also recommend Lusaine for a sandwich or coffee, and if you like house music at 11am – check out Window Cafe. I personally, prefer to work during the day but…

The nightlife is hot.

If you like hanging out on tall buildings, check out the rooftop bar Chill or the lounge downtown – Lush bar. There is a plentiful supply of chill out spots in Saigon, but with the national “curfew” (which you wouldn’t know existed) doesn’t allow the crazy clubs of Soi 11(Bangkok city) or MBS (Singapore City) but the scene is classy if you go to the right places.

Are ya still not sold on the lifestyle? No amount of convincing can get you there. You need to freaking go there, and put boots on the ground. Don’t take it from me, just look at these dudes.

There are lots of people base lining in HCMC, and there is a thriving community of ex-pats selling physical products online, doing consulting work, and other various ventures.

Chill Bar

• Chris Dietrich who is dominating German SEO
• Chris Browning of ChristopherBrowning.com
• Chris Kirkland of TokyoCheapo and Artweb.com
• Chris Zobris who runs a startup center
• Chris Harvey who has a Vietnamese Staffing firm.
• Chris Freund of Mekong Capital

Business Backpackers

There is a growing number of Expats making moves… and not all of them are named Chris. Jimmy Hayes is making some great digital nomad gear, leveraging off of Vietnam’s cheap and quality manufacturing.

You can also get some amazing employees for $500-800 a month here – experienced and knowledgeable web and mobile programmers, custom CMS Software and CRM Software galore.

The startup ecosystem

There isn’t any venture capital (except for IDG capital, a few sporadic angels, and Vietnam Investment Group) and Virtual offices / startup spaces are just starting, but there is a buzz of things happening.

For instance, startup weekends, Tech in Asia, and if you talk to American national Tomo and look at Alehop who is crushing it in the social travel space you can tangibly feel the potential of this place.

Why aren’t YOU here?

The startup ecosystem is just getting started, but if you know where to look, there are a lot of very cool people doing very cool things.

Opportunity in SE Asia

The business opportunity in this emerging market is significant. It is an overlooked, underserved, and not overly competitive market that will grow significantly in the 21^st century. There are over 90M people in an emerging middle class.

What is it that do you do now?

Chances are you could do it better, make more money, and incur less cost if you set up in Vietnam. Sure there is a learning curve, but imagine your business with ~15% less tax, ~50% less cost, and >100% more fun living in Vietnam.

Can I really build a Business in Vietnam?

Yes, but you need knowledge of the local market. Go there first and get your bearings. Don’t go in guns blazing you crazy foreigner! Spend time getting to know the people, the culture, the real Saigon… it will pay off in the long run.

Why type of business if Right for Vietnam?

Any bootstrapped, emerging markets business that could benefit from

• Low cost
• Quality talent pool
• Emerging markets
• Mobile or tech oriented
• Physical product businesses

Who it isn’t right for?

Venture backed startups. If you are looking to raise capital for your business and swing for the fences, you need to get to Singapore or Silicon valley. These two are the best places in the world to start a venture backed startups.

Bootstrapping is the only way to go in this market, as incubators, angels and venture capital is non-existent. You can find Pre-seed and growth stage money. Going IPO is reserved for State-owned enterprise. There are very little foreign investment into tech startups.

————Quick note on OPM and venture backed startups————-

- Please excuse me as I am an American with a myopic and insular view of the world, and compare everything to America.

Silicon valley is the best place to startup if you are an American, but foreign entrepreneurs and foreign talent are simply NOT welcome in the land of opportunity. Did you see the recent HB-1 visa fiasco? Pay attention Washington – the economy is calling – let startups hire cheap foreign talent and let skilled foreigners migrate to America to work in Silicon valley.

Qui Bono?

Why restrict foreigners from entering? The fact that the free market responds by building an office offshore to avoid the burdensome immigration and visa laws should be a signal.

I started this article talking about Vietnam, not America, right? Anyway – speaking of needless bureaucracy and interfering governments… back to Vietnam.

Socialism and You!

Funny enough – corporate tax rate in Vietnam is actually significantly lower in Vietnam, and people still complain about it all the time. The ones who pay, anyway.

The standard tax rate is 25%, and most startups and ventures can get special tax breaks for the first few years.

So the tax in Vietnam isn’t great, but it isn’t terrible either. What IS troublesome is the time and difficulty it takes to set up a company, and the very small amount of available accurate information, to necessary to navigate the endless autocratic processes entrenched in the Socialist Republic of Vietnam.

Are you in the Medical Device / Import Space? –

If not this section may not be interesting, but does demonstrate why socialism sucks. 

—————- skip ahead to read about how to startup a company —————

I attended a breakfast thrown by the Australian chamber of Commerce where Rafi Khan of Family Health spoke on healthcare in Vietnam. He gave some interesting insight into why foreign investment is hamstrung in Vietnam due to over-reaching government.

There is a 10million dollar minimum investment into a hospital. Say for instance, you want to import medical equipment.

How to import medical equipment into Vietnam

(taken from Circular guiding the import of medical device from the Ministry of Health

c) Document for import of medical device

1. Legitimate and valid ISO 13485 or ISO 9001 Certification, the international recognized standard for quality management of the producing countries, firms to the imported medical device.

2. Legitimate and valid certificate of Free Sale (CFS) for imported medical device in the producing countries, or Certificate to foreign Government of FDA, or CE Maker Certificate (original or certified copy in Vietnam or legalized by diplomatic representative offices of Embassy of the Socialist Republic of Vietnam in the producing countries). Minimum information in Certificate of free sale for imported medical devices shall be in accordance with Appendix 3 enclosed with the promulgation of this circular. [if CE or machine exists, there is no need for an original or certified CE Again, except that MOH has no E-Data Bank, so chances are you will need to re-submit.]

3. Legitimate and valid authorization letter of producing firms or legal distributors for  the agencies which are allowed to import and distribute the medical devices in Vietnam. (original or certified copy or legalized by diplomatic representative offices or embassy of the Socialist Republic of Vietnam in the producing countries.

4. The catalog of imported medical device (original or copy certified by the import agencies)

5. Technical description of medical devices in Vietnamese according to the Appendix 4 enclosed the promulgation of this certificate.

If you are just skimming,  the above is the basic requirements to import medical equipment into Vietnam AFTER you already have a company set up.

Hip Hip Horray for Socialism!

AND the equipment has to be BRAND NEW, it cannot be used. Want to know the other counties of the world which restrict their citizens from importing Refurbished medical equipment? China (to protect domestic market) as well as Syria, Egypt, Sudan basically, the safe tourist hotspots of Africa where life is easy (joke).

Thanks big brother for denying citizens medical equipment that will save their lives protecting citizens.

Okay, enough about importing medical equipment, how can YOU, my dear reader – start a company in Vietnam?

On to the meat and potatoes: planting a corporation Flag in Vietnam.

>>>>=======================<<<>>>===========================<<<<

How to start a company in HCMC

Steps to legally doing business in the Socialist Republic of Vietnam

(detailed breakdown of the above points below)

1. A. Company – Company documents including M&AA (memorandum and articles of incorporation) company minutes, and list of members, etc.
2. B. Investment License – this is permission as a foreigner
3. C. Tax Registration – with local tax authorities
4. D. Capitalization – into bank account
5. E. Employees – Utilize that cheap talent!
6. F. Newspaper –  need to publish publicly
7. G. Work permits – depending on nature of business

——————————————————————————————————————————

A. Company Charter. Getting the Company Documents and incorporation is easy enough, and is a good start. You can use a template. The documents can be made in both English and Vietnamese. I can provide both if you are interested. Most companies set up in Vietnam are LLC’s – in that the liability of the owner is limited to the contributed capital. In layman’s terms –the money you put in is what you are putting up for risk. LLC’s are oftentimes a superior legal entity to a general partnership.

B. Investment License – this is the important distinction for FOREIGN entrepreneurs who wish to startup in Vietnam. If you are Vietnamese, have a Vietnamese partner, this step may not be needed.

• The government site helps… http://www.dpi.hochiminhcity.gov.vn/invest/html/sta2.html
• Supposedly you will be able to file online someday. Unfortunately, this isn’t built yet. What do you expect? This isn’t Singapore.
• Most important part is to be able to prove you have a business record and you are financially capable of starting a company. This is easily proved with a certified bank statement, stamped and translated into Vietnamese by a legal firm.

C. An accountant will register you for tax. Would also be a good idea to have a secretary, and utilize a secretary firm, unless you enjoy drafting resolutions in Vietnamese. Don’t slack about either, you need to notify the tax office with your business registration certificate within 7 working days. And also send notice to the investment certificate issuing body on the commencement of the operation of the business within 15 days from the date of issuance of the investment certificate.

D. Bank Cap. Open the bank account and put in that cash. Lawyer can help with this.  Money has to go in (then you are free to spend it on your business)

E. Employees If you have employees you are paying a salary, you need to register to pay eventually pay their social benefits. Alternatively, you can come up with an agreement with them not to pay – this is complicated and unimportant, Accountant can help with this, don’t worry about this yet.

F. Newspaper. your company establishment needs to be published in local newspaper. This is an important step to ensure the validity of your company and avoid problems later.

G. Work Permits. This is an intricate step that some people skip. Some companies have employees working on long term visit pass – even well reputed and established companies such as banks will have foreigners on multiple entry visas.

To do the above, you need documents translated into Vietnamese and numerous trips to a government office where you’ll sit in a queue for hours waiting holding a paper number (if you are so inclined, the building is called “So Ke hoach dau tu”) This list is not comprehensive, but will get you started in the right direction.

Tinh Tien (bill please)

You can do this all yourself, or you can pay and have it done for you, no worries, no hassle, hands off. Shoot me a message using that green button and I’ll connect you to my lawyer there. Please only serious enquiries.

