In this article we are going to look at how you can protect your assets in times of crisis. Or more specifically, what do the measures taken due to coronavirus mean for your money?
In our latest article, we looked at various strategies which will allow you to keep managing your business successfully during difficult times such as the present, whilst also maintaining your freedom of expression and not having to worry about your livelihood due to your accounts being closed, your web pages being blocked, or being fined or sued.
Some of the changes which we have been anticipating for some time are now undeniably getting closer and closer. The potential for bank notes to carry Covid-19 is accelerating a ban on cash in many countries and, of course, if citizens’ fundamental freedoms have been allowed to fall unopposed in only a matter of days, then assets being frozen, expropriations, fees, and taxes as a result of coronavirus, are no longer merely a fantasy in certain parts of the world.
Of course, in this respect all governments worldwide can benefit from coronavirus. We don’t want to enter the realm of conspiracy theories on how we’ve got to this point, but let us just say that opportunistic governments and politicians, as well as their pressure groups, now have the perfect excuse to let this hopelessly failed political and economic system fall apart, while at the same time clearing themselves of all responsibility.
In some countries, governments will even see an increase in their approval ratings as a result of the strong and authoritarian measures that they’ve taken. An invisible virus which turns everyone’s daily lives upside down is the perfect culprit. And the average modern citizen is the perfect victim.
That being said, we don’t have to become the victims of this situation, there are still ways to adequately prepare ourselves for what will most likely happen over the next few months.
Of course, you will be in a good position if you have been making the most of Tax Free Today since its inception 3 years ago by booking consultations and implementing the strategies that we’ve laid out. The ideal situation would be to already have a plan B which consists of permanent residency abroad. However, in any case, you will know how to keep what you own out of reach of the State in your home country, meaning that you will come out of all this in a much better position than most.
The content of today’s article is mostly aimed at those who are still residents in countries with high tax burdens. Although the measures described here are more feasible in some countries than in others.
We can only congratulate you if you have already said goodbye to the totalitarian systems of countries with high tax burdens – you’re going to get off easily!
Of course, the coronavirus crisis is global, and many other countries will introduce measures similar to those discussed here. Because of this, we will just have to wait and see which countries will be attractive in the future.
Things will start properly next year, a few months after this terrible isolation. Furthermore, bankruptcy threatens many companies besides airlines, travel agencies, and restaurants. Not to mention the banks, which are in danger of facing a chain reaction across Southern Europe.
Typical personal economic situation: being highly concentrated
Let’s start with an example of a typical Spanish person, a description which is perhaps slightly exaggerated, but which nonetheless currently corresponds to thousands of people who are Spanish, Argentine, or Mexican, to name a few.
The typical Spaniard has a comfortable job with Santander Bank. He has his savings deposited in a Santander bank account, and he is paying for his home through the corresponding mortgage which will last into his retirement. He has invested part of his savings in Santander’s shares. He met his wife there, and their children also have a savings account with this bank.
When things are going well, this situation seems rather idyllic. They have a steady income, their account is as secure as their retirement, the shares go up enough each year to allow them to go on holiday to the seaside. But as we are currently discovering, good times can turn into bad times very quickly. Most banks are now facing huge problems, and often, people who have accounts with them aren’t even aware of this. Perhaps they simply have faith in the position of their bank within the financial system, or in deposit guarantee schemes.
During a deep economic crisis -as we’ve said, we haven’t yet reached this point- everything happens all at once: the typical Spaniard from the previous example loses his job and it’s very difficult for him to find another one at a different bank as everyone is dealing with the same problems. Share prices fall sharply, and liquidity problems get worse. People can no longer pay off their loans, they lose their houses, perhaps even their wife and kids. In the worst-case scenario, banks go bankrupt and lose their assets, or, precisely to avoid this, the State may impose a compulsory wealth tax. In this case, you just have to hope that you don’t have a high net worth; a 40-50% tax on the working class is fortunately (or unfortunately) the general rule in Spain. In this sense, many of you readers don’t have much to worry about if you aren’t millionaires. But we will talk more about this later.
Likely measures which will be taken by government to sort out state accounts
For a long time anyone who spoke fearfully of an imminent economic collapse was laughed at. Expropriations in Spain or Germany? That’s impossible! (Despite the fact that this has happened more than once in the last 100 years).
