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Moving Out of the Country – Part 1
-By Caleb Jones
As I’ve stated before, my current plan is to live abroad part time for the next nine years, spending 1-3 months out of the country every year. I’ve been doing this for a while now and will continue to do so. Over time, I may even expand that 1-3 months to 4-5 months, but that depends on my mood and the economic state of the US over the next few years. I'm pretty flexible because of my lifestyle.
Then, around 2025, I will permanently shift my home base to somewhere outside of the United States, and swap things so that I will be there (or elsewhere) 8 or 9 months out of the year, while returning to spend the summer in the US to visit my friends, family, women, children, and possibly grandchildren if I have any by then. My son is 24 and my daughter is almost 18, so in the next nine years grandkids are likely.
Right off the bat, you should notice that this is very different than me moving to some distant land and never coming back. Despite its many problems, I have a deep, emotional attachment to the US, since I was born and raised here. I’m sure you feel the same way about your home country, even if you hate it. If you live the Alpha Male 2.0 lifestyle like I do, you’re able to not only live anywhere you want in the world, but also to travel quite a bit and thus visit your homeland a lot, even if you move far away.
The Five Flags
Among capitalist expatriates, there’s a popular concept called the Five Flags. It’s a way of arranging your life so you’re protected from government, taxes, and economic collapse as much as humanly possible. It essentially means you do this:
1. You live in country A, preferably a tax haven that allows long visa stays (6 months or more).
2. You have your citizenship and passport in country B, preferably one that doesn’t tax international income.
3. Your business is based in country C, preferably another tax haven.
4. Your investments are in country D, preferably a place with no capital gains taxes.
5. You buy most of your personal stuff (clothing, toys, etc.) in country E, preferably a place with little or no sales tax or VAT taxes.
Five Flags is Alpha Male 2.0 in the ultra-extreme, and though you’ll be completely protected no matter what happens, you can see that it would be very complicated and beyond the ability for the typical person to accomplish and maintain. I will not be doing Five Flags myself. I agree it’s a good system, but I don’t want to take the time to maintain such a complex structure.
Instead, I will be following a simpler Three Flags model, where you have a passport in one country, live in a second country, and have your business based in a third country. I may also have investments in a smattering of other countries, though my investment strategy changes based on world conditions, so that may change.
This means I need to do and/or determine several things:
1. I need to get a second passport in a country that easily offers them to Americans and doesn’t tax international income. As an American, I am one of the few people on Earth who are forced at gunpoint to pay taxes to my home country even if I don’t physically live there and don’t make any income there. More insane big goverment BS from the Land of the Free.
This is unacceptable of course, so at some point in the next nine years I’m going to need a second passport from another country so I don’t have to worry about this insanity. I'll have to choose the country and then follow that country's process to assume citizenship.
2. I need to pick a country to move to and assume as my home base for my physical residence. This place needs to have low or zero personal taxes on income from outside of the country for non-citizens. Remember, I won’t be living full-time in the country where I’m getting my second passport. Instead, I’ll be living in another country, but leaving for a few weeks or longer every time my visa expires.
You may be wondering about the concept called "perpetual traveler," where a guy with location-independent income never lives anywhere for longer than 3-12 months, always moving to a different country after that. Why don't I do that?
Well, I'd love to do that, but I'm getting older. Next month I turn 44, so I'll be officially in my mid-forties. As you get older, you start to want a "home" to put your stuff (not that I have much stuff). Settling down with an OLTR is also very likely at some point in my future, particularly when I hit my 50s. If I was in my 20s or 30s I would absolutely do the perpetual traveler thing and enjoy the hell out of it. Being a PT is much less expensive and more conducive to personal freedom than having a home base, but I'm choosing to incur this expense because of my personal desires. Perhaps in another life.
3. I need to pick a third country with extremely low (or zero) business taxes to base my business operations.
4. I need to pick a few other countries to place my investments in, if I feel like it and if it makes sense at the time. Ideally, countries should not be where I live, nor where my second passport is based, but they can be literally anywhere else, even in the US(!) if the situation warrants it.
In the next article in this series, I will list the countries that I have in mind for these functions.
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David 2016-03-10 06:18:37
Wow, seeing this article......it's like you were reading my mind this past week, Caleb. I've been thinking on this a lot recently, so I'm REALLY looking forward to more in-depth breakdowns of all these concepts. Are there plans to incorporate this information into SMIC podcast(s) too? Listening to the podcasts repeatedly certainly helps to drive things home a little better.
Caleb Jones 2016-03-10 10:16:38
Are there plans to incorporate this information into SMIC podcast(s) too?Yep! Sure am! That's where the *really* good stuff will be.
zan 2016-03-10 13:28:56
This is an article of high interests to me also. I bet (expensive-ass) Singapore and Hong Kong will make your list...followed by the Philippines. All, english-friendly, tourist-friendly countries.