I’ve heard accounts from people that it takes over 3 months to set up a company, and even then you are lucky. The official time to wait is at least 45 days – unless you know the right people. Lawyer and accountants, I can connect you directly.

I’ve talked about this before – your network is your most valuable asset. It doesn’t matter what you know – it matters who you know, and who knows you.

The network you connect to is a huge benefit of joining the flag theory community and the group of exciting international entrepreneurs as a PT Member.

When you get started, you’ll receive a full course on incorporation written by myself and several ex-pat CPA’s firms from America. You’ll also get a book on second citizenship and detailed information on countries where you can legally obtain a second passport.

Anyway, I’ve got to grab a flight to Singapore. So tạm biệt Saigon, but don’t worry, its just a temporary separation, lets plan to meet again (hẹn gặp lại).

Regards,

Edmund

P.s. Do I just need a Vietnamese company?

The next level of corporate structure would be to have a dual outsourcing / headquarters set up / where you have a company in the ground in Vietnam, and another company abroad which contracts work out, and holds all of the intellectual property rights.

While you must abide by transfer pricing laws if you maintain an arms length relationship – this is an incredible way to avoid capital controls, increase investor and customer confidence, and legally minimize your taxes while operating from a tax free environment with more flexibility. Good countries for IP holding include Nevis, Belize, BVI

This is an area which is complex – but important. The value of this is understood by large multinational companies (MNC’s) like google and facebook who utilize offshore holding companies, but often overlooked by the entrepreneur.

However – spend some time to get your corporate structure and tax situation right, and it will become the solid foundation upon which to build a profitable enterprise someone else might actually want to buy.

Growing a business to a million dollars in profit is cool. Selling a business for a billion dollars is really cool. My question for you is, would anyone want to buy your business if the corporate structure on which it was built is in question?

Planting a corporate flag in a jurisdiction with strong laws, investment options and asset protection is a diligent and intelligent move. I’ve written about this many times. See these articles on company formation on the best place in the US to start a company: Wyoming

Information and articles on Starting a Company in Asia

• Hong Kong
• Singapore
• Thailand
• Myanmar
• Philippines
• Indonesia

P.P.S. If you found this article interesting, Ask yourself this: If this is the stuff I give away for free – imagine the stuff I can’t post publicly, and consider joining the PT community.

Along with the country guides, the incorporation e-course, you’ll gain access to a community of entrepreneurs, accountants and lawyers you’ll benefit from networking with and take a tangible first step at getting a second passport.

Beaches, Ferraris, Casinos, Diamonds, Helicopters, Security Cameras, Yachts, F1, South of France, No Crime, No Taxes. Class.

Pour vivre heureux, vivons caché.
If you want to live happy, live hidden.

Bonjour from one of the classiest places on earth. The billionaires retreat in Europe, Monaco is a great place to vacation, a better place to be a resident, and if you’re one of 8000 lucky Monegasque, a citizenship flag firmly planted in one of the few countries without personal taxation.

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After a long flight from IST–>AMS–>ZRH–>I get into Nice, catch the train into Monaco, throw my bags at the hotel (with a view) and get a bottle of Rosé with a business partner as we sample the local fare. As we walk down the city streets, they are almost empty.

I can’t help but feel like Monaco is like a place that has seen better days.  Some of the buildings in certain parts of the city are older and a bit outdated. Nice on the inside, no doubt – but with a look that they were constructed in the 80’s or 90’s when things were in full swing (before the EU, the Euro, and the fall of the Euro)…

Monaco maybe slightly past her prime – but she undoubtedly has timeless beauty.

Other parts of the town are simply stunning, particularly the casino, Monte Carlo area, and the Palace. Make no mistake, Monaco is a very classy place. The food was excellent, and the combination of French and Italian cuisine was something one could get used to.

The emptiness in March was a reminder that most residents of this seaside town are more interested in catching an F1 race or soaking up the sun in a few months in hte Summer – and most don’t live here full time. A contributing factor to the ghost like atmosphere is the countries residency laws, covered in detail below.

In short, as a Resident of Monaco, you aren’t required to spend ALL of your time IN country, but you do need to prove you were in the country for at least a certain amount of time. One could (hypothetically, of course) set the electronics in your apartment to work on a timer so the utilities would reveal otherwise…. Or you could just rent it out your apartment.

Visa Issues

Monaco has completely opened up, and while a few years ago, you would need to be stamped in, subject to a rigorous search, and pay some money for a visa – now you can simply stroll into Monaco visa free (assuming you have a Shengen visa or you are a EU passport holder).

Quite amazing how well the EU structure has worked for some things (facilitating intercontinental travel, saving time) and been absolutely disastrous for other things (banking, currency, unwanted immigration). For instance, now instead of certain countries being able to police their own immigration laws, they are essentially bound by the immigration laws, and preventions of the weakest link. Food for thought: an illegal immigrant would only need to make it across the easiest border to gain entry to the EU. After that immigrant slips across, then they can have babies that are subsidized by the government. Socialism at its finest.

Cops, Cameras, and No ATM’s

Police are everywhere, on each corner, and where there isn’t a policeman, there is a security camera (undoubtedly with a policeman behind it. Police here write tickets, and I even saw a few picking up trash.

I couldn’t help but feel a little bit stuck in the old world when I was in Monaco. For instance, I couldn’t find anywhere to exchange my leftover Turkish Lira,  and the nearest ATM was literally across the country (about a kilometer across town) -so much so that I would have had to take a taxi to get out some money. A stiff reminder to me that Monaco is not the most modern city in Europe.

Monaco seems like a place where people are trying to clutch on to their money, accumulating cars and drinking vino. It didn’t feel like people were innovating, changing the world, making moves, looking for investments, trying to grow their wealth.

While there is nothing wrong with living well, but that I find the highest priority of having money – to increase and preserve that capital, deploying it to worthwhile projects, investment opportunities, and finding safety in real assets that can grow and generate a return: companies that provide real value to the world.

It is blatantly clear that letting your money rot in the bank is a poor investment decision, and worse – it can be taken from you at any politicians discretion! One need only look a few countries east to Cyprus to find evidence of said thievery.

A Brief Word on Cyprus and The Euro

A grave warning came about within the last few weeks as Cyprus declared that they will be:

1. Freezing all accounts over 100k
2. Seizing 10% of the deposits and exchanging them with company stock/fixed deposits.

When you give your money to the bank, they are merely presenting you with an IOU, and its quite possible for them to present you with additional IOU’s, or just sieze your money completely – if they run into insolvency.

Word on the street is that anyone, who knows anybody, already has got their money out. Cyprus used to be a major banking institution for Russians doing business in Europe. This may be because Cyprus has the lowest VAT of any EU compliant nation, and carries the unfortunate burden of being labeled as a tax haven. This, ultimately, is what led to the demise of Cyprus as a banking hub, as the small country couldn’t stick up for itself, and bigger forces bargained on its behalf.

Unlike Cyprus, Monaco doesn’t have any bank capitalization woes, and although the city state can be walked from end to end in about an hour – they have a fair amount of private banking institutions, assurance funds, you name it (a full list below).  Partially because, you are required to make a sizeable deposit in a Monageuqse bank before you can become a resident.

How to get residency in Monaco

• Valid Passport
• Birth certificate
• Marriage/Divorce certificates if appropriate.
• Certificate of no criminal record in the last place of residence for the preceding 5 years.
• Education/professional background and proof of wealth. Must be in French.
• Health Insurance covering Monaco (only one hospital in Monaco)
• Monaco bank letter stating good standing
  
• A lease for a min of 1 year of Monaco property rental OR deed to property in Monaco.
• Electricity contract for the rental apartment/purchased property. (presumably, to prove your residency through use)
• Residency application forms from the Surete Publique.

Residency Card + 3 Months in Monaco

Residency status requisites the PT to spend a minimum of three months in Monaco each year. Keep in mind that the PT would still need to adhere to  other laws regarding residency in other counties with regards to taxation.

Long Term Residency Card = 6 Months in Monaco

The 3 month rule applies unless the PT receives a carte de sêjour privilegie and become a long term resident of Monaco (details below) in which case you would need to demonstrate that the PT spends at least 6 months per year there.

There are essentially 3 levels to receiving residency in Monaco.

1. “carte de sejour temporaire” which is the lowest level card – and only is good for one year. This does give you official residency status, but will expire if you don’t renew it properly, as well as prove you were inside the Principality for the minimum official time period of this residency provision.
2. After two renewals of the first level residency pass, you can receive “carte de sejour ordinaire”. This level pass is already much better, and is what the majority of what post people have, who stick around for more than one year. This pass is good for three years and renewable once.
3. “carte de sêjour privilegie” is the highest level of residency, and requires you spend half your time in the country. Are only approx. 30,000 people with any type of residency. I’ve heard that you also need to speak 2 out of the 3 languages: French, Italian or English, but couldn’t find any official documentation that states this.

How to get citizenship in Monaco

*Dual Citizenship is strictly forbidden, and not recognized for by the Principality of Monaco, therefore you would need to renounce any additional citizenship.

By declaration

After the age of 18, a person who was born in Monaco of a parent who was either also born Monégasque or who had ancestors of the same branch born Monégasque but who has since renounced Monégasque citizenship can make a declaration before a Registrar provided that he/she lived in the Principality and proves that he/she has had his/her legal domicile or habitual residence there during his childhood.

By naturalisation

In order to recieve a Monaco Passport through naturalization, one would be required to send the following criteria and send their request on stamped paper:

• renounce any foreign nationality and no longer has national service to another nation
• has resided in Monaco for a minimum of 10 continuous years since the age of 18 at the time of making the application

While 10 years is the minimum for making the application, there are specific provisions written into law that allow for the Prince to waive the residency requirement if he considers the applicant to be “worthy of this favour”.