But this all changed in only a matter of weeks. You need look no further than the German parliament, which is already preparing a wealth tax, and analysing whether it is possible to structure this according to the constitution. The corresponding documentation, and some interesting background information, can be found here in German. In Spain, part of the government is preparing a new wealth tax, as well as increasing taxes in many other areas.
A wealth tax can come in various different forms. We will now briefly look at the most likely scenarios in which the matter of covid can be used to exploit citizens.
A wealth tax may seem like a good thing, but it does come with certain problems. After all, mass surveillance is not so advanced as to be able to identify and value all the wealth of every single citizen. It’s not even clear exactly what is meant by ‘wealth’.
How are loans valued? What about home ownership? Will cars, TVs and children’s toys be included? Will they only include bank accounts which are in the country, or will it be foreign accounts as well? How will withholdings be made on accounts abroad? What will happen with foundations, cooperatives, and other legal forms?
We believe that some form of wealth tax on a one-off basis is by no means out of the question, but a new, permanent wealth tax doesn’t seem realistic to us. There are more effective methods which come with a much lower risk of causing complaints. Between taxes and social security contributions, the bill amounts to more than 60% of what we earn, meaning that people aren’t left with much.
Either way, it’s the rich who are in serious trouble. And there aren’t as few as you may think. According to data from 2019, there are 1,365,000 in Germany and 979,000 in Spain, to give two examples. Many of them probably don’t even know that they are considered as such, but owning a property or home of considerable size in Munich, Hamburg, Madrid, Barcelona, or other premium locations, can mean that someone falls under the category of being rich.
It remains to be seen whether habitual residencies will be included when it comes to establishing the assets to be taxed, in Spain it’s been requested that anything which is valued up to a limit of 400,000 euros is excluded.
But many of these millionaires don’t have enough liquidity to cope with even a very low wealth tax of 5 or 10%.
The same thing happens with all small and medium-sized enterprises. The wealth of family enterprises is linked precisely to the company that they manage, and a wealth tax which doesn’t exclude assets associated with a business’s management would just exacerbate the situation of illiquidity and the labour market. Furthermore, if certain exceptions are granted, then the pressure groups which haven’t benefited will demand new exceptions for themselves (and they are usually where Money with a capital letter is).
If a wealth tax is imposed, it’s expected that there will be an exemption on at least the first €200,000 (in Spain they are talking about €500,000), excluding property ownership and any assets associated with entrepreneurial activity. Anyone whose savings fall below this limit needn’t worry about expropriation, but will have to be aware of possible banking crises, and an increase in many other taxes. In any case, it will be incredibly difficult for governments to impose a wealth tax of more than 10%.
A more realistic option than a wealth tax is that of forced mortgages as, unlike overall assets, real estate is much easier to value.
A forced mortgage essentially means encumbering a property with a mortgage, only the money goes to the State, and not to the bank. The mortgage is linked to a property, with the disadvantage for you, but the advantage for the State that, precisely because this asset is immobile, it cannot be transferred abroad, and is therefore the perfect tax subject.
Furthermore, these measures will be very widely accepted as they affect the “right” people: vulture funds and large landowners who raise rent prices and destroy entire cities by gentrifying them. The discussion concerning putting limits on rent prices has already revealed how little appreciation there is for large property owners. If permanent residencies are taken out of the equation, forced mortgages won’t lead to widespread liquidity problems in society. The mortgage debt to the State could be paid over several years. Thus, the State would receive a large part of the rental income, partly through taxes, and partly through the forced mortgage.
For these reasons, we think it’s likely that this measure will be introduced in some form. It’s difficult to predict how much the new tax will amount to, but we believe that it could be around 20-30% of the property’s cadastral value, or perhaps its market value. The saddest thing of all is that the majority of the population will probably applaud this measure, instead of taking to the streets to protest.
Another possibility would be to widen the tax base. For more and more people, some of which have emigrated with the help of Tax Free Today, this will soon no longer be a pipe-dream. Canada is already considering taxing any expatriates on their citizenship, according to the U.S. model, in order to finance the consequences of coronavirus.
The same thing is happening in Germany, where for some time, left-wing parties and the Green Party have been discussing a worldwide citizenship-based taxation scheme. For many European countries, coronavirus would provide the perfect excuse to follow through with this.