Caleb Jones 2016-03-10 14:27:14
Hong Kong definitely. Singapore is out (too hot and humid). Philippines is out (women are too ugly, not an exciting country to me).
Erik Williams 2016-03-10 17:11:08
The US federal tax on income no matter where you live definitely sucks! BUT, depending on your situation you may be able to take advantage of the Foreign Earned Income Exclusion for when you move abroad. There's a great write up on the Go Curry Cracker blog, which has a lot of great tax information on legal ways to minimize US taxes for US citizens living abroad, including actual tax returns - highly recommended: http://www.gocurrycracker.com/never-pay-taxes-by-moving-abroad/
Speculation 2016-03-10 17:34:52
With getting your second passport, don't most countries have residency requirements as a prerequisite? In other words you need to spend X amount of time in the country you want to get residency/citizenship in to qualify. Are there countries that are lax about this sort of thing as long as you qualify in other ways (such as through capital investment or the like)?
NateLyons1 2016-03-10 17:49:56
Caleb, Love the blogs, and am always looking forward to reading. If you are not already doing so in preparation for your next post, please share your thoughts on more "western" countries in a GTFO scenario. As in Canada, Australia, or perhaps New Zealand? How about anywhere in Europe that isn't too far gone? Thanks in advance, Nate
A Man 2016-03-10 19:59:36
Good stuff Caleb
Caleb Jones 2016-03-10 23:50:44
BUT, depending on your situation you may be able to take advantage of the Foreign Earned Income Exclusion for when you move abroad.That only applies if you don't travel for more than 35 days a year away from your home country, so it wouldn't apply to me unless I lied, though if you moved away and never returned back to the US (or did so for less than 35 days a year) then it helps a little. It also doesn't apply to payroll taxes. And often doesn't apply to capital gains. And it can be (and probably will be) lowered and/or repealed at any time.
With getting your second passport, don’t most countries have residency requirements as a prerequisite?Some do, some don't. There are 200 countries in the world so there are many options. As just one example, you can become a citizen of St. Kitts for just buying a house down there worth at least $250K. Uruguay and Paraguay are similar. In other countries you only need to be there a year. I'll be discussing this more in upcoming articles.
If you are not already doing so in preparation for your next post, please share your thoughts on more “western” countries in a GTFO scenario. As in Canada, Australia, or perhaps New Zealand? How about anywhere in Europe that isn’t too far gone?Okay, good idea. In short, Australia and New Zealand are the only good Western options because of their proximity to Asia, but even then you have to be careful about taxes and their stupid socialist governments (New Zealand is better). Canada isn't a good idea since it too closely tied to the US (if we go down, they go down). There is **no where** in Europe that's a good idea in my opinion. Europe is going to collapse sooner and harder than the US will, and even non-insane European countries like Switzerland will be in deep shit, eventually. For my Three Flags I will be completely avoiding Europe like the plague, other than as a vacation spot.
Seamus 2016-03-17 06:01:51
"There is **no where** in Europe that’s a good idea in my opinion". Have you researched Bulgaria? 10% flat rate income tax. http://www.nomoretax.eu/bulgaria-business-attraction-in-the-eu/
Caleb Jones 2016-03-17 09:43:40
Have you researched Bulgaria?Bulgaria is in Europe, and I don't want to be anywhere near there because Europe is collapsing even faster than the US. It's also unstable (in terms of goverment), but I agree it's trying to move in the right direction.
Chuck 2016-03-21 12:44:56
I'm curious to hear more about how you would live PT style if you were in your 20s/30s, as I imagine a decent proportion of your readership falls into this bracket. How long would you spend in a country at a time? Which countries would you visit? How would you manage having long term relationships when constantly moving to new places and having to start afresh?
Caleb Jones 2016-03-21 16:19:27
I’m curious to hear more about how you would live PT style if you were in your 20s/30s, as I imagine a decent proportion of your readership falls into this bracket.Most of my readership falls in that bracket. 🙂
How long would you spend in a country at a time?3-6 months.
Which countries would you visit?It's not countries you should focus on, it's cities. I have a list of about 75 I still need to visit.
How would you manage having long term relationships when constantly moving to new places and having to start afresh?You couldn't have any that lasted longer than 6 months at a time unless they were long-distance FBs, which would be fine.
Jason 2016-11-01 03:41:39
I'm curious how no one mentioned Monaco. It has a lot of advantages over what EU offers, so it should be a valid choice? http://www.relocation-monaco.com/living-in-monaco.html
Caleb Jones 2016-11-01 09:46:58
Monaco is nice but it's expensive. It's also in Europe, which immediately strikes it off my list. (Europe is going down.)