By Blood (Jus Sanguinis)

Monégasque nationality is granted automatically to children who are under 18 when their father or mother obtains naturalization, or a non-Monégasque woman who surives the death of her Monégasque husband.

Why is Monaco residency so attractive?

Are you a brit? Come live here for a few years years, spend less than 90 days per year in Britain, and you could be exempt from capital gains tax. Same with many other countries of the world, who do not have a worldwide tax basis, and consider you non-collectable once you have established a new tax residency (even if that residency has low – or no taxation).

Besides being a classy place with warm beaches, great food and pretty women, there are NO restrictions for foreigners opening a bank account or buying real estate in Monaco.

There is no direct taxation, a few exceptions:

• - Any companies which operate and earn revenue from  patents and literary or artistic property rights, are subject to a tax of 33.33% on profits.
• -Any Companies earning more than 25% of their turnover outside of the Principality, and companies whose activities consist of earning revenues from outside of Monaco

Who Can’t benefit from Monaco’s low tax laws…

Monaco has and will continue to provide the 2nd flag of Flag Theory – Residency, which can sometimes form a basis for legally minimizing avoiding tax in other countries.

However, this much is clear…

If you are taxed on a worldwide basis – a residency in Monaco would be of little help to your tax situation. Therefore, it is likely that American citizens would most likely receive no benefit from a tax perspective from planting a flag in Monaco. They would need to renounce their citizenship to eliminate their worldwide tax burden, and even then – there are laws that require filing and continued taxation.

Furthermore, French nationals unable to prove that they resided in the Principality for 5 years before October 31, 1962 are subject to the French income tax even if they have residency and live full time in Monaco.

Eritrean and Philippine citizens are 2 other countries (other than America) required to pay taxes on a worldwide basis.

Bank Accounts in Monaco

The total asset base amounts to nearly EUR 60 billion, of which 70% are non-resident funds. They are held in the following banks.

• ABN AMRO Bank N.V.
• American Express Bank(Switzerland)SA
• Banque Populaire Cote D’Azur
• Banque Privee Fideuram Wargny
• Banque Monegasque de Gestion
• Banque de Gestion Edmond de Rothschild-Monaco
• Banque du Gothard Monaco
• Banca di Roma International
• Banque Pashe Monaco
• Banque Martin-Maurel
• EFG Banque Von Ernst
• BNP Paribas
• Banca Popolare di Disondrio (Suisse)
• Barclays Bank PLC
• Banco Atlantico (Monaco) SAM
• Caisse Regionale de Credit Agricole Mutuel Provence Cote D’Azur
• Caisse Mediterraneennee de Financement
• CAIXA General de Depositos
• Coutts & Co.
• Credit Suisse (Monaco)
• Credit Mobilier de Monaco
• Credit Lyonnais
• Credit du Nord
• Credit Foncier de Monaco
• KB Luxembourg (Monaco)
• Compagnie Monegasque de Banque
• Lloyds TSB Bank PLC
• Monte Paschi Banque
• Natixis Private Banking Luxembourg SA
• Societe des Paiements Pass
• SA Lyonnaise de Banque
• Societe Generale
• Societe Marsellaise de Credit
• Societe Generale Bank & Trust (Monaco)
• UBS (Monaco)SA

The “International Formalities” department within the C.D.E. (Economic Development Chamber) may be able to assist if you wish to set up a company, establish residency, etc.
2 rue de la Leta
MC 98000 Monaco
Tel: +377 97 98 68 68
www.cde.mc

As stated previously, you also need to make a deposit in a local banking institution. The size varies depending on who you are, and who you know.

Given the deposit + the real estate + the cash burn rate from living in the principality… Monaco isn’t the least expensive option, but depending on your tax situation – it might actually save you millions.

If Monaco is too rich for your blood, there are plenty of other amazing locations you can receive permanent residency, a retirement visa or even a 2nd passport – all detailed at length by yours truly in The Passport Book, FREE with your application to become a PT member (Click for membership details) – $27 per month.

Turkey may not a place that immediately comes to mind when you think of strategic internationalization, but I’ll detail  how to get residency and open a bank account in Turkey, how to buy real estate in Turkey, possible investment and eCommerce opportunities and much more. (est reading time – 7 minutes).

It was a long flight from the far east to the center of Europe, and it was nice to get off the plane and stretch my legs as I arrive in Istanbul.

After I pay the USD $25 visa tax for being an American who entered turkey. I receive a sticker in the middle of a page of my passport (which is running low on space as it is) and off I went to immigration.

Quickly through immigration, without immigration officers documenting my fingerprints (I’m looking at you Malaysia!)

It was time to get some monopoly money central bank officially authorized fiat currency. Government Printed – Sheeple Approved.

In this case – Turkish Lira. Just a few years ago the Turkish lira was denominated in millions, but the government simply dropped 3 zeros overnight, reprinting the entire currency system. Perfect example of how the value of money is arbitrary, backed by blind faith, controlled by government, and can be altered overnight.

After failing to be able to exchange the Thai Baht or Singapore Dollars in my wallet at the exchange, I settled for giving the exchange of some USD I always carry when I travel. Perhaps the greenbacks are on the decline, but the USD is still the most exchangeable liquid currency in the world. And in dollarized economies such as Myanmar to Cambodia to East Timor to Nicaragua – the USD is the choice paper.

After exchanging some USD for TL, I caught a cab to my hotel, a boutique 4 star hotel (acra) near the Blue Mosque on the European side of the city. Good price, great breakfast, highly recommended if you should find yourself on the European side of the Bosphorus in Istanbul.

After I put my bags in my room, checked my email, and headed out into the city to sample the local fare. As you walk down the street in Istanbul, its common to witness the calling to prayer.

Istanbul

Men sing out prayers from the mosque towers in a way that reminds you the country has a very Muslim background – yet at the same time, there is a European feel to the place. The men wear leather jackets and blazers and baseball caps.  The women wear jeans, not burqas.

Istanbul, the capital city of Turkey is at the crossroads of Europe and Asia, and in many ways at the cross roads of ancient times and modernity. Driving over the Bosphorus bridge, its easy to see that this metropolis has undergone ridiculous growth. Istanbul is a very spread out city, neighborhood after neighborhood sprawled across hilly urban  landscape.  16 million people, most of which live in houses or apartments less than 5 stories tall. Istanbul is split between the European continent and the Asian continent. The city is sprawling, and Turkey is not for lack of space.

Turkey has a bright future. It hasn’t grown as fast, Nor has turkey adopted the Euro – and its currency, the Turkish Lira, has some interesting investment opportunities.

Not too many people here speak English, at least not as many as you’d think. But that doesn’t mean there isn’t opportunity to be found.

As always, I’m on the lookout for strategic rreasons to plant a flag when I travel, and as always, I can’t resist trying to open up a bank account…

Passports

Citizenship By Blood

Turkish citizenship is conveyed on a Jus Sanguinis (citizenship by blood) basis. If you are born to a Turkish Mother or Father inside, or outside Turkey – you can automatically receive citizenship.

Citizenship Through Naturalization

It takes 5 years of Residency to receive Turkish Citizenship and a Passport from Turkey if you are not of Turkish Descent and you are a commoner. Quicker if you are married, or you know somebody. Dual Nationality is allowed. Dual nationals are not compelled to use a Turkish passport to enter and leave Turkey.

Residence

It is quite easy to receive residency in Turkey, compared to other parts of the world. The Azeris, Ahiska Turks, Gagauz Turks, Tatars, Turkmans, Kyrgyz, Uzbek, and Kazak receive priority for residence, but it’s possible for many different nationalities to obtain residence.

The bottom line being, if you are from a friendly country and if you have the money and can support yourself, you can be granted a residence visa. This will allow you to work and stay in Turkey,  as well as obtain a Tax ID and open a bank account.

OR

You could forgoe the certainty of residency, and for tax purposes, you wouldn’t be subjected to the up to 45% tax that applies to all those who live in Turkey. Tax certainly isn’t “low” in Turkey, and I talked to many people who complained there was too much tax. This is something which stretches back to the Byzantine era, when Alexander the great levied taxes on the Turkish people.

Real Estate

“Foreign nationals can buy immovable property in Turkey, as a work place or private residence, provided that the legal restrictions are observed. However, the total area of the immovable (real estate) purchased by a foreign national may not exceed 30 hectares even if the immovables are in different localities.”

Permission has to be obtained from the military authorities of the region, through the Land Title Registry Office, and you would need to submit the following to the Land Title Registry Office to buy real estate in Turkey:

• Identity document or passport (as always, you need ID for that).
• Foreign nationals whose acquisition of property is subject to a valid residence permit (a reason for residency)
• You would receive this Residence permit through the police department

Banking Flag

I was impressed by Turkish online banking capabilities, and the rate on CD’s is very good in Turkey, So I headed to the bank. Unfortunately, I was unable to open an account.

You need a residency and a Tax id number (virgi kimlik Number) to open a bank account. I tried, to no avail, to open one without this number. Perhaps if you have an introduction, this might be different. I was told I could obtain a Tax ID number from a Maliye office at city hall, and that I should bring photocopies of your passport, residence permit, and work permit to the Accounts Department (Defterdarlik). After this, I would need to go to the Accounts Department, locate the Tax Department (Vergi Dairesi) and finally the Civil Test Service (Sivil Yoklama Servisi).

I’ll stick to Banking in Singapore, or Hong Kong thank you very much.

Heath Flag

A wild card flag for this country is its 46 JCI accredited hospitals. Turkey has many western trained doctors who can administer medical care at very low prices. On a tour of a local hospital, I was surprised at their oncology capabilities, which included cyber knife technology.

Another hospital I saw was just completed less than 6 months ago, and was already completely packed with people. Half public / half private – the facilities were modern and pristine, with the type of sterility you can only find in a hospital. Yet the technology was incredibly modern. From 10 million dollar oncology radiation machines to LCD screen displaying the doctors names outside of the doors, I was shocked at just how advanced this hospital (in the middle of a rough neighborhood) really was.