After all, it can be argued that thousands of emigrants sought protection in Europe during the coronavirus crisis, seeing as the “fantastic governance and the best health systems in the world” offered undeniable advantages.
However, European law currently does not allow for citizenship-based taxation, and in financial matters the principle of unanimity still applies. It’s precisely EU tax havens, such as Cyprus and Malta, which would oppose such measures, seeing as they would benefit very little from them (they have too few expatriates in other countries), and would suffer large losses in their own tax bases. For this reason we think that it’s rather unlikely that these sorts of measures will be introduced in the short-term.
But it’s not unlikely that they will be introduced on the level of the European Union, even as EU-specific taxes, as tax harmonization increases. After all, as an emigrant citizen one still benefits from the advantages of the EU, such as freedom of movement and establishment, so a certain percentage should go to the European superstate. Either way, it’ll be a few years before we reach this point.
Currently, only the United States and Eritrea require people to pay taxes based on citizenship. In order to avoid the many difficulties of double taxation, US citizens currently have an exemption amount of up to $138,000 (this figure is adjusted every year) on which they don’t have to pay tax in the US. According to many of the signed double taxation agreements, only the U.S. has access to income generated in the U.S. As a result, the majority of North American emigrants aren’t at a great disadvantage.
On the other hand, the wealthiest citizens in Eritrea, which has become the African North Korea, often have Switzerland or Sweden as their favourite destinations. Eritrea has created an efficient system (for what the country is), in which foreign embassies play a key role. The 2% tax is low enough that citizens pay it voluntarily. And if they don’t, the State seemingly has no issue in persecuting and torturing their family members who remain in Eritrea. Furthermore, it’s impossible for Eritreans to renounce their citizenship, as Eritrean citizenship never expires.
A democratic State such as the US offers the possibility of renouncing citizenship, however a wave of requests related to Economic Citizenship in the Caribbean was followed by much stricter measures. Now, denaturalisation costs $3,000 and includes a cross examination in which US officials may dissuade people from making this decision.
But much more arduous is the exit tax. When renouncing citizenship, in principle you have to pay your tax declarations over the last 5 years again. Although this would be possible for those who have become successful entrepreneurs, this technicality would currently make it difficult for many people to afford a new nationality.
Would you be willing to give up a European nationality? Well, if things got too bad, the answer would probably be yes. The freedom of movement granted by a European passport is great, but many of the additional countries which don’t require a visa aren’t countries which you would want to visit. On the other hand, the majority of Caribbean passports which can be acquired legally offer the freedom to travel to 130-150 visa-free countries, including the EU, which we’d say is more than enough. For the United States, Canada, Australia, and New Zealand, you can obtain a multiple-entry visa which lasts for 10 years.
In order to have freedom of establishment in the EU, it isn’t necessary to be a European citizen. In several EU countries, it’s possible to get permanent residency through purchasing property (golden visa). In Greece, this can already be done from €250,000, and is also a very popular option in Portugal, as well as Spain if you make an investment of at least €500,000. After a few years, it will once again be possible to obtain a first-class passport without having to pay taxes in that country.
A decision such as this clearly doesn’t just depend on fiscal aspects. Perhaps someone wants to be president or prime minister and turn their country into an oasis of freedom. Anyone who can live off their wealth and investments can do so with the Spanish or German taxation system. Family foundations, such as in Liechtenstein, cooperatives within the country, or substance creation abroad, all allow for a tax optimisation which is legal, and can be done while still being a resident in the EU.
Of course, Tax Free Today can help you get a second citizenship. There are some perfectly acceptable passports which start from a donation of €120,000 (including fees), or an investment of around €200,000 which you can make a small profit on over the next few years. Here it’s worth going through everything with a fine-tooth comb: there are considerable differences between St. Kitts (great freedom of movement), Granada (without a visa to travel to China), Dominica, Antigua, Vanuatu, Moldova, and others.
Our recommendation would obviously be to go for the smaller countries, such as island-nations in the Caribbean or the Pacific, as they are never going to demand taxes from the few expatriates that they have. The lack of consular advice can be a disadvantage in some areas, but it is definitely an advantage when it comes to your own freedom.
What’s more, insular states are very attractive places to live, even during the coronavirus crisis, as they have been largely unaffected by the illness. The problem is that you can only enter these countries if you are a citizen there.
