Strategies For Compliance For Perpetual Travelers

Financial institutions have to comply with many regulatory requirements.
Often they require an address verification of their customers for KYC (know-your-customers) purposes.

The so called “utility bill” has since become a de-facto standard for address verification.
A utility bill is typically a monthly invoice that shows the consumption of utility services during the preceding month.
Traditionally this relates to electricity, gas, or water. Invoices for cable TV, landline telephone service, or flat-rate internet are also generally accepted.
Invoices for mobile phone contracts are usually not accepted. While flat-rate internet or cable TV have a corresponding, installed connection in at least one residence, this is not the case for mobile phone service.
Depending on the country of the regulator and the provider’s discretion other forms of address verification also also being accepted.

These can include:

  • Account statements
  • Credit card statements
  • Bank reference letters
  • Insurance certificates
  • Governmental benefits,

as long as the home address is clearly visible on the document.

Digitally created documents are generally not accepted.

The documents should be original and printed, even if this is unusual in many countries today.

However these types of documents can easily be faked, by printing, folding and scanned the digitally created version,

Certain countries are designated by regulators as high-risk countries (regarding money laundering).

These include some tax havens such as Panama. While accounts can generally be opened from these countries, often additional requirements are imposed. This normally involves authenticating the applicant’s passport and utility bill.

For authentication, the original document must be available, although a copy of the utility bill that is produced online and printed out is very rarely distinguishable from an original. Attorneys, accountants, banks, notaries, and certain government officials are authorized to perform a simple authentication. In some cases, certification by a notary is mandatory.

The certificate must contain the following information:

– Seal or business address and contact number

– Registration number / employee number (if applicable)

– Name

– Signature

– Date of certification

The actual purchase or rental of a house or an apartment is the best long-term strategy.

But for the beginning or for low-income situations there are other methods available.

You can set up and pay for a utility bill even if you don’t live in a specific location.

After a little while abroad almost everybody has friends or acquaintances who can help with this matter.

The perpetual traveler can simply pay someone elses internet bill for example.

The perpetual traveler gets his utility bill, and his friend gets free internet.

In turn the friend can also forward his mail, if something like a letter, a credit card or a pin actually has to be delivered to the provided address.

In many countries this is a simple process. The property owner just has to go to the notary. In many countries in Latin America this is a common procedure.

If the client is not present, the process can often be done via power of attorney.

With the certification of a notary, the corresponding supplier contract can then simply be transferred to the client.

The property owner or tenant can make the payment himself or sign it over to the client.

And now it gets underway. Even if the transfer of an internet bill is not possible in certain countries, can someone simply have a second line “installed” for a friend, or even “into the blue”? There are numerous possibilities here for a resourceful Perpetual Traveler. You do not even need a close friend – you can often ask a hostel or pension owner in your host country.

An entrepreneur may now ask why no one has started a business based on this, including myself. The problem lies in the high risk that such a business may take in relatively little revenue. Finally, this kind of utility bill is also popular with people who do not want to provide proof of only one place of residence but have none at all. Criminals of all kinds would know to use such a service even though it allows the offerer no good options for verifying customers. Anyone offering a utility bill cannot demand one themselves.

If this utility bill is then used for illegal activities, its user may quickly find himself behind bars for aiding terrorism, money laundering, tax evasion, or the like. Therefore I’ll leave it as a request that you use this trick to obtain a utility bill only for legal purposes.

There are also creative ways to obtain a utility bill without renting or buying a house. The costs here can be between €50-100 per month, and you usually have to pay them yourself.

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Tax Identification Number, Tax Return, and Co. – the best long-term setup for the Perpetual Traveler

Finally, obtaining a utility bill without having a legal residence has been considered by even the most uncreative bureaucrats and regulators. And so financial institutions are introducing more indicators which attest to having a residence in a given country. Giving a tax number is especially popular for this.

There are two ways of getting a tax number in any given country, other than making one up (please don’t do that): immigration or acquiring a permanent residence permit, and the triggering of a limited tax obligation. These options ideally should be combined for the long term, since in terms of the regulation spiral, local personal identification is essentially presumed to be a given.

Obtaining a Permanent Residence does not always mean that a tax identification number is automatically attached. In many countries with territorial taxation, it is not so easy to get a tax identification number if you do not operate in that country at all and therefore pay no taxes. In these cases you should inquire whether the country assigns a tax identification number to its permanent residence permit.

While Paraguay, for example, in general offers the easiest pro-forma residence, obtaining a tax identification number involves certain obstacles if you have nothing to pay tax on. On the other hand, in Panama you are assigned a tax identification number with a resident personal ID card (for which a third visit to the country is necessary), but you are then obligated to file a tax return if you live in Panama for at least 183 days out of the year. A Permanent Residence does not establish tax liability, but in most cases it is sufficient to avoid basing your life in other countries.

Again, a tax identification number does not obligate you to file a tax return. Increasingly you will find that banks will demand a tax return initially and then yearly, even if you do not have to prepare one in your country of residence. For the banks and countries it is not so much about determining whether you have paid taxes, but about the income you have generated. A tax return generally cannot be faked since it is independently verifiable and gives (under threat of punishment) exact insights into the income and financial circumstances of most citizens. And the government must know whether it is even worth it for a foreigner to base their life in the country.

Although a combination of Permanent Residence with a tax identification number and utility bill from a third party is a completely acceptable solution at present, it is not absolutely the best one.

Owning foreign real estate is the best way long-term solution to achieve compliance

A property outside of their home country will generally allow a perpetual traveler to generate every required document to be fully compliant during KYC-procedures. Those documents include utility bills, a tax id and potentially even a filed tax return.

Owning an actual property outside their home country is the best long-term solution for perpetual travelers to be fully compliant with all current and future regulations. It also adds no additional cost and can create extra income.

It does not have to be an expensive piece of real estate. Any house or apartment will do.

A personality owned property should make it trivial to acquire a level 3 utility bill. In case the apartment is being subrented, and the tenant pays the bills, you should be able to at least register internet, phone oder cable tv service.

Additionally the property can serve as a depot, an address to receive mail, or as a safe heaven / last retreat in the case of a crisis.

Strategically creating a limited tax liability by renting out foreign real estate

The local rental income creates a limited tax liability in the country of the property.

While in many countries proprietors can easily avoid paying taxes without the fear of consequences, technically the income will always be taxed in the corresponding country.

A leased out apartment makes it possible therefore to receive a tax id and to file a tax return.

Conveniently it only creates a limited tax liability. To that end only the locally generated income and not the worldwide income has to be declared.

The tax return can therefore be used as proof of a tax residency, without revealing important information about our financial situation.

The property can also help to acquire a permanent residency. In many countries buying real estate of a certain value is a prerequisite to acquiring a permanent residency. The property can therefore also help you with this, in case a proof-of-residence is ever required. But it also allows the perpetual traveler to obtain all the necessary documents required for international company formations and to open bank accounts, but without officially tying him to specific countries. And it will be almost impossible to prevent this through more restrictive regulations.

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