They had a helicopter lift (where the chopper would be lowered by hydraulic pumps into the building), completely paperless EHR systems, antibacterial flooring, all of this in a public/private hospital, backed by private investment. The company had also bought up adjacent plots to tear down the surrounding buildings and build a large hotel, the entire complex located strategically near the large international airport.

Venture Capital

At a meeting with a local VC firm, I was pleasantly surprised to see the thriving tech scene in Turkey. Its no silicon valley, but there are certainly some entrepreneurs here trying to shake up the old economy, taking advantage of the massive market opportunities presented by the growing middle class Turkey. Mobile penetration is extremely high and the internet is fast, accessible, and widespread. Huge opportunities for e-commerce.

My Opinion

Too much tax! I couldn’t open a bank account by walking in off the street (but I am American, so that doesn’t help.)

Opening a company is more complicated than it needs to be. I suppose Istanbul isn’t a bad place to settle, but its not a strategic residency flag. I’ll be in Monaco next week, however, and that is a fantastic place as a residency flag.

Turkey is a fascinating place rich with history, and lots of great things to see. Less interesting from a strategic financial standpoint, plus – the weather isn’t great, and the taxes aren’t that low. More of a place to vacation then to plant flags. A great place to visit and the the food and the coffee are incredible. If you are able to live like a PT – why NOT spend some time in this country, in this city with vibrant and fascinating culture.

I think I hear them calling my flight…

I’m off to Monaco.

Truth is like food. People only like it when it tastes good.

In this letter you’ll find out why central bankers like to blow things, why china is banning BBQ’s and the  3rd flag of flag theory needs a revision from the 1950′s edition.

If you haven’t already, consider becoming a PT member. You’ll receive my passport book, and also receive access to exclusive content not available publicly including the country guides…

1. Your money can lose its value – overnight.

Imagine waking up one morning and learning that you now have half the net worth as the day before. This is essentially what happened to people in Argentina just one week ago, when they saw the purchasing power of thier currency decrease by 30% overnight.

Think it can’t happen to you?

Society at large has a misplaced faith in currency and the banking system. It is easy to do when you have banking institutions that can’t fail, and you enter the eye of the economic storm. However, the financial crisis that was nearly averted in 2008 was never cleaned up, it was simply swept under the rug. There are major flaws in the system that still exist today. Further, the idea that paper money is somehow secure is a rather modern mistake, let us learn, and not make the same mistakes as others have made in the past.

Paper money and or ones and zero’s in a computer, (i.e. your bank account) is not inherently valuable. It is backed purely by faith, and if that faith disappears, so will the value. Those who are well read in economic literature, particularly Austrian economics obviously would concur with my sentiments: don’t trust a monetary system based on debt and inflation, as it is unsustainable.

People who save and invest wisely are economically successful in the long run. Governments are no different.

¥ & €

The Yen and the Euro are the two currencies that are the most vulnerable at the current time. As the economies behind these currencies become more distressed, burdened by the debt of bad governments, the currency in turn becomes devalued – as the countries currency is the underbelly, exposed and open to be cut on the open market by shrewd investors, hedge funds and banking institutions.

Escape from the Euro

Many of the countries here seem to encourage laziness. Its impossible to hire workers who actually work more than (the 3 hour workday) and as an entrepreneurs working in Europe, its even harder to fire them.  (http://www.linkedin.com/today/post/article/20130106152612-108843352-advice-for-us-entrepreneurs-who-move-to-europe) Perhaps that’s why I’m seeing a multitude of entrepreneurs flocking in droves to opportunities in SE Asia.

A major global event that could transcend the world economy would be the death or downfall of a major currency. This would obviously have dramatic effects on the global economy, and when you look at just how fragile currencies like the yen and Euro are, there is clearly a deep seeded instability which could cause the entire pyramid on which the current financial system is built (fiat currency) to collapse.

2. Capital controls are being introduced

As governments become more desperate to protect their economic well being, and currency, they sometimes institute powerful capital controls.

What is a capital control?

It is a law, order or measure by the government restricting the free movement of capital, and we are seeing them being introduced all over the world in different ways.

Take for instance the Chinese RMB. The currency is so hard to exchange, and the people are so afraid of it becoming worthless, that countless people have livelihoods, full time jobs running backpacks full of RMB notes (the largest denomination is about $20) between Hong Kong and the Mainland.

Believe it or not, a currency that is not fully convertible is actually a lax , or recent rules in Greece and Spain which prevent the outflow of capital, restricting residents to withdrawing a mere few hundred dollars a day.

Who is to say this won’t happen where you live? As the currencies become even more leveraged and unstable, the governments that back them will try to avoid the masses from transferring out of the failing currency. Unless you have a bank account set up in a foreign country (which is very easy and simple to do) – or a corporate bank account (such as a Belize Bank account tied to a Belize LLC) set up in a foreign country – you may find it difficult or impossible to transfer out your life savings if things start to go wrong.

After your funds are no longer able to be transferred, higher taxes are naturally the next step.

3. Taxes are getting higher, harder to escape, with harsher punishment

Someone puts a gun to your head, and orders you to give them half of your income or you will be arrested and thrown in jail. If I did that to you, you would call it robbery. if your government does that to you, you call it taxes.

What may be worse is the absolute waste of bureaucracy that stems from the inefficient waste of creating rules, on top of rules, on top of rules for new taxes, to stop people from avoiding the old taxes, continued on ad naseum.

Some places in the world, the taxes are low, comprehensible, and happily paid by citizens.

Why Higher Taxes?

Simply put, the alternatives are more painful. As politicians become more desperate to maintain the status quo (huge governments and cushy pensions) there are traditionally 3 ways to “re-balance” the budget in the long run

• austerity measures – As if politicians could bring themselves to be frugal when creating a budget, they have very little incentive to do so, as they are extremely unpopular with the masses who want handouts.
• printing money – Quantitative easing is essentially central banker trying to blow up a balloon (the world economy) with hot air (fiat currency) that has a giant hole in it (debt, inflation)
• higher taxes – the 3^rd way a government will continue their insane expenditure spending is to implement higher taxes. The issue here is known as the “Laffer Curve” and is an economic phenomenon whereby the following occurs:

Governments Raise taxes ==> Collect Less Money

Governments Lower taxes ==> Collect More Money

How could it be that governments raise taxes but end up collecting less money? The Laffer Curve posits that as the people are threatened with higher taxes, they have a greater incentive to spend more time to minimize, or even illegally avoid taxes.

In Hong Kong, when at worst, you only have to pay about 17% of your income to taxes, there is little point to avoiding or even minimizing taxes. You just pay them, because it is simple, and easy to do so.

Meanwhile, in France – you can sometimes have over 50%+ of your income owed in taxes, (and the PM wants to raise it to 75% if you earn over 1M Euros) it just so happens that talented and affluent individuals, like Gerard Depardieu will give up French Citizenship.

If you take a look at a country like Monaco – which has the highest GDP per capita in the world, but actually no taxes, it goes to show that taxes may not even be necessary to run a successful economy. (By the way I’ll be in Monaco next month, so if live in the area, drop me an email).

As taxes get higher, it becomes necessary to institute even further capital controls. And as further capital controls come, taxes continue to increase.

4. Overcrowding and population controls

The world is getting more crowded. Have ya been to India or China? Its downright frightening how many people live on Planet earth. There are over 1.3 billion people in china and 1.2 billion people in India. And most of them are guys.  And hey, lets be honest, the party is never as good when you screw up the guy to girl ratio.

Pollution is reaching unprecedented levels.

For instance in china, the smog is so damaging that the BBC has reported on the existence of cancer villages.

China’s response to the rapidly expanding? Banning BBQ.

Leave it to big governments to completely miss the point. Perhaps if China took a look at the massive amount of coal power plants, then perhaps the world could start making steps in the right direction.

However, there will be no stop to consumption until the world runs of fossil fuel, which might happen sooner than you think. Many predict that we will reach the peak in 2033.

5. Commodity Crunch

Laws of economics dictate that anything with a limited supply and a rising demand will see an increase in price. The coming decades there will be a huge increase in the cost of things like gold, oil, silver, rare earth metals commodities which are inherently valuable and easily traded, with a limited supply unlike corn, wheat, soy, etc.

If you want to make big money in the coming years, borrow at the ultra low rates, and bet on commodities.

The newest rage in Oil & Gas is the acquisition of natural gas via fracking, which is extremely damaging to the water supply. This much is clear, coal, oil, and gas are polluting the world; selling out future generations for cost and convenience sake. This is why renewable energy is so critical for mankind to continue to innovate, iterate and improve, so that we can stop destroying the earth we depend upon.

6. Diminishing clean food and water supplies

As the world becomes ever more crowded and polluted, there will obviously be increased pressure on the availability of clean food and water. I’ve talked about the importance of clean food and water here and I’m not alone in this sentiment. When I have the chance to chat with international investors like Tim Staermose, I routinely pick their mind on this issue, and we all concur that there will be a dramatic demand for organic food and potable water.

Others stateside feel the same way. That’s why the ‘survivalist’ mentality, homesteading, and rainwater harvesting is all the rage these days. And for good reason.

Is it acceptable for government to arrest citizens for drinking raw milk, collecting rainwater, or having a vegetable garden.

People will take a lot of crap from their government before they do anything, but when you start threatening their livelihood and ability to survive, a switch is turned. When this happens, watch out.

There is very little incentive to start a revolution based on higher taxes (lest we forget, that was how America was born) but when there isn’t enough food to go around, watch out, because there will be massive…

7. Riots and War

We will see a war of massive proportions by 2050. There are too many players with incentives to control and dominate the worlds dwindling resources. As countries seek to grab up the last “easy” resources in the world – the battleground could well be Africa.