Increase in taxes
Of course, they can simply raise tax rates or create new taxes. This will definitely happen, but the States will have to do so very carefully, so as not to further damage the recovering economy. Because of this, it’s unlikely that there will be significant increases in corporate taxes (although this will depend on each individual country). Taxation is likely to increase on dividend distributions, as politicians will want to try and get companies to reduce them so that they don’t become decapitalized (in fact, they have ordered companies which have received financial support to suspend dividend payments for a few years).
We think it’s highly likely that dividends and capital gains will once again be subject to income tax in EU countries where this is not already the case. This would provide some relief for small investors, but would be a burden for entrepreneurs and wealthy people.
Similarly, it’s not unlikely that progressive tax will increase at the top. Progressive tax increasing by up to 50% is entirely within the realm of possibility.
To sum up, the prospects for investors all over the world aren’t at all encouraging. We just have to hope that in 2020 it will still be possible to emigrate!
Keep printing money
The printers are working at full speed, and will continue to do so. In doing so, they have already shattered all the taboos surrounding central bank policies. The independence of many central banks now only exists on paper at best. These banks now no longer only guarantee the State’s debt, but even support companies though directly purchasing their corporate bonds. The United States has already launched the “money helicopter”. This, along with the recent fall in oil prices, is paving the way for an economic disaster in the coming months, as faith in the markets and their institutions continues to wane.
These monetary policies will certainly continue to be enforced even more strongly than they have been previously. After all, expropriation through inflation only becomes apparent when it’s too late, after which monetary savings can only be used as toilet paper.
Protecting your assets during a crisis: the two key mantras
When faced with this gloomy picture, what can we do to protect our assets? The answer lies in the two key mantras of flag theory and asset protection. The more we abide by these mantras, the more likely it is that we will be able to face the following years without suffering any great losses.
Flag theory’s mantra is: “Go where you will be treated best”. Any risk of expropriation in your home country means that it is no longer the place where you can best protect your assets. If your home country is in Europe, then it is definitely better than many other places in the world, but it is still far from perfect. Depending on the flag, there are different alternatives in several countries. It’s also possible that a country falls short in some aspects, but stands out in others. An example of this would be Cyprus, which is really attractive in terms of residency and setting up a company, but does however have a disastrous banking system.
The core of flag theory is global diversification. It’s essential to avoid the risks that we explained at the start. It’s not an exaggeration to say that for each type of investment, one should have 3-5 alternatives in different countries, whether they be bank accounts, broker funds, deposits of precious metals, or other assets. But nor is it necessary to take all of your savings out of your home country, what we’d advise is to always have a cash or gold reserve which can be used when you eventually leave the country.
In order to get the most out of flag theory, it should be considered alongside elements of asset protection. The second important mantra is as follows: “control everything, own nothing”, for nothing can be taken away from the poor. There are various different ways to be officially classified as poor, but to live like a rich man, although many people find this more difficult to understand than international diversification.
Asset protection involves structuring legal forms with the help of flag theory in order to separate your assets from your person. Your assets should form part of a structure which belongs to itself, but over which you have some control. This is achieved through the help of Operating Agreements, which are interpreted by reliable people, such as the board of a charitable foundation, for example.
It’s often possible to carry out such operations through your own company, which in turn should be a member of the foundation’s board, or it’s also possible to intervene through a Protector/Guardian Veto against some of the Board’s provisions. The only important thing is that for both tax and asset protection purposes, the recognition of such structures depends on the actual transfer of certain controls.
An option would be to set up, fairly cheaply, a structure of anonymous US LLCs, UK Limited Foundation Companies, a series of other legal forms, or a combination of all of these in order to become a founding member of a cooperative. Concealment is an important part of asset protection, as if it can’t be attributed to you, it can’t be taken away from you.
A sophisticated asset-protection structure combines different legal forms across different countries in order to be as secure as possible. It’s true that the administrative costs can quickly skyrocket. However, even in ideal circumstances, only the most deftly organised structure will be enough to avoid the aforementioned scenarios.
Foundations are a good solution against wealth tax. In Europe, it’s common for only EU/EEA family foundations to be recognised. Here, the best option is the small Principality of Liechtenstein, where the concept of the family foundation was created almost 100 years ago. A family foundation, combined with the right private bank and insurance contracts which are linked to the fund and arranged privately would be a tough nut to crack, especially if these assets are diversified across other foreign subsidiaries of such a foundation.
