Perpetual traveler

The term perpetual traveller (PT, permanent tourist or prior taxpayer) refers to both a lifestyle and a philosophy.

Background

In practical terms, perpetual travellers (PTs) are people who live in such a way that they are not considered a legal resident of any of the countries in which they spend time.

By lacking a legal permanent residence status, they seek to avoid the legal obligations which may accompany residency, such as income and asset taxes, social security contributions, jury duty and military service.

For example, while PTs may hold citizenship in one or more countries that impose taxes based solely on residency, their legal residence will most likely be in a tax haven. PTs may spend the majority of their time in other countries, never staying long enough to be considered a resident.

Rationale

Some PTs are wealthy individuals whose primary motivation is tax avoidance. It is possible for a non-national to live for several months, and in some cases even own property, in many countries without becoming a legal tax resident and therefore eliminating paying income tax.

For example, most European countries allow tourists to spend up to three months (and in some cases six months) in the country without being considered a resident or being required to file a local tax return.

Similarly, it is possible to spend up to 122 days each year in the United States without being considered a resident—or being required to file a US tax return. This workaround is applicable only for non-US citizens who are not permanent residents and earn no income in the United States.

In general PTs can, by moving between countries on a regular basis, be able to legally reduce or eliminate their tax burden. Other PTs may adopt this lifestyle for self-ownership reasons, seeking to be free from government authority, interference and "The System".

Besides the aforementioned economic reasons, some people become PTs from philosophical or existential reasons, feeling unable and/or unwilling to commit to residency.

Five Flag Theory

Perpetual travellers may attempt to organize their affairs around the "Five Flags" theory,^[1][2][3] arranging for different facets of their lives to fall under the jurisdiction of separate countries or flags. This is W.G. Hill's^[1][4] own "2 flag" extension of investment advisor Harry Schultz's^[1] original "Three Flags" approach.

Whether to minimize governmental interference (via taxes or otherwise), or to maximize privacy, the theory proposes that you arrange for each of the following to be in a separate country:

1. Passport and Citizenship - in a country that does not tax money earned outside the country or control actions.
2. Legal Residence - in 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.

Three Flag Theory

The general basis of the Three Flag Theory is:

1. Have your citizenship somewhere that does not tax income earned outside the country.
2. Have your businesses and speculations in stable, low or no tax countries.
3. Live as a tourist in countries where what you do for a living is valued, not outlawed.

In recent times, PTs are revising the Flag Theory and looking beyond planting just a few flags.^[5]

A classic case exemplifying the application of the Flag Theory is the case of renunciation of US Citizenship by Facebook co-founder, Eduardo Saverin in favour of his Singapore Residency which is considered to be tax-friendly.^[6][7]

Philosophy

On the surface, perpetual travelers have some things in common with world citizens, in that they see themselves as untethered to any one nation. Many PTs align themselves closely with the libertarian or anarchist schools of thought, which advocate individual sovereignty - sovereignty vested in the individual rather than in nation states.

See also

• Tax resistance

References

External links

• IRS Publication 519 IRS document explaining the "Substantial Presence Test"