China has been investing in Africa for years, and now the Obama administration is setting up drone bases in Niger. It is impossible to predict where and when the next major wars will occur, but the world has been at war constantly since WWII. At this point, peace would be the anomaly.

So the question becomes: What are YOU going to do to protect yourself, your savings, your family, your legacy?

===

These “things” do not exist in a vacuum, they exacerbate and accelerate each other. They could happen overnight, before you have action to prepare.

This ins’t “sky is falling” chicken little post – this is  saying look: When you examine the macroeconomic conditions that that the aforementioned 7 truths are inevitable.

What can you do?

Think International. Adopt a worldwide perspective where you constantly seek to establishing flags globally so that you can pivot your wealth and your self to a safer location should things start to deteriorate where you currently live.

Flag Theory

1. Get a 2^nd passport without taxation on a worldwide basis that allows for freedom of movement.
2. Establish a tax domicile or residency so you no longer pay high taxes.
3. Own physical land with clean food, potable water, and renewable energy. (more on this soon)
4. Place your assets in different baskets that hedge against different scenarios. For instance, get a gold backed debit card.
5. Start a business in an emerging market.

If you need help with going global, contact me – and I’ll connect you where I can.

Best Regards,

-Edmund

Sunday Febuary 17^th – Kuala Lumpur – Malaysia

I’m in Kuala Lumpur for the first time to start forming business bonds in a specific industry. I can’t stress enough how important it is to “touch” people when creating a business relationship, particularly in Asia. Americans don’t do business like this. We want to examine the facts and move quickly, there is not a need to feel, but to think. However, I have come to appreciate the Asian mentality for doing business, and now like to adopt a hybrid model. More on that in a second, first a brief overview of the strategic flags you can plant in Malaysia.

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Flag Theory | MY

Malaysia is a solid strategic business hub and there are several flags which can be planted in this country (and its offshore hub Labuan) to great effect.

Maylasia is a predominatly muslim country (about 64% of the population is muslim).

Which means that although its Sunday, I’ll actually be able to do some work today and sign papers, instead of just meet and have kopi (coffee)! It never ceases to amaze me how people can be so shocked that I work every day of the week. Only fellow entrepreneurs seem to understand the nature of the business beast requires constant attention. Besides, I love what I do!

Despite being a largely Islamic state, Malaysia’s law and jurisprudence is based on English common law, which is a major benefit for doing business.

In general, I won’t consider planting most flags in a location unless they have common law – because the entire base on which the system is based is foreign to me. With common law, I always have a basic understanding of the ‘legal alphabet’. I wouldn’t recommend college or law school to most youth in the connections economy (besides engineers and doctors), but it certainly has made understanding laws, tax treaties and other semantically complicated documents a lot easier.

Anyway, after meeting with a respected foreign lawyer who runs a law firm here, I’ve learned about several different fast track residency, offshore structuring (involving double tax treaties) and other strategic options.

Flag: Residency

Maylasia: The best place in the World to retire?

One could easily make the case that retiring in MY is simpler, easier and comes with less hassles (and less taxes) than almost anywhere else in the world. With the proper planning, you can recieve a powerful 10 year “social visit visa” with the ability to

• opportunity to purchase a vehicle with no taxes & duties
• work permit with option of working 20 hrs/wk
• legally own 100% of a business
• legally own property in your name.

How much does it cost?

The cost of the processing is negligible, you can do it yourself using this government site as a guide.

You must spend RM500,000 on property (except in Penang where it is still RM250,000).

You can also spend 350,000 in propert and then 150,000 in an investment vehicle. Under most options, you should include support income of RM10,000, from anything, from where the cash and income is proved by supplying 3 months worth of bank statements. This is about US$160,000, and around US$3000 per month, that is supposed to be from a

pension. However, one could (i’m not saying you should, but you could) set up standing instructions from another bank to tra

nsfer in each month, and label the transfer as a pension.

There are other options as well but the aforementioned route is the easiest. This will grant you a 10 year social visa (which could essentially be considered permanent residency, given the length of stay and the various perks that accompany this visa.

Flag: Assets

Maybank has great interest rates, close to 3%. For more security, you might consider a Singaporean bank doing business in Maylasia.

Labuan has strict banking privacy rights. If you are looking for something more private, this might be a good offshore jurisdiction for you. There are also trusts, companies and other legal entities which could be of great use, especially given Maylasias robust dual tax treaties with other countries around the world.

Flag: Physical Land

It seems to be that property rights here are more secure and easier for foreigners to obtain than other areas of ASEAN. It may still be advisable for property investors to obtain title insurance, pursue a purchase though a trusted agent, and perhaps own the real estate in an approved legal entity. However, when contrasted with other favorable retirement visa options (Panama and Ecuador are two such places) Maylasia has much better property rights in my opinion.

Just Visiting? | Where to stay?

If you aren’t ready to shell out cash for a property and just want to check out the country, try this boutique hotel at $40 per night or the Le Meridian for about $150/ night. Nice hotel, reasonable price, but very far away from the action… I enjoyed the boutique hotel, but make sure you look for something good as the places vary in quality considerably.

The ideal way to do business in Asia

1^st meeting

Meet for drinks. Whoever initiated the interaction or is requesting something should pay. The venue is less important. Coffee, or tea, or alcohol should be consumed. This is a good first meeting.

I learned this from my buddy Dan Andrews: Alcohol helps men bond quickly in a situation that might otherwise be more slower moving. The booze breaks down barriers and expose what really matters, true vulnerabilities, passions, pursuits, and your true self. I couldn’t agree more. Be careful if you go out with this guy though, he will one up you, because he can drink like a fish!

2^nd meeting

Meet for a meal. The venue is more important. The amount of extravagance (or lack thereof) displays the importance of the meeting to the other person, as well as the degree of success they’ve achieved.

At first I was hesitant to this (it can seem like it takes a while to get anything done!) however, now I’m in the opposite camp. If we need to do important business together, I want to get to know you. People do business with friends, and if I don’t like you on a base level as a person, I’m quite happy to pass up your business and help others who I like!

3^rd meeting | onwards

Paperwork, focus, what needs to get done. MOU’s and NDA’s and RFP’s and IOU’s galore. Acronyms should be adjusted to the corporate nature and size of both persons/businesses. Bring your pen, your laptop and bank security device. Handshakes and Wire transfers. Stuff gets done. Venue should be in office or ideally on neutral ground.

From here on, the relationship should be fostered and solidified by both friendship and pecuniary exchange, for the mutual benefit of both parties.

Final tips: don’t believe the fake crap you read online by people suggesting to  if you were to “wai” as a westerner entering into a meeting in Thailand (for instance) you would look like a fool. Firstly, you would probably not wai at the correct height (the placement of hands is important, and signifies level of respect to the other person) and you would just be awkward… They don’t expect it, and it comes off as supplicative if you are bending TOO much to try and fit in.

There is, however, certain customs which are common and should not be ignored. For instance, in China influenced countries (Singapore, Hong Kong, PRC) you should a person your business card with both hands, and accept with both hands.

Making Business Connections in Asia as a Foreigner

I’ve done business in many different countries and cultures around the globe, and compared to the United States – it is dramatic the difference to Asia the importance of meeting people in person.

The interesting thing about making connections is that it is oftentimes a crapshoot. People can waste your time, others have nothing to offer, and its difficult to come across as genuine when you are busy playing a game of social Darwinism.

The best thing you can do is meet as many people as you can, come with no expectations, and see what you can offer to them, first. I’m constantly trying to help my network create new bonds, forge new business, and create new value.  This is particularly difficult as a foreigner in a new land, but sometimes you can have an instant bond with ex-pats in these type of places.

Pay To Play

In all parts of the world, there are certain connections that are exceptionally valuable, who need to be paid for their time. If someone can offer you specialized advice, they should be paid for on an hourly basis. Particularly if the longer term reprucssions of that advice is worth much more, there should never be an issue. You should simultaneously feel like you are paying a lot, but are also getting a bargain.  The right connectors often have exceptionally strong networks and can refer you onwards to receive specific servicing for your exact needs.

In what Seth Godin, describtes as the connections economy, WHO you know is more important than ever. A collegue I look up to, Derek Sivers would agree: even though the acceleration of technology is making things like money, healthcare and information free flowing and borderless – who you know around the world is of tremendous value. Who you know within a country is very important for establishing a flag, particularly a profitable business.

I think that we haven’t seen the end of the connections economy, we are barely at the brink. Although the internet has changed the world forever, we are just getting started. Now is an exciting time to be alive.
I’m working on putting something together that will allow PT’s and other expats to join in an online community to privately discuss matters of importance, meet, and share connections. Watch this space.

For now, is there a connection I can make for you?

Until next time, faithfully yours,
-Edmund

Every time you cross a border into a new country, you enter into a different society. There are new laws, new language and culture, the food and the people are slightly different. This takes time to adapt, especially if you have the eyes of an entrepreneur and investor who want to learn quickly where the problems and subsequent opportunity lie.

It makes you smarter, and travel is the ultimate learning experience. For instance, entering Burma for the first time last week was a eye-opening experience. What a land of both problems and opportunities. The Burmese leaders are very smart, and know what they are doing, they do not need money – they need expertise in specific areas. It is becoming easier to start a company in Myanmar – in fact I have a friend there who does just that. However, not everyone is at the place is selling shovels to the miners – many are trying to mine themselves.

Where NOT to put your money.

In anything that competes with the government. My business partner told me of an interesting dinner whereby the Myanese spoke of a big oil company coming in, spending billions, and missing the oilfields by under a mile. If they had just “asked” then they would have kindly told them where to look.

However the problem is when you go into a new country, you CANNOT be arrogant to the local ways of doing things. It takes adaptation and flexibility. One must (in the words of Bruce Lee) be like water and adjust the cultural norms.

