The effects of the Corona crisis on Flag Theory

A lot has happened recently – who could have imagined 30 days ago that things would come to be where they are today?!

The situation undoubtedly calls for a proper newsletter because, as you will already know, crises always bring many opportunities, but at the very least, you need to think about protecting what you own.

If you are expecting an email full of conspiracy theories, apocalyptic images, fear and complaints about what’s going on and how the States have dealt with it, you might as well stop reading here, as this is not today’s objective. There’s already enough of all that on social media and the news.

I’d like to remind you that these opportunities aren’t for everyone. They are for those who stop complaining, who aren’t sat around waiting for the State to help them, who aren’t paralysed by fear, but who are able to open their eyes, look a little further, and act.

If you still have something to lose, now is the moment to act – don’t wait!

If you want to take this leap, times of crisis are when the need is greatest. It is precisely this ability to see and satisfy such needs which creates great fortunes.

Now, you may be wondering, what effects does the current crisis have on Flag Theory? What options do you have in terms of internationalizing your live in the areas where it matters most? Where should you go, where will you be treated best?

That is what we will now discuss.

Passport/nationality

At least until now, there were very few people in Europe who were aware of the advantages of having a second passport and had therefore invested resources in order to obtain one.

It’s true that European passports normally give you a great deal of mobility on an international scale, but as we have seen, this can change overnight. Crises like the one in question can mean that borders are closed to those from certain countries, or that you are looked down upon once you enter the country.

The truth is that in the current crisis, many countries are differentiating between one’s country of nationality, and their country of departure. But this is not always the case, and of course will depend on the type of crisis in question (an economic crisis, or war, for example).

There are some European countries, such as Greece and Spain, who are sending tourists back to their own countries. In cases such as these, having a second nationality in a country without any cases of Corona, such as an island in the Caribbean or Pacific, would be incredibly useful. At least you will have the option to retreat to these countries, even if they close their borders to foreigners.

Of course, having a second nationality is not the only option, you can also start by getting a residence permit. This ensures that you will be able to enter (or stay in) the country even when the borders have been shut to everyone else.

It is even more useful to have a second nationality in cases of countries which make its citizens either stay inside the country, or return to it, as is the case with the United Arab Emirates, and other countries around the world.

In principle, with the exception of the US passport (you pay tax worldwide for being a citizen), it’s never a bad idea to have another passport. In fact, the more the merrier. In a worst case scenario, you can always renounce them (with a few exceptions, such as Mexico).

Residency/emigration

Currently, with all the travel restrictions and State-imposed isolation, if you had plans to move your residency, you will have found that they will have to wait. Instead, you’ll have time to have another look at the most interesting destinations on our blog, or even the Emigration Encyclopedia.

Don’t hesitate – between the crisis and the potential aid which will be distributed all over, taxes are not going to disappear in countries with a high tax burden, if anything, they will increase in order to tackle the high level of debt, and all the promises made throughout this period.

The States will play the patriotism card in order to make you stay: “we all have to pull together and rebuild the country”. The fact that there are still people who believe this shows what kind of animal human beings are. Of course, they will give us the necessary medals, then hand us the shovel and stay to watch us work and see how long we last.

The Corona crisis once again shows why it can be useful to have a plan B. Those who were abroad or living as Perpetual Tourists, but had permanent residence permits, may have been kicked out of the countries where they were travelling, but they can still easily return to one of the countries for which they do have the necessary permits, even if these countries are shut to foreigners. They don’t have to return to their home countries if they don’t want to.

Luckily, in the current situation, the majority of Asian countries which usually only allow foreigners to stay for a short period of time, have been generous and extended their visas without any fines, but other States may well not do the same.

If you have returned to your country of origin, but you are not (tax) registered there, in principle you do not have to worry. In most cases, you will just have to avoid spending the famous 183 days in the country. Given the current situation, even if you can’t avoid it, it’s possible that if your habitual residence is in another country, they won’t be able to make you a tax resident in your country of origin.

Having said this, the best option would be to leave the country as soon as the situation allows.

If you already started the emigration process, in some cases it’s still possible to continue with it.

Take Panama, for example. Due to the fact that they have closed off the country for 30 days, it’s not possible to start any new applications, but any requests that had already been made are still being processed by lawyers and the authorities.

