Essence of the 5 Flag Theory
The original “5 Flags” concept was created by W.G. Hill, who added a 2 flag extension to the "3 Flag" approach created by the infamous international adviser Harry Schultz. People that adopted the "5 Flags Theory" were originally known as Perpetual Travellers. It involved arranging different facets of their lives to fall under the jurisdiction of separate countries better known as flags.

 

Whether the objective is to minimize governmental interference (of taxes or otherwise) or to maximize individual privacy, the “5 Flags” theory was structured as follows:

1. Passport and Citizenship: In a country that does not tax money earned outside the country. 

2. Legal Residence: Ideally within a tax haven.   

3. Business Base: Where you earn your money, ideally somewhere with low Corporate tax rates.  

4. Asset Haven: Where you keep your money, ideally somewhere with low taxation of savings interest and capital gains.

5. Playgrounds: Where you spend your money, ideally somewhere with low consumption tax and VAT.

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The above “5 Flags Theory" was the fashion of the day for wealthy people in the 1990’s, but increasingly difficult to apply in today’s 21st Century world, which is experiencing the demise of the offshore Tax Haven and ever-increasing Government control over rights and .

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One therefore may wish to replace a Tax Haven with a country that applies a low personal tax and is not considered Offshore. Examples of such countries would be UAE which has a zero personal tax rate, Tax-Free zones and only 5% VAT. Dubai is the UAE's most well-known Emirate and the world's fourth most visited city.