At the conference I attended, it was the same story. Dumbass westerners thinking they know EVERYTHING who are clearly scared and going to lose their hat. They don’t have connections, they don’t have a local partner, and for some reason they think that they don’t need one.

Where you should put your money in Myanmar.

Anywhere there is a problem that needs to be solved, that isn’t restricted or regulated by the government. I’ve got several specific plans in mind… But the reality is: it is simultaneously both a better investment, but also harder than you think.

As investment opportunities dry up in the west (do you really think the NYSE has room to go up further at 15,000?) Banks offer record low rates (do you really think Bernake can keep interest rates at 0%?) it becomes obvious that a corporation, banking, or assets flag planted offshore is a prudent and intelligent practice. Keeping your money in the West is fighting a losing battle.

You could start literally ANY infrastructure business in Myanmar and find yourself doing quite well several years later. Returns of 100% ROI within 5 years would be considered on the low end of the spectrum. There is a need for ambulances, cars, apartments, hotels, restaurants, almost anything… but you need to put boots on the ground (at least initially) to do it right, and find a trusted local partner.

The times, they are a changin’

Only 50 years ago, it was almost impossible to diversify internationally, and the theory of doing so (sprung forth by the most successful investor of the time) was purely designed for the HNW investor. Nowadays there is an entire generation of young men and women seeking opportunities outside the borders of their home country. In the past, you had to live in the same country to invest or start a business. Nowadays, you can diversify without leaving home.

It isn’t well publicized by the mainstream media, but you don’t even need to travel in order to internationalize. You can open up a company and bank account in Belize for instance without even traveling there. Or, if you can get a gold backed debit card through an offshore bank without leaving the comfort of your living room.

Can you keep up?

With the aid of mobile application technology (have you used wechat and whatsapp?) – you can now have FREE international communication ANYWHERE at the press of a button – no strings attached – iPhone not included.

But in Myanmar, it costs $1000 to get a basic SIM card – the wifi moves at a painfully slow rate, and the technological infastruture of the 21st century just isn’t there.

Commercial airlines have made worldwide travel is an inexpensive and commonplace occurrence. To really experience the speed at which the world is throttling into the 21^st century, you need to get out there and see the bustling metropolis of Alpha cities like Bangkok, Hong Kong, Singapore and the steadily expanding emerging markets of Asia.

Like a rolling stone…

Regardless of whether you are ready to embrace a worldview or not – the world has already changed. We already live in an internationally connected world – one that is fragile, unpredictable, volatile and dangerous. And those who are the most connected, and most diversified across borders are the ones who will be able to survive and thrive what is to come in the future. Those who have clean food, water, healthcare and physical assets will be safe. Those who supply others with clean food, water, healthcare and physical assets will make a fortune in the years to come.

The developing world has seen a hiccup in recent years with the financial crises. The Euro is a mess, and wealthy Europeans are sending their money by the billions to Asian financial hubs to ­escape the dying euro for “safe-keeping”. Do you want to side idly by and ignore these trends. Take action, don’t be the same.

Don’t have money to invest?

As the jobless and unemployment figures continue to rise (a figure that is dramatically flawed) it is perhaps outside the borders of your own country where you should seek to find new work. Right now, there are more Chinese learning English than there are English speakers in the United Kingdom. Why not get a job teaching English in China – or better yet – why not start a business teaching business English with your current job specialty.

While you might find your skillset commoditized in the western world, you might find yourself to be a unique and valued asset in the developing world.

What is Flag Theory?

Flag theory is a method of internationalization that allows one to legally decrease tax, evaluate different jurisdictions based on their merits, and experience the true freedom that comes from living a life without borders – or a controlling government presence.

If asset protection is about keeping all your eggs out of one basket, flag theory is about making sure you have multiple baskets spread out in different countries around the world.

The signs that things are changing are obvious, and the benefits of internationalization are tremendous.

Don’t get stuck in the Ring of Fire…

Flag Theory is a way to avoid being dragged down by unfair or unfortunate mishaps of your homeland. Thinking your home is safe just because it is what you are comfortable and used to is a foolish and unfortunate mentality.

Things are not always what they seem to be, not everything you see, hear or read is real! The future cannot be accurately predicted, except for this: Things will change, and your life and the world will not be the same a year from now as it is today. That is why it makes sense to keep learning skills, exploring new ideas, diversifying your self and your wealth, so that whatever happens, you can survive. This is the prudent and cautious methodology of internationalization called Flag Theory.

The first flag of flag theory is a citizenship (and passport) from a country which doesn’t tax on a worldwide basis. If you want to receive the real scoop on passports, where you can get one – and exactly how much you should pay – I encourage you to check out this book.

I get questions all the time from people who ask:

“where can I get a 2^nd passport without having to travel there?”

My question is, would you really even want a passport from a place you have never been? Furthermore, it is more than just a travel document – a passport is a component of a citizenship which ensures the universal human right of freedom of movement.

Universal Declaration of Human Rights. Article 13 of the Declaration states:

“Everyone has the right to freedom of movement and residence within the borders of each state. Everyone has the right to leave any country, including his own, and to return to his country.”

Looking for residency? Or a second passport?

• Thailand – A long term visa if you are over 50 years old is simple, easy and lasts for a year (with a need to leave every 90 days). After 4 years of this you can apply for residency.
• UAE – start a company here and capitalize it with the minimum amount, and you’ll instantly be rewarded with a residency (the equivalent of a green card)
• Philippines – Learn how to start an offshore headquarters in the Philippines and find out why it is more fun in the Philippines.
• Uruguay – A place where you can legally pay no taxes and become a citizen in as little as 3 years (if married to a person of any nationality) or 5 years if you are single.
• Paraguay – Some of the best farmland in South America, this landlocked country affords foreigners a bona-fide citizenship in as little as 3 years. Used to be you can get residency the week you come into the country. Through the right channels, this might still be possible – but be careful with who you deal with.

If you do have money and just want to escape your homeland for a bit, why not take up residency in a foreign land?

If you are too scared to leave, no one can help…

All is not well in the western world. You either see it, or you don’t. The writing is on the wall. If you want to survive, best not to keep all your eggs in one basket.

• Get a gold backed debit card.
• Set up a residency or look for a 2^nd passport option
• Set up a US LLC in Wyoming and receive privacy, simplicity, and inexpensive asset protection
• Set up an international company or trust and protect your assets offshore (just make sure you file the right forms come tax time)

Until next time, please question everything you hear, second guess your own assumptions and thoughts about the world, and don’t trust anyone.

Think for yourself. Are you really prepared? Or have you yet to begin…

East Timor

Is a war torn nation that no one knows much about, or has even heard of. The currency of choice here is single American dollars. The country is extremely poor and lacks almost any infrastructure of any kind. Will any entrepreneurs step up and make a difference in this country? Where there are problems, there is opportunity.

Sri Lanka

I have a friend who recently raised 30 million from the largest telecom in the country after being in the country for just 3 months. They now have the ENTIRE e-commerce marketplace to themselves. They are quite literally, they are the only company doing e-commerce at scale in the entire country. After a few weeks of operation, they eclipsed 101 employees today. Their headliner is a daily deals site / group-on clone: anything.lk

Burma

I’ll report back from Myanmar next week, as I’ll be jumping on a plane to head there shortly. For those who are interested in visiting, the visa situation is a pain! I decided to go last minute to attend a conference, and although I qualify for a “visa on arrival” the process is anything but clear. You need a letter from a Burmese business with address IN Myanmar (as well as permission from a ministry). Full details are available at this site. It is much, much easier to arrange a visa in advance at a local embassy.

Indonesia

From what I’ve seen so far from Indonesia, I enjoy this country. However, corruption at the lowest levels, as dealing with police (or the local banjar) can be burdensome for entrepreneurs. As for most places around the world, it’s best to enjoy your time here, follow the rules and don’t make too much noise. If you are going to start a business here, you better have a great understanding of the culture, a well connected local partner and deep pockets. I’ve written about starting a business in Bali in this post. If you are able to start a business, you’ll find incredible local talent for an inexpensive rate. The workforce is (by and large) more technically skilled than many other countries in the region, and there are great developers and designers.

Korea

Korea is a place I don’t know much about. From an outsiders perspective, its not emerging, it seems expensive and difficult to penetrate as a foreigner without extensive time and effort. Although I have Korean friends who I know and love, it doesn’t attract me from an a macro-economic perspective and I can’t see this economy having the growth potential of others in the region. It is very well developed, and in many ways the polar opposite of its neighbor to the north…

North Korea

North Korea is the last frontier of Asia – hidden behind a communist veil, much of the society is kept in secrecy. I do know some people who have been able to visit and do business in the country. Believe it or not, they run a consultancy that teaches social skills. I guess that proves that maybe there is a market in NK? Recently it came out that Google is trying to penetrate into the economy here, and bring peace to the people. This is an admirable goal in my mind, and displays how the free market and private business can accomplish something that bureaucracy and governments could never accomplish in the country – freedom, peace and profitability.

China

China is intimidating. I need to learn more. I’ve barely scratched the surface. All I can say is watch this space.

Hong Kong

Hong Kong is amazing, I love spending time in this country and it is just so damn entertaining to go out for a night on the town in this city. Hong Kong has a great culture – its not overbearing with centuries of tradition, but its deep enough to have caught its voice and be able to proudly proclaim: this is what it’s like to be Hongkongnese.

Hong Kong simultaneously both IS and IS NOT China. Technically, it is a “special administrative republic” and Hong Kong S.A.R. is an exemplar for an efficient free market economy, yet for all intents and purposes, is subservient to the centrally controlled Mainland. Although the quality of life, language, way of doing business, food, travel documents, and a lot of other things are completely different – Hong Kong IS china.

