There are many reasons you should choose Panama for offshore investment, but for each person, these reasons may differ a bit. It’s all about finding the right fit for your money, and the right climate to invest in. Luckily, Panama is ripe for offshore investment these days, making the choice easier, and of course, more profitable. Panama has one of the fastest growing economies in all of Latin America, and has lots of benefits to offer the offshore investor.

Here are 5 reasons that we think should push Panama to the top of your offshore investment list:

1. Stable Currency; Low Inflation. One of the biggest issues with investing offshore in Latin America is the value fluctuation of the local currencies, as well as high inflation. In Panama, this isn’t the case. Panama uses the US Dollar, meaning that their currency is the strongest out of all the currencies used in Latin America and the Caribbean. They also have low inflation rates, paralleling the US to a degree, keeping investments safer, and less prone to devaluation.
2. Location. While technology has made location less important than it used to be, you can’t undervalue the benefits of a strategic location. When you choose Panama for offshore investment, you are choosing to be in one of the most strategic locations for business in the western hemisphere. With the Panama Canal serving as a logistics focal point, plus a major airport hub and proximity to the US, Panama’s location is ideal for both short-term and long-term investors.
3. Strong Banking Sector. After years of favorable laws for foreign investment, Panama has built a reputation as a premier international banking city. There are over 100 banks operating out of the small Central American nation, giving you lots of choices for who you want to manage your money, and facilitate your offshore investments. Panama’s banks have very favorable interest rates and opening a bank account as a foreign investor is much easier than in similar countries in the region.
4. Great Real Estate Market. A good sign of economic stability and high future expectations is having a strong Real Estate market. In this category, Panama is soaring. There are more new business and residential properties being built in Panama than any of its neighbors, per capita. Plus, available properties are plentiful and make great investments. It also makes it a great place to buy or rent property to live, should you choose to relocate to Panama as part of your offshore investment strategy.
5. Cost of Living; Cost of Labor. The cost of living in Panama is fairly low when compared to similar countries and North America. This makes for a strong consumer market, low personal overhead, and even lower business overhead. Labor costs are low, and favorable taxes means less red tape when trying to plan a new business or help grow an existing one. A low cost of living is also beneficial if you choose to relocate to Panama while you choose your offshore investment, or if you want to live in Panama permanently.

For more on how to find the best Panama offshore investment for you, contact us today. We can help you step-by-step through the processes you need for your specific situations, and help find the best solutions for your investment plans. 

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The post Don’t Worry, Panama is Still a Tax Haven appeared first on POLS Attorneys.

The term “tax haven” commonly refers to countries whose laws allow for anonymous ownership of legal entities like corporations, private foundations and trusts, as well as limited taxation on specific types of corporations. Tax haven also refers to countries with bank secrecy laws which protect customer’s accounts from being spied on by outsiders. Panama has been referred to as a tax haven country due to its strong bank secrecy laws and anonymous legal entities, including Panama corporations and Panama foundations. However, Panamanian banks are now obligated to provide banking information in certain cases due to the information exchange agreements that are now in place with several countries.

The best tax haven countries are those that have both high banking secrecy and anonymous legal entities. Anonymous ownership of an “offshore” corporation (offshore because it is outside the owner’s home country) can be achieved in several ways. Some tax haven countries allow what are known as “nominee” board of director’s members and corporate officers such as the President, Treasurer, and Secretary. The term “nominee” means that a person is nominated by the corporation to serve in that capacity rather than naming the true owner as a board member or officer for the corporation. Usually an attorney or law firm residing in the “tax haven”, which formed the corporation, supplies three of its employees to serve as the nominees. Some owners may worry that these tax haven nominees could control the corporation. This can be avoided by the corporation’s bylaws dictating their limited role and the power resting with the majority shareholders. Some tax haven law firms even provide the owner with pre-signed, undated letters of resignations from all of the nominees. This allows the owner to be able to replace the nominees at any time. This is in fact what we do for our clients.

Another method used by a few tax haven countries is the usage of “Bearer” stock certificates where the actual stock certificate simply says “bearer” rather than an actual person’s name. This means the bearer of the majority of shares is the true owner of the tax haven corporation. Panama is one of the few remaining bearer shares countries. Hand the bearer shares to a third person and now that person is the owner of the Panama tax haven corporation. Panama recently changed the law requiring that all bearer shares certificates must be held in custody by the corporation’s resident agent.