First of all, you can repeatedly swear that you don’t own any assets; second of all, you prevent your own State from having direct access to these assets. Thus, you can enjoy an accumulation of capital which is tax free, and which will be free of inheritance tax for the next generation. Furthermore, as a beneficiary of these investments, you’re always able to cover your living costs.
However, it’s not certain whether a family foundation of this type will be of any use against forced mortgages on properties. Seeing as these are real estate assets, they have no protection against the local legislator.
Some prefer to transfer their properties to a US LLC or a stock corporation, both of which often have full legal capacities.
We work together with leading experts across the field of family foundations in Liechtenstein, so if you are interested in this form of asset protection, please contact us. Furthermore, Tax Free Today can set up an American LLC for you. We are also experts in associations, trusts, and other alternative legal forms.
Bank accounts: options both within your home country and abroad
Although Tax Free Today has carried out a comparative study on international banks, we don’t think it’s a good idea to deposit large sums of money in these institutions. This is because money that you deposit in a bank belongs to the bank, and not to you. And with every penny you deposit, the banks can multiply the money supply.
You have to ask yourself whether it would be better to keep your assets out of reach of the banks, and only deposit a small sum of money in bank accounts so that you have some liquidity for day-to-day use. You can keep just enough money in a bank account to cover credit card payments, and the rest can be kept in the form of other assets. At least this is what we do here at Tax Free Today.
If, despite all this, you still want to trust the banks, you should diversify where you deposit your money. Switzerland, as well as some other European countries, are not bad options as places to have a bank account, especially when compared to many other countries. We even strongly advise some clients to open bank accounts in Germany, seeing as German banks are stable, and offer good services at fair prices. However, it’s important not to generalise, and you must look at each institution in great detail in order to minimise risks such as the banks failing, or wealth taxes.
An offshore bank account probably won’t be much help against a wealth tax because, in the same way that you pay taxes on global income in your home country, wealth in your name anywhere in the world will also be used in the case of a wealth tax. With the global exchange of information, it will become increasingly difficult to hide wealth in bank accounts, and furthermore, it’s likely that the concealment of wealth will be established as a crime. In the EU it’s already possible for your accounts to be seized.
Faced with a wealth tax, the only solution would be to remain within the corresponding exemption limit. Anyone with less than €200,000 in their bank accounts probably has nothing to worry about.
The banks failing is a different matter altogether, and is now an inevitability due to the economic crisis brought about by coronavirus. Although the banks in the north of Europe are in a less precarious position than those in the south, they will all undoubtedly end up collapsing. It would therefore be unwise to rely too heavily on the deposit guarantee scheme for accounts which contain up to €100,000. The deposit guarantee scheme’s legislation specifically states that it does not reimburse money in the event of a banking crisis. The deposit guarantee scheme can only help if the economy is functioning normally, but a bank goes bankrupt as a result of mismanagement. In times of crisis, which of course affect more than one bank, we cannot count on this. On the other hand, with a high deposit guarantee scheme, there’s more incentive to carry out risky investments. ‘After all, the State will save us’ is the mantra in high banking circles, something which will most likely happen again, according to the EU’s new plan.
If you wish to keep your money in European banks, we once again recommend that you diversify widely, and don’t go over a 5-figure limit for each account and bank. It’s better to avoid banks in Southern Europe (the hardest-hit by the crisis, with the added risk of the national currencies being greatly devalued if they leave the Euro) and even the German banks Deutsche Bank and Commerzbank, seeing as if the banks in Southern Europe collapse, these banks will be next to fall due to their high exposure to debt in these countries. In terms of German banks, the majority of Sparkasse, Volksbank and Raiddeisenbank are far more stable. However, here too, it’s important to look at each bank very carefully, as depending on the city there may have been an inadequate allocation of resources, with a high level of risk.
The German bank which, in principle, is considered to be the most stable in the event of a banking failure is DZ Bank. DZ Bank is relatively unknown, but it’s the second largest bank after Deutsche Bank in terms of equity.
As the parent bank of all Volksbanks and Raiffeisenbanken organised as cooperatives, it is also the reference bank for cooperatives. Of course, you could use it to open company accounts for limited companies, or other legal forms. A branch in Luxembourg could provide some additional advantages.