The food and the people are great, the city is so much fun, and Hong Kong is the best place to open a bank account. Scratch That, it is the 2nd best place in the world for banking and starting a business, right behind…

Singapore

Singapore is THE best place in the world to start a business. I’ve written about Singapore city here, and also here. I have a deep respect for the ability of the government to spur entrepreneurship and innovation, and raise the quality of life for a society. Living here is a joy, and I love being here for that reason, now if I could only find some interests outside of my work…

Thailand

I write too much about this country already. I’m redacting my previous statements on the LOS. There is “nothing” to see in Thailand, please move along… My advice to backpacking tourists looking to “find themselves” and “see elephants” and “ladyboys” is to stay for a day, visit Phuket and then get out. We never wanted you here anyway.

For those of you who want to see the real Thailand… I recommend at least a year on the ground. Learning the language, starting a business, getting a multiple entry visa in Thailand through a Thai Company, and living in Bangkok city.

Cambodia

Cambodia is the future rice bowl of SE Asia. Along with Thailand and Vietnam, this is where the bulk of food will be produced in the 21st century. it’s also a very young society, and its developing quickly. I’ve seen ventures fail here (premium beer, commerce) and other succeed (citizenship by investment, property investment, fund management, rice, micro lending) the business field is wide open. Read more about Cambodia here.

Vietnam

Vietnam has an emerging tech community. You would not believe the talent that comes out of this country in terms of technical ability. The currency is a dong, and the government makes it near impossible to start a business unless you know the right people. Even the locals have to go and stand in a room and be read a number in order to start a company here. I spoke to a young girl that did it herself (instead of pay a company rough $200). From the beginning, you should only pick a venture that the government will LIKE – because if they don’t like you – bye bye. Take for instance Facebook – which saw a countrywide ban when groups starting popping up opposing the incumbent party.

Philippines

Ahhh the Philippines. The friendliest people on earth. Despite having one of the lowest GDP per capita, they have one of the highest happiness ratings. The women here are very intelligent. If you want to set up a business here, make sure you have strong females on your side, and great government connections. They are open to foreigners doing business, but all of the guys I know here that have had success know when to show their palms, and when to show their teeth. REAL power rules.

If you are interested in setting up a company in the Philippines, or learning more, check out this post on why its more fun in the Philippines…

There is a lot of opportunity here, partially displayed by the fact that google is setting up a HQ in the Philippines. As a societal whole, you really want to root for them. They have the potential, they could do better, they even know it themselves (see this commentary called “get real Philippines” or just look at the town slogans “aim high!”

TWO OTHER NOTES…

P.s. I’ve been having many clients lately sign up for Wyoming LLC’s. This is one of the quickest, easiest ways to get an additional layer of both privacy. You can foreign qualify the LLC in your home state and you get charging order protection, deterrence from creditors, a layer of privacy, and the comfort of knowing that your assets are safer without paying out the ass to an insurance company.

P.p.s. If you are looking for more help with flag theory, or want to learn more about the first step of flag theory – obtaining a 2^nd passport – you can check out this book I’ve written on alternative citizenship which will also make you a PT member of Flag Theory with premium subscription and monthly updates. See the full offer here.

Dumping his high flying stocks when there was no sight of a crash, he switched everything to cash and municipal bonds, and not only avoided the crash, but again made it big.

Finally, he moved his life savings into gold when it was selling between 400  – 800$ per ounce. At more than $1600 per oz., he thinks now is the time to move out of gold.

But the question remains, what comes next? Where are the next big trends coming?

Emerging Markets.

The sign that emerging markets and commodities will really pick up will occur when there is a mass convergence on Africa. It is hard to say exactly when this will occur – but with China already investing in Africa, and

China and America will both try to seize control of land and resources in Africa, which is has over 12% of the world’s arable land but 80% of it is not in use.

More and more I’m hearing rumblings about entering Africa and providing base level services. Private equity funds aren’t quite there, and it seems to be very difficult to find local partners on the ground who can be trusted. Many of my friends have grandiose plans about starting a recycling plant, or a carpark – but its extremely far away and difficult to get started. Compared to other places, the barriers to entry are enormous.

Simon Black told me how he thinks Africa will be the next big asset class but he is hesitant to go there, because the timing is particularly difficult. It’s clear that things like carparks and hotels WILL be needed – the question is: When?

The speed at which you get your capital back is arguably just as important as the rate of return, and having your cash tied up in an African hotel does you no good unless there is a chance to make residual income / cash out ; which requires a herd mentality to converge on Africa.

Douglas Clayton told me over drinks in Bangkok how the African continent is one of the few places overlooked by investors, and that he would love to be there – but is currently tied up in other emerging markets due to Leopard 1 and 2 funds, and his Haiti fund.

Other notable investors such as Jim Rogers speak highly of Myanmar, but states that the boat is already set to sail. If you aren’t there already, you might be too late, or maybe not…

I know a guy in Myanmar who is trying to do ANYTHING to get traction with a business including:

• selling soaps and toilet paper supplies
• security and alarm systems
• chauffeur services
• pretty much anything you will pay him for

But he hasn’t yet addressed a need that people are willing to pay for on a consistent basis. Like many instances, the ones who clean up in the gold rush are the ones selling shovels. For instance, a hotel room in Yangon costs 500-1000$ per night, and the food at a local restaurant is ludicrously expensive.

That being said – there are still opportunities. For instance, the country is JUST NOW going through a trial run with ATM’s in the country. Up until now (and still now, because it is rare to find an ATM) you need to have crisp, pressed $100 bills with the proper serial numbers. Whoever said the dollar is losing its status as the worlds reserve currency has never been to Myanmar!

So it isn’t easy to start a business in Myanmar. It isn’t easy to start a business anywhere! Such is the life of an entrepreneur. You have to solve a problem. In a developed economy, but more so in an emerging market – you MUST find a problem that people are willing to pay to solve – until then you don’t have a business. Once you find a big enough problem that you have the answer to, the business will emerge.

So what is the biggest problem the world will face this century?

Clean Food and Water

The biggest wave of pain and profits will come when water and food become increasingly rare. This is slowly creeping upon us. For instance, the rates at which fish are being pulled from the oceans should be a cause for concern. Some estimate that there will be no edible fish left by 2030.

Many people provide the arguments of fish farms, or that technology will solve these issues. Or maybe technology won’t be able to fully replace clean water or healthy organic protein sources. Maybe natural is best in these instances, and whoever controls the supply of clean food and water will be able to dictate pricing to the increasing demand.

Increased Population + Increased Demand > Supply of Clean Water + Supply of Clean food = (The Price Must Go Up!)

Source: UNwater.org

The amount of potable water is decreasing at an alarming rate. In fact the statistics for this seemingly abundant resource show it to be anything but abundant. Wars over water are extremely common in the most crowded places on earth. Take for instance India and Bangladesh, where a decade long war has raged over water rights to the Ganges river which flows through both countries.
We oftentimes take for granted the fact that we have clean water (especially if we live in a 1st world society), but much of the world doesn’t even have clean running water.

As investors and entrepreneurs – if we can sense the changing of times and anticipate the coming waves of problems that will occur, we can position ourselves strategically to survive and thrive no matter what happens in the world. The future is nothing to fear, unless you are unprepared. If you are prepared, it is a time for opportunity where anything is possible. Trillions will be made and lost depending on who is able to capitalize on emerging economies, fresh food, and clean water.

By 2025, 1 800 million people will be living in countries or regions with absolute water scarcity, and two-thirds of the world population could be under stress conditions. Source: FAO

The key to success and survival in the future involves:Internationalization through a foundation of flag theory and access to healthy food, and clean water. I also see medical care as an extremely important trend, more on that next time.

If you are able to secure the aforementioned categorical objectives of flag theory, you have a good chance of surviving and thriving, no matter what happens to the world. As a final note, if you’d like to secure your future today, consider becoming a Flag Theory member, where I’ll be there to help you on that path to survival and profit, presenting opportunities for internationalization.

“I recently created an IBC in Seychelles as the international arm of a domestic online company I own (sells subscriptions to online software). However, I’m having trouble finding a bank that will allow me to open an account, as I’m a US citizen and most banks seem to have recently closed their doors due to FATCA.

I currently live in Indonesia, so a bank in Asia or this side of the world would be ideal, and preferably one with low fees. I also need a merchant account to accept credit card payments in multiple currencies from my international customers.

Do you know of any banks or merchant account providers you could recommend that would open an account for a company in Seychelles that is owned by a US citizen?”

First, find a bank that will still work with American citizens. Many in Hong Kong are still willing to accept US clients, but you must have an introduction (many times from a local HK accountant). In Asia you simply need an introduction to do business. I’d prefer not to name the Banks publicly, but they are out there.

Once you have the Hong Kong account, and a residency, you can use one of many merchant accounts available, including one from the bank depending on which one you go with and if your monthly turnover is interesting enough for said bank to accept you as a client.

You may have to set up a new company, or at least have all the necessary apostilled documents from Seychelles. Hong Kong banks would much prefer to work with a newly set up BVI company.

Other options for bank account… Belize is one of only a few countries that accepts clients online (without appearing for bank account). Contact me and I can set you up with my connections in Belize or Hong Kong.

If this person wants to live longer term in Indonesia, it might make sense to set up a local Indonesian company and receive a Kitas, which I wrote about here. Although this is capital intensive (100k to capitalize) it would give more assurance to living and working in Indonesia because of the dual tax treaty between US and Indonesia. View the treaty here –> irs.gov/pub/irs-trty/indo.pdf

The problem with working through a Seychelles company (and no Indo branch) is that it would be hard to say that the residency is in Indonesia, but if its not in Indonesia – Where is the residency?

This is the concept of establishing a tax domicile.  Ideally in a place which doesn’t tax on a worldwide basis (Thailand is one such country, although “work” by foreigners is strictly forbidden in the Kingdom of Thailand). Other such places are Monaco, Cayman islands, Uruguay in some instances.

This is the 2nd flag of Flag Theory – establishing a foreign tax home.