Panama Tax Benefits

Tax havens are called that because they normally do not impose any type of income or corporation tax on their offshore corporations, private foundations, or trusts. A true tax haven effectively levies a 0% tax rate on offshore corporations. Some tax havens will not tax any income made outside of the country but will tax income derived from the sale of products or services to people or companies residing within the country. This is usually known as “territorial” income subject to taxation. Panama is a territorial income tax country. Other tax havens do not have any taxes on their offshore corporations, foundations, or trusts no matter where their source of income is from.

Read more about Panama Taxes

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Panama income taxes are a burden to many individuals and businesses alike. So, why pay more than you have too, right? There are many ways for you to lower your Panama income tax, and of course all our recommendations are legal. We’ve put together a list of 7 ways to lower corporate income tax in Panama. Enjoy!

1. Earn Income Outside Panama

Since Panama is a territorial based tax system which means that all income earned outside its borders are tax free; conduct all of your Panama corporation’s business outside of Panama. This can include offering products and services on the internet to anyone not living in Panama. Conduct international trade of goods between different countries other than in Panama. Panama corporations can also engage in different types of stock market trades along with Forex, commodities, securities, government bonds from companies not located in Panama.

2. Dividends Tax

Corporations conducting commercial and industrial businesses inside Panama must withhold 10% of the dividends paid out on their Panama profits as a withholding tax. Corporations located inside the Panama Free Zones (except for the Special Economic Area of Panama Pacifico) along with registered Multinational Regional Headquarters, companies must only withhold 5% on dividends distributed. Distributions of interest paid or credited on cumulative preferred shares are not subject to dividends tax if they meet certain requirements.

3. Capital Gains

Normally, net gains from the sale (within the territory of Panama) of Panamanian negotiable instruments, Panamanian securities, and Panamanian real property are considered capital gains. If the capital gains are a result of the Panama corporation’s normal business, the capital gains will be taxed at the corporation tax rate which is at a maximum rate of 25%. However, if the capital gains are not a result of the corporation’s ordinary business activities, the capital gains will be subject to a reduced 10% rate.

4. Transfer Tax

Panamanian real property title transfers are required to pay a transfer tax of 2% of the greater value stated in the deed or the cadastral (Panama real property tax office) value on the transfer date. Panama corporations can sell the corporate shares and avoid the 2 % title transfer tax as the corporation maintains legal title to the real property. However, the sales of corporate shares are a capital gain subject to a 10% tax. The purchaser is required to withhold 5% as an advance payment and submit it to the Panama tax authorities.

5. Commercial License

Every Panama corporation conducting industrial or commercial business in Panama must register a Notice of Operations (Commercial or Business License), unless specifically exempt. There is an annual license tax at a rate of 2% of the corporation’s net worth up to a maximum of $60,000 USD. However, corporations located in the Colon Free Trade Zone and registered Multinational Regional Headquarters do not have to register a Notice of Operations. But, corporations operating in the Free Zones must pay an annual 1% Operations Tax on the corporation’s capital (minimum of $100 USD to a maximum of $50,000 USD).

6. Life Insurance

Corporations can purchase “Key Man” life insurance policies through Panamanian insurance companies on the key individuals that make decisions for the corporation (such as directors, officers, managers, or shareholders), and the premiums are fully tax deductible.

7. Business Deductions

Panama corporations can deduct all typical business expenses as a tax deduction. This includes purchasing equipment, supplies, and vehicles used in the business operations. Rental of leased business premises are also deductible.

We have provided you with 7 ways to lower corporate income tax in Panama. Contact Us for consultations on Panama taxes in order to minimize income tax in Panama, as well as forming a Panama Corporation whether conducting business in Panama or outside of its borders.

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A Panama private interest foundation can protect your assets in several ways. A Panama foundation is a unique legal entity dating back to when wealthy European families created them as an inheritance tool in Medieval times. Liechtenstein, Luxembourg, and Switzerland enacted laws creating private foundations for personal usage. Panama used parts of these three country’s laws to create a unique Panama Private Interest Foundation law back in 1995.

Panama Private Interest Foundations are different from corporations because they don’t have corporate stock certificates (shares) nor officers or a board of directors and don’t engage in active businesses. A Private Foundation is a legal entity without owners such as partners, shareholders, or participants; traditionally its purpose is to benefit a specific group of individuals.

