• Posted By : Admin
  • Tax havens
  • 23-03-2018
Index [Hide] [Show]

Panama is a fully independent Central American country that enjoys high political and financial stability influenced by the United States. Its privileged geographic location, bordering on the North the Caribbean Sea, on the South the Pacific Ocean, between Colombia and Costa Rica makes this offshore jurisdiction one of the preferred countries for foreign investments. The Panama Canal is another of the country's great masterpieces that attracts foreign currency, increasing the appetite of the investor to make investments in the country.

General information

Official language
English / Spanish
75,420 km2
Form of government
Presidential Republic
Balboa (PAB) and US Dollar ($, USD)
UTC time zone
UTC - 5
Legal system
Spanish Civil Code, with amendments to the Common Law.

Taxes for non-residents in Panama

Panama maintains favorable tax laws for foreign investment in the country. It is considered a tax haven and natural and legal persons that do not reside in the country and whose incomes don´t not come from its territory are not obliged to pay tax. Investors who decide to open a bank account or register a company in Panama will not pay taxes such as rent, corporation taxes, VAT, inheritance, donations and will not suffer the dreaded tax deductions for subsequent years. Investors who decide to invest in Panama and repatriate the money to their country of residence can save on taxes through double taxation agreements.

Characteristics of Panamanian Companies

Types of companies
Private Limited Company (PLC), Limited Liability Company (LTD), Private Interest Foundation.
Share capital
The minimum share capital of PLC is $ 10,000.00. The shareholders do not have to pay it up at the moment of registering the company.
Constitution time
10-12 days
Panamanian companies are exempt from all types of taxes if their income does not come from its territory.
3 director minimum (PLC). The director can be an individual resident of any country.
1 shareholder minimum. The shareholders can be individuals or companies with residence in any country.
Registered and Bearer
Legal address
LPC must have its legal address on the territory of the country. When the director of the company is a foreigner, a registered resident agent must be appointed, whose function will be to receive communications from governmental authorities.
LPC can not be forced to reveal confidential information related to its beneficiaries or directors to the Panamanian or foreign authorities if there is no violation of Panamanian law or judicial order.
Board meetings
Meetings of directors or shareholders are not mandatory and can be held anywhere in the world.
Accounting / annual audit
It is required to keep accounting records for IBC, however, the submission of annual accounts or auditing of accounts is not mandatory.

Financial system in Panama

Financial services
Banks in Panama are specialized in Forex and stock exchange investments. The client may request any type of financial services: checking accounts, savings accounts, credit cards, foreign currency accounts, stock exchange accounts, credits etc.
Limitations of cash payment
There are no limitations on cash payments nor there is exchange control. Banks in Panama can open accounts in numerous currencies Euros, US $, GBP, AUD, CAD, CNY, JPY.
Deposit guarantee
Panamanian banks cover up to $ 10,000 of customer deposits..

Automatic information exchange in Panama

Panama has signed the automatic exchange of information treaty that has entered into force on January 1 of 2018 but has not signed a bilateral agreement with any country.

The signatory countries of the agreement

Year 2017
Anguilla, Argentina, Barbados, Belgium, Bermuda, British Virgin Islands, Bulgaria, Cayman Islands, Colombia, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Faroe Islands, Finland, France, Germany, Gibraltar, Greece, Groelandia, Guernsey, Hungary , Iceland, India, Ireland, Isle of Man, Italy, Jersey, Korea, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Mexico, Montserrat, Holland, Niue, Norway, Poland, Portugal, Romania, San Marino, Seychelles, Slovakia, Slovenia, South Africa, Spain, Sweden, Turks and Caicos Islands, United Kingdom.
Year 2018
Andorra, Antigua and Barbuda, Aruba, Australia, Austria, Bahamas, Barein, Belize, Brazil, Brunei, Canada, Chile, China, Cook Islands, Costa Rica, Curaçao, Dominica, Ghana, Grenada, Hong Kong (China), Indonesia, Israel, Japan, Kuwait, Lebanon, Marshal Islands, Macao (China), Malaysia, Mauritius, Monaco, Nauru, New Zealand, Panama, Qatar, Russia, Saint Kitts and Nevis, Samoa, Saint Lucia, Saint Vincent and the Grenadines, Saudi Arabia, Singapore, San Maarten, Switzerland, Trinidad and Tobago, Turkey, United Arab Emirates, Uruguay and Vanuatu.

The treaty of automatic exchange of information does not affect the fiscal status of the country, that is, if the tax laws in Panama establish that people and non-resident companies pay 0% of taxes, the signing of the treaty will not make it pay taxes in Panama. The treaty of automatic exchange of information is presenting many problems between countries since it is NOT a treaty in which automatic information will be reported to each other or all to all, that is, each country will have to sign a bilateral information agreement automatically with another country. What does this mean? If, for example, France is interested in exchanging information with Panama but Panama is not interested in reporting information to France, there will be NO information exchange and clients privacy will be protected. Currently, 23-03-2018 Panama has not signed any bilateral agreement to automatically exchange information. You can see the updated list of countries that have signed bilateral agreements to exchange information automatically with each other.

The bilateral agreements with Panama

Year 2017
No bilateral agreement has been signed for this year.
Year 2018
No bilateral agreement has been signed for this year.

The countries most affected by the signature of the automatic exchange of information treaties are going to be the countries of high taxation and not the offshore jurisdictions. It is expected that high tax countries sign bilateral agreements with each other with the corresponding problem that these have: competition in investments, tax competition and abandonment of investments in other jurisdictions by countries with lower or no taxation allowing legal repatriation of them to the country of fiscal residence.

Using offshore jurisdictions what can be achieved is a reduction and postponement of tax payments. As a general rule high-tax countries force natural and legal persons to declare all the world's income. But what happens when you have an offshore company and you do not divide dividends or have gone bankrupt? For example, a person has a company and account in Panama, the company has generated annual benefits and the final beneficiary doesn’t want to repatriate them to his country of residence. So what happens? The answer is very simple: there will not be any kind of tax payment until the benefits obtained from Panama reach the territory of a tax residence of the final beneficiary. Therefore, if you are required to report benefits obtained from abroad, it is advisable to inform your tax agency so when you will be offered a tax advantage in your country of residence to repatriate them.

Advantages of Panama

Panama is one of the best offshore jurisdictions to invest for the following reasons: 

  • No tax obligations for non-resident individuals and companies.
  • Legal security guaranteed by law. 
  • Privacy. 
  • Jurisdiction specialized in asset protection and tax planning.
  • Good telecommunications infrastructure. 
  • Little bureaucracy when it comes to obtaining financial licenses, companies formation and bank accounts opening
  • There is no restriction by nationality. 
  • Excellent geographical location. 
  • Economically stable financial center. 
  • Panama is specialized in e-commerce for offshore companies.
  • Economically stable financial center. 
  • Central bank with strict regulations.