Selecting an offshore jurisdiction is an integral part of establishing an offshore structure or financial account. The jurisdiction that you choose should have at the very minimum, the following 10 characteristics:
1. Advantageous Fiscal Platform For Offshore Business – Panama has no capital gains tax on offshore investments, no interest income tax on offshore bank account interest, no offshore income tax, etc.
2. Favorable Incorporation Laws – the corporate laws of the country should enable you to hold “Bearer Shares”, have directors from any country, inexpensive, and be able to incorporate Private Interest Foundations like Panama does.
3. Stable Currency With No Currency Restriction Regulations – the currency of the country must be stable, and there should be no restrictions on the movement of funds in or out of the country, and your offshore bank should be able to hold your money in any major currency.
4. Strict Privacy Laws – there should be strict privacy laws that protect your banking information and corporate book information.
5. Stable Government – the government of the country should be a stable democracy. The country should also be safe to visit.
6. Stable Economy – the economy of the country should be stable, with consistent growth and low inflation.
7. Excellent Banking System – the banking system of the country should be advanced in areas of international banking regulations, infrastructure, government auditing, and technology.
8. Excellent Communications System & No Natural Disasters – the communications systems of the country should be technologically advanced in comparison with first world countries, and the country should be located in a region that is free of environmental / natural disasters (hurricanes, tornadoes, earthquakes, tidal waves, etc.), so communications are never severed or problematic.
9. Language Compatibility – the language of the country should be suitable for your understanding.
10. Time Zone Compatibility & Close Location – the time zone of the country should be such that you can contact your offshore provider or financial institution during your normal domestic business hours & fly to the country quickly (same day) if necessary to handle urgent business or financial needs.
After careful research, you will find Panama to be the ideal jurisdiction for your offshore needs, since Panama meets ALL of the above criteria! The Panama corporation law was promulgated over 80 years ago and has since been copied by many of the other tax haven nations. Panama is one of the most popular places in the world to incorporate, with currently over 500,000 registered entities. Panama also offers the Panama Private Interest Foundation, which is one of the most useful asset protection and estate planning vehicles available today.
Panama Offshore Benefits and Advantages
1. Advantageous Fiscal Platform for Offshore Business: Non-resident offshore Panamanian Corporations (Panama IBC’s) and Private Interest Foundations do not pay tax on offshore income.
- No income tax of foreign earned income.
- No capital gains tax (except on sales of real estate located in Panama).
- No interest income tax.
- No offshore sales tax.
- No tax on issuance of corporate shares.
- No tax to shareholders.
- No stock sale or transfer tax (except where sale of shares is for transfer of Panama real estate).
- No capital stock tax.
- No offshore property tax (except on real estate located in Panama).
- No estate tax.
- No gift tax.
- No stamp tax.
- No succession tax.
- No inventory tax.
- No municipal tax.
- No state tax.
- No federal tax.
2. Panama offers the most favorable and most flexible incorporation laws available in the world. Private Interest Foundations are also available, and are one of the most widely used estate planning structures in the world today.
- Panama is the registered domicile for over 500,000 corporations & foundations, making it the second most popular jurisdiction to incorporate in the world, next to Hong Kong.
- Panama does not impose any reporting requirements for non-resident offshore Panamanian corporations.
- Panama does not allow “piercing the corporate veil”.
- Panama corporations share certificates can be issued in Nominative or Bearer form (anonymous form of ownership), with or without par value.
- Panama corporations do not require Paid-In Capital, nor is there a time limit in which authorized capital must be fully paid.
- Panama corporation’s directors, officers and shareholders may be of any nationality and resident of any country.
- Neither the directors nor the officers of Panama corporations need to be shareholders.
- Meetings of directors, officers, and shareholders may be held in any country and accounting books may be kept in any country.
- It is not necessary for the interested parties to be present in Panama for the purpose of establishing a corporation.
- Panama offshore corporations conducting business outside of Panama do not require a commercial license for offshore business activities.
3. Panama’s circulating currency is the US Dollar and Panama has no currency exchange controls or currency restrictions so funds can flow in and out of the country freely.
- Panama uses the U.S. dollar as its legal tender (currency), instilling tremendous fiscal and monetary discipline while keeping inflation very low – under two percent for the last 40 years.
- A dollar economy insulates Panama from global economic shocks. During the Asian monetary crisis of 1998, Panama became one of the healthiest economies in Latin America.
- No currency exchange controls. Panama has no restrictions on monetary remittances abroad, including dividends, interests, branch profits and royalties.
- No restrictions on funds flowing in or out of the country in any currency.
4. Panama continues to maintain what we consider to be the most solid banking and corporate book secrecy laws in the world, which are engraved in its’ constitution. It is clear that Panama remains the most secure offshore financial center, where privacy and confidentiality is not only respected, but vigorously protected by constitutional law. Panama has several double taxation treaties, which are beneficial for foreign investment in Panama, however, bank secrecy laws in Panama remain in effect.
- Panama offers the best bank secrecy laws in the world.
- Panama offers the best corporate book secrecy laws in the world.
- There is no such thing as “piercing the corporate veil” in Panama.
- Revealing banking information to third parties is a crime, punishable by prison.
- Panama Corporations offer “Bearer Shares”, allowing shareholders to maintain 100% anonymity and privacy.
- Panama Private Interest Foundations allow for Private Protectorate Documents and Private Letters of Wishes, enabling controllers (Protectors) and beneficiaries of Private Interest Foundations to remain 100% anonymous and private.
5. Panama has what is considered by government analysts to be the most stable government in all of Central or South America.
- Democratic government since 1990. The Government of Panama is headed by the executive branch, which is composed of a president and two vice presidents, democratically elected for a five-year term by direct vote.
- Mireya Moscoso was the Panama’s first female president and led the country at a moment of great historical importance as the Panama Canal began a new era under Panamanian administration. As of this writing (June 2010), the president is businessman Ricardo Martinelli (whose term will end in 2014), and he is a right wing, pro-business advocate, with commitments to make Panama into “the best place to do business in the world”.
- The Panamanian military was abolished by constitutional amendment in 1994, and the government still has a unique security arrangement with the U.S. due to the Neutrality Treaty of the Panama Canal. As a result, the risks of going back to the earlier military regime are virtually non-existent (Source: Euromoney Report/Lehman Brothers, Feb. 26, 1999).
- Stable government with excellent government infrastructure.
- Pro-business government attitude and policy.
- Civil law system.
- Moody’s has issued Panama a sovereign debt ceiling of Ba1 and Standard & Poors has assigned a default-risk rating of BB+.
- Panama is a peaceful country with no military. Unlike many neighboring countries, personal security concerns are limited. Panama has the lowest crime rate in all of Central and South America.
6. Panama’s economy is one of the most stable, prosperous, and most advanced in all of Central and South America.
Panama is home to the second largest international distribution and trade center (free trade zone) in the world next to Hong Kong. Panama’s Colon Free Zone has over 1500 international import/export businesses operating within it, receives more than 250,000 visitors yearly, and generates exports and re-exports valued at more than US$11 billion annually.