In 2010, for the first time in my life I jumped on a plane to leave the country I’d always called home. With Australia in my rear-view mirror, I looked ahead to a year of exploring, living and working abroad.
Back then it was a rite of passage – something to get out of my system before returning to my flourishing IT career.
As we planned our return to Australia however, something didn’t feel right. It didn’t feel as though we were returning ‘home’.
It was during this time that I first met someone living the perpetual traveller lifestyle.
What Is Perpetual Travel?
Surprisingly hard to define! Perpetual Travellers are, as they sound – individuals that are constantly on the move.
Perpetual Travellers are mostly interested in individual sovereignty, that they in and of themselves are “enough”. They are independent of any location or group of individuals that they were born into – that they didn’t actively choose to be part of.
It’s not uncommon for the name to be shortened to “PT”, which becomes increasingly ambiguous. Every individual considers it to stand for something different, but some popular meanings for “PT” include:
- Perpetual Traveler
- Permanent Tourist
- Possibility Thinker
- Post Tyranny
- Privacy Tactician
- Positive Thinker
- Prior Taxpayer
- Prepared for Tomorrow
- Practically Transparent
- Party Thrower
- Priority Thinker
- Paranoid Together
- Passing Through
The theory many PTs go by is that most countries treat tourists far better than their own citizens, so rather than becoming a resident or a citizen in a country, they remain a tourist everywhere they go.
How Does One Become a Perpetual Traveller?
PTs typically subscribe to something called ‘Flag Theory’, where basing different aspects of their life in different countries and not spending too long in any one country enables them to escape from the many obligations of being a resident.
The concept of flag theory began in the 1964 novel, “How to Keep Your Money and Your Freedom“ by Harry D Shultz.
It started with 3 flags, became known as “five flag theory”, and it has since grown to 7:
1. Passport and Citizenship
In countries that meet certain criteria, such as free movement of goods and people (through great visas).
Canada has long been a popular country to get a great passport, but it takes 7 years of commitment to become a citizen. Other countries offer citizenship by descent or investment which can be worth considering.
2. Legal Residence
Other countries use a “territorial” tax system like Costa Rica, Panama, Malaysia or Thailand, where if funds are generated and kept offshore for a time, they aren’t taxed.
There’s no one-size fits all rule here, but if you want some ideas, check out my post on the best country for entrepreneurs to live in.
3. Business Base
This is where you earn your money. Many focus on countries with low corporate tax rates or that allow one to “pass through” corporate income to their self, when they have residence in a country with low or no income tax.
I’d argue that ease of doing business is more important. Many consider the best country to register a company to involve the British Virgin Islands, Estonia, Hong Kong, UK or USA though there are many more options out there.
4. Asset Haven
Where you keep your money, ideally in a country without tax on capital gains, interest, dividends, or royalties. It should offer safe, well capitulated banks.
This is a moving target and depends on the currency you like to bank in too, but can mean banking in Australia, Canada, Denmark, Gibraltar, Hong Kong, Singapore, Switzerland and so on.
This said, there’s a question of fees and convenience as well, which is a market being disrupted by Wise, arguably the number 1 choice of digital nomads and expats right now.
Where you spend your money, ideally somewhere with affordable cost of living, low consumption tax and VAT.
Thailand is very popular in this department, but for others so is Colombia, Mexico and realistically, anywhere else you can afford and love spending time in.
This said, it can be advantageous to make purchases in countries with high sales tax when this tax can be reclaimed on exit, or when there’s a big difference in currency.
As international brands aim to be competitive in all markets, often they price their products after tax, to be a similar ‘number’ to other regions. This means it can make sense to buy clothing in Singapore, for example.
6. Digital Security
This is where your digital documents, passwords, merchant accounts and business infrastructure is stored.
It’s ideally a country with strong privacy law like Switzerland, Iceland, Malaysia and the Netherlands.
7. Digital Assets
With growing acceptance of digital currency and website investing, where you “store” these assets will again come into play.
Of course this brings in another dimension to the offshore world. I am sure we’ll see an increase in IT services physically housed in obscure micronations like Sealand or Liberland. Whether they will add any extra protection though, I’m skeptical.
Fundamentally, It’s About Freedom
The “goal” is for each of these flags to be planted in a different country. Some PTs may even use multiple countries for each flag (2 passports for instance).
Few PTs seem to bother setting up all 7 flags.
Typically PTs are extremely independent, so to conform to some sort of set list of flags that they must plant is unlikely to be high on their list. Instead, they’re probably living a variation of flag theory that suits their needs and makes 100% sense to them.
What Sort of People Are PTs?
Perpetual travellers come from all walks of life. They may be a:
- backpacker, travelling from country to country to pick fruit, banking in multiple countries out of convenience.
- businesswoman with 3 companies, each in a different country due to consumer demand.
- Canadian born dual-national with Irish heritage, now living in New Zealand doing some contract work.
- a location independent entrepreneur living out of Thailand, banking in Singapore and running a company in the US.
It might sound like a major headache to get a 2nd or 3rd passport, but in reality it can help with living in, working in or travelling through different countries, not to mention during times of war or oppression.