It’s been decided that the presence of the applicants is not mandatory for this purpose. Therefore, you won’t get caught in delays if you are currently processing your residence permit there.

Generally, if you don’t want to suffer the worst of the crisis (which of course, for the vast majority of people who survive Corona, won’t be the health crisis, but rather the economic crisis which will follow it), you should seriously consider leaving the country, especially if you are somewhere with a high tax burden.

On the other hand, perhaps the current crisis will lead you to acquire residency permits in more countries. Perhaps after this health crisis, taxes and freedom are not the only things which will matter to you when it comes to choosing your residency, you may also want to consider how the country in question is dealing with the pandemic.

If for you staying alive is more important than personal freedom, perhaps you would prefer to move to a country like North Korea, which shut its borders at the very beginning of the epidemic. Or if you prefer less drastic options, there are countries on the Asian continent which have responded in a disciplined and effective manner, without just shutting everything down completely. If you don’t mind paying very high taxes but want to be left alone during the next pandemic, maybe Sweden would be an option.

Either way, it will be interesting to analyse countries’ different reactions to the virus with a broader perspective.

Undoubtedly, once the general hysteria has passed, we will learn many things. Among them, that the most dramatic measures, which give a greater sense of protection, are rarely the most effective.

Companies

This is one of the flags which has been least affected by the crisis. It’s still possible to register companies abroad. This means that in the case of LLCs, for example, nothing has changed, beyond the fact that the procedures may take a few more days.

If you were planning to start up an LLC, don’t be put off by the fact that it looks like the end of the world out there, we will still be there to help you with registering companies and opening the respective company accounts, as always.

If you are still unsure as to the best jurisdiction for your business (just in case you were wondering: NO, your country of origin is probably not a good option, unless you want to be drowning in taxes!) you can find many interesting options on our blog, in Tax Free Today’s business encyclopedia, or, of course, by booking a consultation, which will clear up any doubts.

Without a doubt, once this period of isolation is over, there will be changes in taxes, but on the whole, they will be for the better. Countries with smarter governments will lower taxes in order to stimulate the economy. And, conversely, others will raise them (at least now you’ll have an easy way to calculate the intelligence of your government :D)

Bank accounts

Many are worried (and rightly so) about the security of their assets and savings. At the moment, the risk of expropriation seems minimal, as long as you don’t have a warehouse full of disinfectant and masks.

If you use euros, you’re in luck, as this currency is greatly increasing in value, compared to foreign currencies (with the exception of the US dollar). Be that as it may, the measures taken by most countries will cause inflation to rise sharply, and lead to a general devaluation of money.

Furthermore, the moment which we have been speaking about for a long time now seems to be getting much closer, the total ban on the circulation of cash.

The fact that notes and coins are “unhygienic” gives States yet another powerful argument which will allow them to fully control what we do with our money. It wouldn’t be surprising for us to have reached this situation by the end of the year, at least in countries where card payments are already widely used.

In Europe, if you have less than 100,000 euros held in bank accounts, it would appear that, in principle, you don’t have much to worry about. If you have money in Deutsche Bank or Commerzbank, this may be a good moment to take it out and transfer it to a more secure bank.

Generally speaking, it makes sense to spread your money out by keeping it in different countries across the globe, doing so not only in bank accounts, but also brokers (we usually recommend interactivebrokers.com) and precious metal storages such as Bullionstar, where you can also put cash away.

Although it’s generally pretty complicated to open bank accounts remotely, this appears to be changing due to the current situation. Some banks could make an exception, if you can justify it sufficiently. Opening bank accounts in the US, although only for LLCs, is an interesting option.

Unfortunately, the service for opening bank accounts remotely in Georgia is currently suspended. Due to various allegations of money laundering, the Georgian banks have been under investigation for several weeks.

However, this won’t change the stability of the Georgian banking system at all. Therefore, if you already have a bank account there, your money is still safe, although it is potentially under certain restrictions on its use (you won’t be able to send or receive large sums of money, but you can withdraw money from an ATM).

Investment

Investing in a time of crisis is an almost infinite topic. In moments like this, it’s essential to have a basic understanding of how the economy works. Too often we still hear of people saying that everything must be stopped, that people come before the economy, that we have to expropriate, or that bills don’t have to be paid during times of crisis.