In principle, an offshore account is a good option for anyone, and can be opened completely legally anywhere in the world.
Within the European Union, we wouldn’t recommend opening bank accounts anywhere south of Switzerland. At the moment, it’s not advisable to open an account in Spain, Italy, Greece etc., mostly because they don’t offer many advantages, but they do come with greater risks. It’s important to keep in mind that these countries are in a lot of debt, and their banks are in a highly precarious position (partly because they have a large part of their public debt on their balance sheets) and, should any of these countries leave the Euro, their national currencies (be it peseta, lira or drachma) will be greatly devalued, probably by more than 50% and, with it, all money deposited in their accounts, which would automatically become local currency.
We think that Scandanavian banks in Sweden or Estonia are currently among the most stable, as both countries have a low sovereign debt compared to others. If you travel there yourself, SEB Bank can open accounts for you relatively easily, especially in Estonia. Conversely, in Sweden you usually need a Swedish tax identification number. However, this number is fairly easy to obtain if you are an EU citizen, and doesn’t lead to any tax obligations. As Sweden is one of the few countries which is currently completely open, it could be worth paying it a little visit.
Following Brexit, another good alternative in Europe is the United Kingdom. In England, by depositing more than £25,000, you can open an account for non-residents with major banks, such as Barclays and Lloyds. From £100,000, it’s also possible to open an account in the Crown colonies, such as the Isle of Man, Jersey, or Guernsey. In terms of investment products such as life insurance or fixed-term deposits, the minimum amount may be lower. For non-EU residents, fixed-term deposits for Lloyds in the Isle of Man start from £10,000.
Despite bank secrecy coming to an end, small private banks in Switzerland or Liechtenstein are still highly recommended. Here are a few to choose from.
We work together with experts who can help you choose the right bank for you, often saving you 50% of the costs. However, for this, you would need a minimum deposit of at least half a million euros.
There are also options which require smaller sums of money, especially in Switzerland. The CIM private bank in Wollerau, near Zurich, Lugano, and Geneva, is very popular within offshore circles. This bank grants business accounts relatively easily to EU and offshore jurisdictions which have a good reputation.
Outside of the European Union, there are an endless number of possibilities. Singapore is highly recommended, but if you don’t have residency there, you need to make a deposit of at least €150,000 in order to have a real chance of opening an account.
It’s easier in the United States. If you travel in person to Florida, there are various banks which allow you to open a private account with a credit card, and do not require a tax identification number. However, having a tax identification number does make things easier, and is required in order to demonstrate solvency. Tax Free Today would be happy to help you with the application. What’s more, in the coming months, the US dollar will probably be the best currency in which to hold your savings.
Puerto Rico is part of the United States, but is subject to its own banking laws, which exclude the territory from automatic information exchange. Therefore, the infamous offshore EuroPacific Bank moved to the island in 2017, having previously been based in the Caribbean State of St. Vincent. With an equity share of 100%, the bank founded by a prophet of the crash actually physically holds all deposits and is financed exclusively from fees.
The fact that it doesn’t grant loans or speculate with its clients’ money means that, in principle, this bank is very stable. As well as accounts, it’s possible to obtain a trading platform and a guaranteed gold account. Business accounts can be opened from anywhere in the world for practically any legal form in any jurisdiction. You can open accounts remotely from any address outside of the United States.
A bank with a similar philosophy is the Capital Security Bank, which is located in the New Zealand territory of the Cook Islands. This bank certainly offers excellent asset protection through its trust and LLC structures. However, it is relatively expensive compared to the EuroPacific Bank.
Panama is the only country in the world to not have a central bank, and it has come out of past crises very well, as the banks know that they cannot be bailed out if their investments fail. This is why the proportion of its own funds is very high, and the management rather conservative. Residency in Panama is popular, and it’s also relatively easy to open a stable bank account there.
Georgia remains a fairly popular central bank, and we offer a service which allows you to open bank accounts remotely there. The lack of automatic information exchange attracted some rather dodgy fortunes, and at the start of 2020, partly due to rapprochement with the EU, large-scale investigations into money laundering were carried out, which led to numerous accounts being closed. The Georgian banking system is relatively stable and in principle is still recommended.
Currently, we are only able to offer our remote account-opening service to those with a minimum deposit of €15,000, preferably €100,000.