So does setting up a Seychelles Corp  qualify me for tax there?

Well, as mentioned earlier – NO.

To reiterate: an important to considering when doing business internationally is the headquarters, or sometimes referred to as the domicile of the business, or the mind and ‘brain-center’ of your corporation.

Furthermore, most “paper” or “virtual” corporations don’t allow you to operate within the jurisdiction of which you’ve been established. Some jurisdictions – such as BVI – have laws which specifically prevent from a local office being established which does any business with BVI locals.  There are however, other advantages to a BVI company – mainly, banking. These type of “offshore” companies are of little advantage to someone who might need to establish a new tax home.

Therefore, it may be necessary to establish a headquarters in a different country. This may open up the person to taxation in this new country, which may not mean more tax, if there is a dual tax treaty – or may mean no tax if there is no taxation on a worldwide basis.

High tax countries in the OECD and the United States oftentimes have statutes (CFC Laws) to prevent against offshoring profits for corporations which have a controlling shareholder interest. In order to receive relief from double taxation, it is sometimes necessary that a “person” is a “resident” of a country where they receive the double taxation relief.

The test of residence for companies is oftentimes contingent upon the operations of the business (which could be anywhere if the company is a virtual, or internet company), the management of the company and/or the place of incorporation of the company.

However, the point of this article is that the place of incorporation of the company leaves the taxpayer of a former high tax country with little certainty if the place of incorporation does not allow for a local headquarters, operations and makes it difficult for banking i.e. Seychelles, BVI and other “virtual corporation” jurisdictions.

This alone is not the problem, take for instance Hong Kong…

Hong Kong is known for having low tax, and the ability for companies to operate both “onshore” and offshore.

• Offshore = Belize IBC = No operations in Belize. 0% Tax
• Onshore = Delaware C-Corp = Operations Anywhere. 35% Tax
• OnShore/Offshore = Hong Kong = Territorial Tax Regime 0% tax on profits OUTSIDE of Hong Kong, ~17% tax on operations IN Hong Kong.

However, lets go deeper and examine this from a PT perspective.

Hong Kong IRD Practice Note 21 concerning the “Territorial Source Principle of Taxation” interprets “Hong Kong sourced profits” very broadly, so it is very possible that your Hong Kong company would be taxed at the current rate of 17.5%

IRD Practice Note 21 at ¶ 29 says it will “’only be in rare cases that a taxpayer with a principal place of business in Hong Kong can earn profits which are not chargeable to profits tax under s14’ (TVBI)”.

In order to prove that the profits from trading in goods bought and sold outside Hong Kong does not have a source in Hong Kong, the Hong Kong company must prove that substantial activity of the company was effected outside Hong Kong, thereby putting the Hong Kong company at greater risk of being taxable on its profits in the high tax jurisdictions in which it makes sales.

see CIR v HK-TVB International Limited (1992) 1 HKRC ¶ 90-064, CIR v Euro Tech Far East Ltd (1995) 1 HKRC ¶ 90-076 and Board of Review cases D28/86 and D47/93 (Case D24) (1994) 1 HKRC ¶ 80-274); but compare CIR v Magna Industrial Co Ltd [1996] HKCA 542 and ING Baring Securities (Hong Kong) Limited v CIR (2007) HKRC ¶ 90-195.

What this means:

If you live IN Hong Kong and do business there, you will be taxed in Hong Kong.

If you live OUTSIDE Hong Kong and do business elsewhere, you won’t be taxed in Hong Kong, but you are at risk at being taxed elsewhere.

You can’t have your business in Hong Kong AND not have it there at the same time. Where is the headquarters?

========More Analysis with Precedent Caselaw========

The place of incorporation of a company provides certainty for corporate taxpayers, but it has been described as arbitrary and unrelated to economic reality for the individual PT in many instances (particularly if they are an individual who IS the business).

However, the concept of placement of management or operations as a test for residence of companies is of import, and can be susceptible to manipulation.

Many countries indeed use the place of management as a test for residence: France, Germany and Japan, or where there are meetings held for the board of directors – Canada and the UK.

Only in exceptional circumstances will a foreign subsidiary corporation be considered to have its place of management or control in the country where its controlling shareholders reside.

UK Specific Law

The cases dealing with “central management and control” in the United Kingdom referred to below demonstrate the importance of the board of directors of the foreign subsidiary carrying out their duties properly in order that the foreign subsidiary be treated as a resident of the country where the board meets. Professor Arnold has said:

“If the foreign corporation is properly organised and its affairs are conducted by its own properly constituted board of directors, even though they simply act in accordance with the instructions of the controlling shareholder, corporation will be treated as a non-resident corporation. In effect, the place of management test is largely formal; it looks to de juri control of the foreign corporation. Consequently, the test can be easily avoided and is not effective in dealing with tax haven abuse.

“Moreover, even if the place of management test is applied to treat every tax haven corporation as resident where its controlling shareholders are resident, there are serious difficulties in enforcing any domestic tax against the tax haven corporation. Assuming, as is quite likely, that the tax haven corporation does not have any assets within domestic jurisdiction, it will be necessary for the domestic tax authorities to collect the tax from the controlling shareholders”.

It is an international “norm” that the fact that a company resident in a particular country has a subsidiary in another country will not of itself make the subsidiary a permanent establishment of the parent company, in the country of residence of the subsidiary.

The United Kingdom and Australia are examples of countries which now determine corporate tax residence on the alternative bases of:

1. Place of incorporation (but see the cases below!)
2. Place of central management and control.

There have been cases which demonstrate that the place of incorporation alone is meaningless:

In Untelrab, the United Kingdom Inland Revenue asserted that the company incorporated in Jersey, with two Bermudian resident directors, and one director resident in Jersey, was nonetheless resident in the UK, where the parent company was resident. The Special Commissioners held that the company was resident in Bermuda and applied Esquire Nominees. What is interesting about the case is the depth of analysis of the evidence of the activities of the company over a six year period, including cross examination of the offshore directors.

The Inland Revenue had more success in criminal proceedings in R v Dimsey; R v Allen where the defendants unsuccessfully appealed their gaol sentences for “conspiracy to cheat the public revenue” and “cheating the public revenue” respectively.

The central allegation in those cases was that companies incorporated in Jersey and other havens, and of which Mr Dimsey was a Jersey resident director, were in fact centrally managed and controlled in the UK, such that the companies were liable to UK corporations tax. The evidence accepted by the jury was that Mr Dimsey’s client in the UK (Mr Allen), who was not an actual director, was a shadow director, and was in fact actually managing and controlling the companies in respect of board level decisions. The result for the companies was that they were resident in the UK rather than Jersey.

The established principles were recently applied in UK Tribunal decision in Laerstate BV v Revenue & Customs [2009] UKFTT 209 (TC) (11 August 2009), where a Dutch company was found to be a tax resident of the UK. Again, the case demonstrated the detailed enquiry into the decision making process of directors (and for a period, a “shadow” director). Esquire Nominees was again referred to with approval. A somewhat more detailed emphasis was on whether the director who did now own the company had sufficient information before him to be able to make an informed decision.

General Guidelines:

1. Effective management should be where the board of directors regularly meets to decide the policy, conduct and manage the strategic, high level, decisions for the business and
2. A majority of the board (or shareholders)

…Should be residents of the jurisdiction the company is to be “resident” of for tax purposes

US persons living in the US

US persons will almost never receive a benefit (from a tax perspective) from setting up a foreign corporation IF they live full time within the US, or even if they live part time and they become involved in the day-to-day operations. This is because the corporation can become “effectively connected”, to a US “trade or business”, and therefore taxed in the US: refer Reg 1.864-7(c).

NOTE: Residency of the board and persons in the US renders the offshore incorporation income “effectively connected” meaningless for tax purposes. This is simplified and but should supply a laymans understanding of the concept: where you live, can (but doesn’t have to) turn into where the business is taxed.

The US persons can still receive a large asset protection benefit from establishing an LLC in another state (such as Wyoming) or another jurisdiction (such as Nevis) that have strong company laws protecting directors and shareholders from the liabilities arising from doing business.  An LLC in Nevis makes it even easier for tax purposes (for it will most likely be tax transparent, be taxed in the US, and have NO EFFECT on taxable income) but there would still be the potential for asset protection provisions afforded by Nevis.

American Entrepreneurs living abroad

Might do well to pick a jurisdiction which is “low tax”; because it may be difficult to entirely escape tax at 0%. These persons might do well to pick a jurisdiction which allows for a local headquarters: such as Ireland or UAE or Cayman islands which allows for headquarters yet a 0% taxation, or they could pick a domicile such as Labuan which has a tax at 3%.

You could examine google and facebooks corporate setup, which I wrote about here, – which both involve an Irish headquarters. Plus, if you set up an Irish company, you can gain Irish Citizenship.

What to take from this article:

1. Trying to be clever and “hide” income is a bad idea that is bound to land penalties, or worse – jailtime.
2. There are ways to properly set up a corporate structure and live as a PT – and residency is an important consideration!
3. It takes time and serious planning to establish a proper offshore structure.
4. It may be better to choose a jurisdiction which allows for 0% or low taxation AND operations based in said country. Options include:

• Brunei
• UAE
• Tax free zones in the Philippines or Uruguay (where you can get a 2nd-passport) or many other countries
• Labuan
• Ireland

More on this in future articles.

Final takeaway: There are plenty of places around the world which value entrepreneurs AND allow for low taxation, AND provide visas and citizenship options for those who are willing to locate there. I’ve written about the process for Ireland, New Zealand, and Canada, and a full explanation and walk through of each in the passport book, which comes with your PT Membership.

It is vital to speak with an attorney or CPA who can properly write a letter of opinion on your given corporate structure. Nothing in this article is given as personal advice, simply my own observations and experiences doing business abroad, and should not be relied upon for any reason.