As someone from “the lucky country“, I never understood the importance of a second passport, but as I’ve travelled and met people from all walks of life, I can see their points of view.
I know many Brits looking for a second passport that will allow them to live in the European Union before the Brexit fallout takes place and Americans desperately hunting a second passport, with newfound uncertainty in government policies.
The idea of owning rental properties in Montenegro, Colombia, London and Warsaw might seem like a management nightmare, but to the PT making these investments – they’re probably thinking about the diversified currency income – invaluable to someone that spends a lot of time travelling.
Driven PTs are probably the first ones to consider their home country bias, but not just their financial exposure. These PTs are diversified not only in assets, but in business, citizenship, residency and their digital footprint.
And then, some PTs are all about trying to be Jason Bourne, wanting to brag about having a passport with visa-free access to almost every country in the world and a bank account or 5 in each continent.
Other people that fit the PT mould have never even heard of the concept, stumbling into internationalization as a result of living and working overseas and probably have more “flags” than many self-proclaimed PTs.
Perpetual Travellers Accept The Situation
Many issues seem too large to ignore, and we feel as though we must spend our energy righting those wrongs.
…they’ve included such things as pollution, civil rights, overpopulation, drugs, conservation, communism, consumerism, women’s liberation, poverty, organized crime, law and order, disappearance of animal species, the sexual revolution, government solvency, pornography, educational problems, mental illness, privacy, high taxes, the Vietnam war, campus riots, the military-industrial complex, police brutality, and disarmament.
PTs are privileged in that they can benefit from the nuances of different countries…
- Want to drive fast on the motorway? Go to Germany and do it legally.
- Gambling illegal in the country where you live? Jump on a plane to a place where a hand of poker isn’t considered to be a bad thing.
- From a country where women wearing a swimsuit isn’t accepted but need some sun? Go West.
- Want to smoke a joint or 10? Catch a flight to Amsterdam for the weekend.
Prior to 1996, many Irish men and women became PTs as divorce was not allowed. Similarly, laws have brought many same gender relationships to countries where marriage is legal.
Rather than trying to campaign against something they believe in, PTs tend to change their surroundings to ones that suit their views.
This isn’t to say that PTs can’t take a stand against something they believe in – they certainly can. Only they tend to do so when participating makes them happy.
The Negative View
With great freedom comes great responsibility. It’s no surprise that some have abused their situation as PTs. Given the globally “heated” tax situation as well, there’s some understandable negative opinions around flag theory.
Something you may begin to see while living, working and running businesses overseas is that with decreased regulation often comes shady individuals. In more cases than not, this involves a whole lot of people selling snake oil/misinformation.
The days of doing illegal things with money are fast coming to an end. Perpetual travellers I’ve met are highly legitimate business people and likely to be more tax compliant than many everyday citizens who claim made up deductions for a measly discount.
The irony is, while some people assume PTs are up to no good, by being able to drive fast in Germany and gamble in Macau, PTs don’t need to break laws to be their true selves. Instead they are simply clever about where they pursue their fun and games.
Digital Nomads: Half Baked PTs?
So we’ve established that PTs have great privilege in their ability to live the life they choose, 100% legally.
One of the biggest concerns around flag theory is it’s growing popularity in the digital nomad community.
While it is great that entrepreneurs are pre-disposed to “breaking the rules” when it comes to social norms and disruptive technologies, more and more appear to be operating with the logic of “what I don’t know won’t hurt me” when it comes to tax.
While we all need some blind optimism to build a successful business through the rough times, tax laws don’t take your lack of knowledge into account!
Most governments are broke, so they need as much revenue as possible. Where does revenue come from? Tax, duties, levies, fines and many other synonyms for tax.
It has become easier to:
- start a business online,
- incorporate a company in a far away country,
- open a digital bank account on a smartphone,
- live in new communities established in cheaper and cheaper locations, and
- access information on starting a business.
There’s a glaring omission here – it remains just as (if not much more) complex to stay compliant. And in a lot of cases, there’s a huge amount of misinformation out there among digital nomads when it comes to tax. Perpetual traveller tax is complicated!
Slowly this is changing but there’s still a long road ahead for simpler products that suit the needs of digital nomads growing businesses online and making sure they are tax compliant at the same time.
If you’re an international tax lawyer wanting to become a location independent entrepreneur – this is an opportunity!
Perpetual Travelling Is Lifestyle Design at It’s Finest
At the crux of it, PTs are masters of lifestyle design. They look at countries as “service providers”, picking and choosing the best place to live, travel to, get health care, keep their savings, run their businesses and so on.
What I find so fascinating about the perpetual traveller lifestyle is that it seems to be a club, but within this club, there are very few similarities between its members.
For those looking to learn more about perpetual travellers, there are some interesting podcasts on The Voluntary Life:
Possibly the most inspiring PTs I’ve come across in my research is Paul and Vicki Terhorst. Their website shows you a positive attitude towards life and some solid values after a long stint of being PTs.
Are you a PT? I’d love to learn about how you discovered perpetual travelling and what encouraged you to live this lifestyle. Leave a comment below and tell me where you reside, or where you spend your time!
Want to become a PT? Check out this global tax strategy course from my friend Kathleen and set yourself up correctly from the beginning.