There are fewer and fewer countries which do not adhere to the exchange of information and have acceptable financial and banking systems. The majority of Africain countries aren’t recommended as places to deposit your money. Among some of the most interesting jurisdictions without the CRS, if they haven’t already been mentioned, are Thailand, Paraguay, the Dominican Republic, Taiwan, and Cambodia. In Thailand especially it is still fairly easy to open private accounts, even as a tourist, and the baht is currently a good currency. Furthermore, Thailand is the perfect place to escape the exchange of information through verified residency, though you have to find a few loopholes…
Tax Free Today works with a variety of partners who can open both personal and business accounts in other parts of the world which we haven’t mentioned. It’s often possible to use an experienced Banking Introduction Service to open accounts in places where we would normally be turned down upon request. Of course, the cost of this exceeds many people’s price range.
Liquid alternatives to a bank account
Something important to keep in mind is that banks are not the only institutions which can maintain liquid resources in currencies. Instead of a bank, you could keep your money in any other type of financial institution. For example, with a broker without investing in stocks, or in a precious metals deposit without purchasing gold. This is usually a good alternative in certain jurisdictions in order to benefit from more lax KYC (Know Your Client) requirements.
If you don’t wish or plan to travel to the United States in the near future, you can remotely open an American brokerage account fairly easily, and transfer your money into it. Instead of investing your money in stocks, or getting involved with trading, you can leave the money in US dollars. Often you even earn a bit of interest. Non-residents can have deposits in some US brokers. Interactive Brokers is the leading force in the industry, but in order to use it, you have to apply through the official US website itself. EU residents are automatically referred to Luxembourg. TD Ameritrade is a good alternative for perpetual travellers, but it won’t work if you are a resident of an EU country. Charles Schwab allows you to open accounts from most EU countries.
In the current market climate, it’s not a bad idea to keep some money in US dollars, as a further appreciation of the dollar can be expected in the short term, perhaps even reaching parity with the euro in the coming months. As the world’s reserve currency, the United States has the advantage that it can get into practically unlimited debt but then finance itself by printing notes.
Of course, with a balanced account structure, currencies also play a part. The Australian, New Zealand, and Canadian dollars, along with the Swedish kroner, are an interesting combination. The euro, on the other hand, is less stable due to the fragility of various member states, namely Italy, Greece, and Spain.
But let’s return to the various options you have in terms of accounts: anyone who wants to benefit from the advantages that Singapore brings, but who doesn’t have sufficient funds, can instead transfer money to the precious metal suppliers Bullionstar or Silverbullion and keep the amount in Singaporean dollars. All you need to open an account remotely is a copy of your passport. What’s more, there’s no exchange of information and, seeing as there’s no interest, there’s no tax fraud either. Of course, you can (and probably should) convert part of the money into precious metals such as gold or silver.
Another way to keep liquid currencies is through using stablecoins, which we explained in our previous article. Stablecoins are a non-volatile cryptocurrency which, through blockchain mechanisms such as Smart Contracts, simulate the value of different currencies, and constantly adapt it.
There’s no doubt that Bitcoin, as well as other cryptocurrencies, will be the winners of the coronavirus crisis. But anyone who does not wish to speculate, can certainly use cryptocurrencies with stable coins to their advantage. For this, you don’t need to hold them in banks or wallets.
As with any intelligently-programmed cryptocurrency, they are practically impossible to seize. No State can gain access to your cryptocurrency wallet. There are already enough ways to access bitcoins without verification or to trade them with decentralized and unregulated wallets.
Meanwhile, there are already a number of stablecoins, of which DAI is the most appropriate for beginners, as it reproduces the US dollar rate. There are conflicting opinions regarding Tether, some believe that it is a huge scam. DAI works with the blockchain Ethereum and is compatible with recommended wallets, such as Monolith. Being a resident in the EU means that it’s possible to get a Visa debit card, which can carry your DAI. You have total control over the money as long as the DAI is in your wallet (as only you have the private keys). Only on charging a Visa card is access theoretically possible, but only to a small amount, which is generally spent directly.
The current global situation suggests that cryptocurrencies will once again experience a boom from now until the end of the year. It may still be a good time to get involved and protect yourself. Stablecoins are preferable to any bank account worldwide.
