A Montenegro Family Office, Tax Optimization and Wealth Protection

The Baron had a large family and multiple banking business, which he spread out amongst five jurisdictions to diversify risk and protect him against the caprice of kings, who wanted to seize his assets and kill his family for lending them money.

Such diversification into five jurisdictions, combined with robust asset protection mechanisms, came to be known as the Five Flag Theory and used by ultra-wealthy families to protect and grow their money.

The technology of creating your own family office has been developed by families like the Rothschilds over time and here we will explain the mechanisms. Today, a family office is essential for anyone, even with medium wealth.

What risks do wealthy families face?

In today´s world, with an ever-increasing government control, high taxation, violence, and corruption, wealthy families are the main targets for governments and criminals.

You need only to have a basic knowledge of history to know that the western world is bathed in blood, corruption, lawlessness, crime, revolution, and political prosecution. At any moment, any country can become Venezuela. The whole continent is so unstable because arguably there is no real government as such, but simply coalitions of feudal lords supported by armed gangs.

The problem is such feudal lords often argued between themselves and constant currents of communism, organized crime and popular unrest are awaiting. We have recently witnessed popular uprisings and riots in the United States. Moreover, things are about to get even worse because of the following factors:

1-Ravages of the coronavirus

The coronavirus will only increase the pressures on the already unstable financial systems, so rulers will bow to popular uprisings and pressures to increase taxation and confiscation of wealthy families’ assets.

At the same time, COVID-19 presents a real threat to the United States because of the extreme measures taken by the government.  In some cases the government has responded to the pandemics by locking down their population, thus removing basic freedoms like freedom of movement.

2-Arbitrary taxes

In the US and Europe, taxation is arbitrary, which can equal confiscation since you pay for whatever the government tax collectors say you need to pay. There is no rule of law. As these countries face more financial pressure, it is likely there will be arbitrary confiscations of wealth.

What is a family office and how it helps avoid risk?

Going back to Baron Rothschild, who segregated his family’s wealth into five separate jurisdictions and was able to avoid attacks and confiscation by Kings, the family office is basically a special structure that is designed to grow and protect the family’s money from risks. The concept is so successful that family offices are growing by 30% a year and, while they have many variations, they usually have the following components:

Step 1:

The family obtains a second passport in a suitable country (Malta, Cyprus, Vanuatu, the Caribbean) in order to achieve permanent freedom for themselves and their descendants.

Step 2:

The family obtains a physical tax residency in a place that has a low personal income tax and no fiscal controls.

Step 3:

The family creates a rock-solid asset protection structure (usually a trust, foundation, or fund) to hold their wealth and assets.

Step 4:

The trust owns an operating company (or companies) which trade, invest, and work as the permanent family office with either a retired or permanent team of lawyers, wealth advisers, accountants to advise on the wealth management strategies.

Step 5:

The operating company invests in various assets and establishes bank accounts in safe locations (again with diversification in mind).

Such a structure is permanent, intergenerational, and, if properly planned, able to help families avoid all the major problems and risks, including divorce proceedings, inheritances and wealth taxes, government and political attacks, succession problems, etc.

Why is Montenegro a good place to have your family office?

Experts in family office establishment will tell you that the best places to establish family offices are where there is a small population reliant on foreign investment into its financial sector and where, historically, fiscal and personal freedom has been valued.

They will also say you need to plan ahead to make sure that such a territory will not tolerate things like communism, socialism, high taxation, and crime. In other words, you need to find places where the rich can feel safe and places that welcome wealthy investors. There are not many such places in the world, but Montenegro is certainly one of them.

The reasons why Montenegro is a top choice include:

1-Prestigious citizenship program

The Montenegro Citizenship Program is one of the best and most prestigious in Europe with only 2,000 places reserved, which will soon be taken up. Wealthy families find this to be the Switzerland of the Balkans with a high degree of high nets moving here and extremely good lifestyle opportunities in the center of Europe.

Due to its size and border control, Montenegro has almost no cases of COVID-19 at the time of writing. It has the fastest-growing tourism economy in Europe. Montenegro, for example, also does not extradite its citizens, so this is perfect for political refugees from Venezuela who have had their assets wrongfully seized or who are against the Venezuelan Government.

2-Advantageous fiscal system and no CRS

Personal and corporate tax is extremely low (9%) and tax residency in Montenegro provides great advantages to families to reduce personal income tax. Indeed, the tax rates are amongst the lowest in Europe.

Thus, opening a personal bank account as a Montenegro citizen and tax resident is easy. Further, as a tax resident and citizen, there is no CRS exchange with other countries. There are several excellent banks in Montenegro with highly professional support and safety.

3-Open to trusts

Although Montenegro does not have a trust regime, it has no problems in citizens holding their assets through trusts. One of the best regimes is the Madeira trust regime, which will be recognized by Montenegro’s banks.

4-Great investment opportunities

The operating company in Montenegro will have very low corporate tax rates (9%); in fact, the lowest in Europe. It has excellent banking and amazing investment opportunities with the fastest-growing tourism sector in Europe. You also have access to high-level professionals to run your family office whilst you go yachting in the most beautiful waters on earth.

5-Quality banking

Montenegro’s banks are very loyal to their citizens and residents and offer excellent banking services and a high degree of secrecy. Since there is an increasing influx of high net immigrants, Montenegro is expected to have ever-increasing banking options for the family office.

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