Obviously, these comments give a clear idea of how little these people know about economics. First of all, the economy is not some monster which eats people up, the economy is the people, it’s what maintains our civilisation, and what stops us from plunging into a state of absolute poverty.

Now that you most likely have plenty of free time, we’d recommend that you do an online economics course. The impact that the current halt will have on the world will be immense. Without a doubt, you will be much better off if you understand how it all works.

One of the first refuges in a time of crisis is gold. Unfortunately, this is no longer so easy to get hold of. The purchase options in the Singaporean storehouses which we often recommend to our clients are practically gone. In any case, if you are presented with such an opportunity, buying gold is a good option. Keeping the situation in mind, the current price still appears to be good (don’t be surprised that stores with signs saying ‘I buy gold’ will soon reappear all over the world).

Luckily, the investments that we usually recommend here at Tax Free Today are still going strong. Corona hasn’t affected the Georgian walnut industry at all (in case you were wondering, yes, you can still invest in this), and investments in real estate in Panama and other projects like Free Private Cities will just be delayed by a few months.

We’d like to warn you of the risks of maintaining real estate in Europe. It seems pretty certain that by the end of the year, the States will introduce new taxes on this type of property in order to help cover the cost of the crisis. Perhaps with the exception of first homes.

Therefore, all those who are able to sell in the next few months should do so, and then possibly move focus directly to countries outside of Europe, where there are many opportunities, partly due to the euro being stronger than other currencies.

For example, with an investment of only 120,000 euros in real estate in northern Brazil, you would be able to obtain citizenship having spent only 4 years there. For this, you would only need to spend 30 days each year in the country, meaning that you wouldn’t even be a tax resident in Brazil.

Leisure

Having fun during a time of quarantine and widespread fear isn’t easy, and generally amusement is digital.

Those who are more concerned with their freedom than the supposed security which comes with staying home should not feel guilty about leaving their home countries. This will reduce the risk of passing it on to other people, as well as alleviating already overloaded hospitals. Of course, you should ensure that in the next economic crisis you will still have an acceptable income wherever you are, or that you won’t lose too many assets.

Counterintuitively, it currently makes sense to head to East Asia and assess the situation in China, including Macao, Hong Kong, Taiwan, South Korea and Japan, all of which are probably over the worst of it. Europeans can currently enter Taiwan, Japan, and South Korea, as long as they haven’t been anywhere classified as ‘high risk’ in the last 2 weeks.

Currently in Latin America, Mexico, Nicaragua and Uruguay remain as options. However, things can undoubtedly change very quickly. You can also enter Brazil, as long as you haven’t come directly from Europe.

The restrictions on entering different States is changing practically every day. The best source of information on this matter is the IATA’s database. If you have a little look, you will be able to find more options. You can look for current flight connections with Flightradar24.com and then book them with Kiwi.com.

Health insurance

We often have to clarify the difference between international health insurance, and travel insurance with medical cover. The latter is limited in terms of time, as well as the treatments it covers in the foreign country.

Many digital nomads who opted for travel insurance because it’s cheaper and they assumed that it works in the same way, have now discovered that this form of insurance doesn’t cover Covid treatments, and they will therefore likely be repatriated if they fall ill.

You must keep this in mind. Generally, international health insurance providers such as Foyer Global Health, Inter, Cigna, Globality and Allianz cover possible illnesses worldwide.

Many of us who decide to leave our home countries, especially when they are in Europe, have it thrown in our faces that if we get ill, we will return and take advantage of the social and health systems. However, if you have health insurance, you won’t find yourself in this situation, as it means that you can pay your bills and seek treatment in the country of your choice (of course this does depend on the travel insurance option that you have selected).

To conclude

And so we finish our little exploration through the world of Flag Theory. To sum up, don’t let yourself be paralysed by fear, or bound by the States in their attempts to deprive you of your personal freedom.

Make the most of this time: learn, plan, work on your projects…

Tax Free Today will continue to work as usual, so if you want to get going and need our help, we will be here!

Wishing you the best of luck and health here at Tax Free Today,

Adrián and Christoph