Christoph is investing in Bitcoin, as well as in Hedera Hashgraph and Pirate Chain. Hedera Hashgraph is one of Ethereum’s competitors, and has better technology, which is also resistant to quantum computing, the biggest threat to cryptocurrencies for the next decade. Pirate Chain is currently the most anonymous cryptocurrency in the industry. He also supports the development of optimal projects which combine both aspects. Jorge, on the other hand, has chosen to invest in listed companies which have been hit hard on the stock market, but which are businesses with a long history behind them (they have overcome many crises) and strong competitive advantages, with net cash and hardly any debt, they are very profitable companies which are run by a family (management with skin in the game). He has also invested in companies which deal with raw materials such as copper, LNG, and oil, which are bought at a knock-down price.
Returning to the topic of cryptocurrencies, the current lockdown provides the ideal moment to start familiarizing yourself with them. Thanks to StableCoin, this can be done without the risk of financial loss. With this, the short-term volatility is within the range of 2% maximum.
However, there is also money to be made from them. The key term for this is “Decentralized Finance”, a topic which we will save for another article. Nowadays you can earn much more interest on them, compared to what you earn with banks through decentralized loans, and do so without any risk.
Other ways to protect your assets
Thousands of pages could be written on the matter of investing during an economic or financial crash. The investment strategies used by both Christoph and Jorge are not recommended to the average investor who does not have ample training or experience. Both are concerned with very long term investments. In Christoph’s case, they are illiquid investments in which the money is “lost” as it’s tied up.
More than 90% of his wealth is put towards unlisted companies’ shares, across various sectors. The most well known is perhaps the nut plantation in Georgia which, with 10 thousand trees in full growth, is a tangible asset. But there are also various real estate projects, including short-term rentals, shares in attractive companies run by successful entrepreneurs, and private placements (early sale of shares at a discount before they are released to the public). As well as venture capital investments in, for example, free private cities, which will finally start in a few weeks.
As we’ve mentioned, Jorge mainly invests in listed companies with a very long-term time frame. He deals with companies which have good long-term prospects (whose products/services are still going to be required/consumed in the future), with high returns on invested capital due to strong entry barriers which prevent competitors accessing the market, with net cash and very little debt which will allow them to come out the other side of the crisis with guarantees, and a reference shareholder which ensures an alignment of interests between management and ownership. Of course, companies must be bought at good prices, as the return on an investment doesn’t just depend on the profitability of the company being invested in, but also, and most importantly, how much it is bought for. Current examples which comply with these requirements are Dassault Aviation, Berkshire Hathaway (Warren Buffett’s investment holding company) or Fielmann, to name just a few examples.
Of course, all of this can be turned back into cash, but this is only worthwhile after a few years. The investment horizon is very long term and the value of these assets will depend on the free cash flow that the company has generated so far.
Either way, you have to be very careful with the stock market, and only invest if you have adequate training (here you can get hold of our latest book which deals with the investment world, with a specific focus on the stock market) and a detailed understanding of the business in which you are going to invest.
The most important thing is to invest in the long term (so that your savings can be capitalized in a compound way) in such a way that as time passes, you forget about the money, never think about it, and sleep better. You may even think of yourself as poor, thus increasing your motivation to keep working hard. It’s important to note that crises also bring opportunities, and in fact, they are often the most favourable times to invest (despite what many people believe).
Either way, you must keep in mind that making short term investments in the stock market without a solid understanding is pure speculation, of course you may gain a lot of money on a one-off occasion (or lose it), but if you want consistently good results, you have to make informed, long-term investments (money that you aren’t going to need in 5 to 10 years). The best option for investors who don’t have enough time, or the right training, is to invest passively in an ETF or investment fund which replicates a stock index (preferably made up of more than 500 shares). Some good examples include the S&P 500, the Russell 2000 or the MSCI World Index. But be aware of the fact that many of these indexes are at their historical highs, and both the financial economy and the productive economy are currently decreasing (stock market is at a high, along with one of the greatest economic crises in history). For this reason we would recommend a staggered investment, instead of investing all your assets in one go.
Although there’s a lot more which could be said on this matter, we will leave it here for now. Here at Tax Free Today, our investments are largely guided by the Austrian school’s fundamental economic principles. Therefore, we would strongly recommend that you familiarize yourself with these theories.