1. Lawsuit Protection

A Panama foundation can strip you of all ownership of assets. By not owning assets such as vehicles, real properties, jewelry, art objects, antiques, airplanes, boats, securities, and even bank accounts, you can become “Judgment Proof”. When you own nothing, you will not be a victim of civil lawsuits which are out of control in the U.S. and other countries. Civil lawsuits are a menace to society because juries often award too much to the plaintiffs. A good example is the famous $2 Million USD judgment against a McDonald’s franchise because a customer in their drive through window spilt hot coffee on his lap while being seated in a car. There are many more huge judgments arising from civil lawsuits which have bankrupted the defendants. Putting ownership of all assets into the name of a private foundation is one way to protect your assets from frivolous lawsuits.

2. Perpetual Estate Planning

A Panamanian Private Interest Foundation can provide a low cost, fast process for passing on your assets to your heirs who will then pass on the assets to their heirs and so on. Simply leaving your family a will and testament is not a very good way to protect your heirs when you pass away. That is because a will usually must be put through a civil court probate proceeding. Probate is something your family should avoid because it is time consuming and expensive with all of the lawyers, appraisers, court costs, and then payment of estate taxes. It even gets worst if some distant relative decides to challenge the will in probate court. If all of your assets are owned by a private foundation you will have no assets to probate. The foundation will continue to exist while your heirs (known as the beneficiaries) can quickly assume control of the foundation.

3. Avoiding Estate Taxes

Another way in which Panama Private Interest Foundations protect your assets is by legally avoiding the payment of the estate tax. Many countries have a tax which is levied against the value of the assets which have been through probate. If there is no need to probate because no assets were left by the deceased there will be no estate tax. The assets held by the private foundation will not be subject to an estate tax because the foundation will never go through a probate.

As you have just read, there are three ways how a Panama Private Interest Foundation can protect your assets. Read more about Panama foundation or contact us to set up your own Panama Private Interest Foundation.

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Asset Protection for business owners is defined as a system for taking all assets from every business owned by an individual or a family and changing the ownership to legal entities in another country.  These legal entities are often offshore corporations in tax haven countries.

A tax haven country is one which either has a very low tax structure, no taxes at all, or only tax income derived from within its borders.  Asset protection for a business owner who prefers avoiding income taxes completely involves choosing one or two tax free countries.  For instance, Panama is considered a tax free country because it does not impose an income tax on income earned outside its borders.  A Panama call center only handling customers based outside of Panama can make all of its earnings totally income tax free.  The same goes for online businesses or companies involved with trades between companies based in other countries.  Tax havens provide excellent asset protection for business owners.

Legal entities which can provide asset protection for business owners include corporations, private foundations, and trusts.  These legal entities are often referred to as offshore corporations, offshore private foundations, and offshore trusts.  The most popular are the offshore corporations as they are perpetual, can do business, and in many tax haven countries can be anonymously owned for better privacy.  They can also own many different assets and can open offshore bank accounts and offshore brokerage accounts to conduct different types of investments.  Panama has laws protecting the privacy of individual and corporations bank accounts by making it a crime for any bank employee to divulge any information about a bank account to an unauthorized person or agency.

Besides lowering taxes, offshore asset protection for business owners provides a shield against lawsuits filed against the business from jeopardizing the individual’s and family’s assets from being seized to pay off a civil court judgment.  This is accomplished because the individual and family members are not the owners of the business which is being sued.  The business is also shielded from being dragged into lawsuits filed against the individual and family members because they do not own the business.  Lawsuits in the U.S. and other countries are a huge problem as people and businesses can be sued for the silliest reasons.  From spilt coffee onto the lap of a McDonald’s drive in customer resulting in nearly a $3 Million judgment to burglars and thieves suing their victims for defending themselves in their homes to drunk drivers suing the owners of cars they crashed into.  Asset protection for business owners shields both the businesses and their owners from lawsuits.

Another benefit of asset protection for business owners is that it provides global estate planning so that control of the businesses can be perpetually passed onto the individual’s heirs and then to their heirs.  This is accomplished by setting up different offshore corporations to not only own the businesses but all of the assets of the individual and the family.  Panama has an advantage over other countries by having a unique law establishing a Private Interest Foundation which can own all the corporate shares of these offshore corporations.   This is a perpetual legal entity allowing control over all assets to pass onto the heirs and their heirs.

Contact Us for all your Asset Protection for Business Owners Needs.

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