…and other
ways to profit from an international lifestyle
by Gary Scott
It was
strange to be sitting in the back seat of a Rolls Royce, papers laid
out in front of me on a folding picnic table, writing an article. But as
I gazed at the eleven hand-stitched Scandinavian hides that made the seat
covers, and as I ran my hands over the rare, polished, Italian burl that
adorned the car, I felt inspired. And knowing that my Rolls, having traveled
100,000 miles, would run many more years and grow in value as well, inspired
me even more. Best of all, I bought that Rolls for less than the price
of a new Chevrolet.
That inspiration
took place nearly twenty years ago when in my global travels I discovered
a distortion (and a weak British pound) that allowed me to buy a shiny
Rolls Royce, and import it duty-free back into the United States—for a
mere $14,000.
I gained much
more than a luxury car from that loophole. I gained the understanding that
distortions could turn my international journeys from expenses into moneymakers.
Though that
Rolls has long since been sold (at a profit I might add) and that particular
loophole has changed, you can still find similar distortions that will
not only pay for your travels, but could become a profitable business.
Over the past twenty years, I have gained enormous tax and business benefits
from my travels…and I want to show you how to do the same thing.
Two distortions
that remain
Two things
help make your penchant to travel worldwide profitable: taxes and currency
fluctuations.
First, let’s
look at the tax benefits of global business activities. A recent front-page
article in the USA Today points out how the two current U.S. Presidential
candidates have very similar economic policies.
The article
stated that the reason behind this is that U.S. economic policy is now
controlled by the realities of the global economy. These economic realities
dictate what U.S. administrations do and also dictate a part of the country’s
tax policy, unchanged in 20 years (and unlikely to change soon).
This policy
gives U.S. business people who conduct business abroad a better deal than
their poor brothers who operate only in the U.S. The tax law essentially
leaves non-U.S. companies totally free of U.S. taxes (even if owned by
U.S. citizens). To qualify, your business must 1) not do business in the
U.S. and 2) earn 70% or more of your income from nonpassive sources (passive
sources include rent, royalties, dividends, etc.).
This loophole
is technical and loaded with pitfalls, so don’t run off and start an offshore
company half cocked.
You’ll want
a good international attorney (see my list). But this is a solid loophole
forced upon Congress by the fact that U.S. businesses must be allowed to
compete in global markets to maintain a balance of trade. There is little
chance that this benefit will be eroded in the near future. Anyone with
a desire to build a reasonable business overseas can take advantage of
this fact.
A second tax
benefit, even if you don’t have an overseas company, is that if you take
your trips with the intent of making a profit through business, the cost
of the trip, flight, hotels, etc., can be tax deductible. This tax benefit
is for almost anyone willing to look for business opportunities when they
travel abroad.
Turn your
passion into profit
What type of
business should you start? I recommend you make it something you really
enjoy. Most of us travel for pleasure, so begin your business by turning
your passion into profit. You do not have to make a big deal out of your
business to gain tax benefits. The activity can (and should) be fun, but
if you desire, the offshore business can be kept quite small.
For example,
my mother, a grandma in her 70s, is not a business person in any sense
of the word. Her passion is making and collecting dolls.
Because she
knows the art of making dolls well, she is able to have a very small international
business. She knows that the best doll eyes in the world are manufactured
by a small company deep in the countryside of England. She turned several
of her UK visits (to see me when I lived in the UK) into profitable trips
by buying these exquisite dolls’ eyes there and selling them to her doll-making
friends back home.
The $14,000
Rolls Royce
This example
also highlights the second way to make money with your travels: currency
fluctuations. As currencies rise and fall versus the U.S. dollar, they
create distortions.
When I lived
in England, the pound was very weak (as low as one pound per dollar). This
made my Mom’s doll eyes cheaper in U.S. dollar terms. The pound per dollar
parity also meant when I bought my Rolls for 14,000 pounds—I paid only
$14,000 bucks!
Often a crashing
currency also comes attached with an economic crisis. This creates an even
better opportunity. In the case of my Rolls, I took advantage of an English
economic crunch (which drove the price of luxury cars down and forced many
diehard owners to sell), a weak pound, and a U.S. customs loophole. Three
distortion opportunities like this are the best.So talk to a tax attorney
experienced in international structures, keep and eye on currency fluctuations
(right now the Euro is still relatively weak, although it has moved up
in recent weeks, which helps create European bargains), and look for distortions
relating to fun things you want to be involved in.
1,900% pillow
profits
Don’t make
this harder than it is. There are opportunities all over the world waiting
to be used. Art lovers might get into the business of buying art at auctions
in one country and selling elsewhere. Love to fish or golf? Organize tours
to your favorite fishing or golfing spots. Recently on my latest trip to
Ecuador, my wife Merri stumbled across these amazing, huge herbal pillows,
filled with Eucalyptus, rosemary, pine, lemon, orange, rose, and chamomile.
Having an interest
in aromatherapy, I know that very small herb-filled pillows sell in U.S.
health stores for as much as $39.95. These full-sized pillows in Ecuador
sell for just two dollars! This is a distortion I know I could (if I didn’t
already have more than enough business there) capitalize on. If you love
photography, why not create a book or calendar? The 12 best golf course
in the world (of course you’d have to spend time at St. Andrews) or the
best dozen fishing spots (you’d have to fish for salmon in Scotland), or
the most famous paintings, or the top 12 wine cellars, the list goes on
and on.
Do you prefer
to write? How about creating a travel newsletter or writing a book
about a subject you love? One of my readers, a private pilot, wrote quite
a good book on the best restaurants near small airports. Unique restaurant
guides of all sorts make sense (i.e. the best pubs in Limerick…the ten
best places in the world to get french fries…the most romantic hotels,
etc.) In fact, German business woman Ann LaViolette created an entire global
business based on the idea of Romantic hotels. She published a Romantik
Hotel and Restaurant Guide, which lists romantic hideaways all around the
world. I learned about this business while staying at the Hotel Hermitage,
a quaint, charming inn developed from a 17th-century plantation on the
tropical island of Nevis. We had a lovely balcony overlooking the mountains
and blue sea, with monkeys swinging from the trees. She also hosts weddings
there…we enjoyed watching a plantation wedding, complete with the bride’s
horseback arrival.
Free hotels,
rooms, and meals
This hotel
stay reminds me of one more benefit that can come from your global business. When Merri
and I enjoyed the Hermitage (the rooms normally cost from $190 to $690
per night), our stay was free. We have received free hotel rooms, flights,
tours, meals, and cruises. Real estate developers have even offered to
give us free beachfront lots. So you can gain free fringe benefits when
you spot distortions because having a global business view makes you an
important person, able to help other people’s businesses as well as your
own. This mentality puts you one step ahead of the lot.
I could go
on and on, because this subject is my passion, but the main point is to
grasp the underlying principles: do what you love as you travel the world.
Keep your eyes open for business distortions, especially those created
by currency fluctuations or a by a local economic crisis.
