Panama

Incorporating in Panama provides a long list of tax incentives as well as many other benefits for an IBC.  A few of these incentives and benefits include:

• Taxation in the Republic of Panama is based on the principle of the source of the income. Therefore income obtained from operations performed abroad is not income obtained from sources within Panama and therefore is not taxable, under Panama law.
• Panama offers the strictest banking and financial secrecy laws available in the world, therefore providing legal protection to your assets and your identity through the confidentiality of business and banking transactions.  Most other offshore jurisdictions, including the Bahamas, have vowed down to recent legislation that the U.K. has passed, which has begun the removal of bank secrecy in those British colonies around the globe.
• There are no currency restrictions in Panama.  The U.S. dollar is the circulating medium. Panama is home to one of the world’s largest banking centers.  The relaxed banking laws make it easy to move funds in and out of the country.
• There are no requirements to file any reports with the Panamanian government regarding any off-shore activities, except the annual government franchise tax to remain in good standing.
• It is not necessary to have a paid-in capital, nor time limit in which the authorized capital must be fully paid.
• The Republic of Panama has no reporting requirements.  Since the Republic of Panama has a territorial tax system, while the income is earned offshore or from exempt sources, such as interest on bank accounts, then the corporation is not required to present tax returns or audited accounts

It should also be noted that neither the directors nor the officers need to be shareholders.  There is also no Citizenship or residency requirements or restrictions with respect to Owners, Directors and Officers of the company.  In the Republic of Panama, there are no international trade tariffs, no annual tax return requirements, and no import/export quantity limitations.

The Republic of Panama Tax Benefits Include:

• No income tax.
• No capital gains tax (not including the sales of real estate located in Panama).
• No interest income tax.
• No sales tax.
• No tax on issuance of corporate shares.
• No tax to shareholders.
• No stock sale or transfer tax (excluding where sale of shares is for transfer of Panama real estate).
• No capital stock tax.
• No property tax (with the exception of 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.

Banking Secrecy Laws

Article 74 of Decree 238 prevents the Republic of Panama banking commission from conducting investigations on individual banking clients.  Any information the bank uncovers while doing its regulatory operations cannot be revealed to any person or authority, unless subpoenaed (court order required) by a Panama court order.  Anyone found violating this order is subject to Article 101 which states:

” Any person who furnishes information in violation of this Cabinet Decree, or who violates any of the prohibitions established in it, for which no specific punishment is provided for, shall be subject to a monetary fine as determined by the Banking Commission, without prejudice to applicable criminal and civil liabilities.”

Article 170 enforces these laws indefinitely:

“Any person that in the course of his occupation, employment, profession or activity obtains knowledge of confidential information that in the event of being made public could inflict damages, and such person discloses that information without the consent of the concerned party; or in the case that disclosure of such information were not necessary to safeguard a higher interest, shall be punishable by imprisonment of 10 months to 2 years or a comparable fine, and the inability to practice his occupation, employment, profession or activity for not more than 2 years.”

There are many other countries that allow the use of IBC’s (such as the Bahamas the Cayman Islands etc.) However, we highly recommend the Republic of Panama due to its lenient tax laws and banking transaction security laws (i.e. the safety of all funds wired in and out of the country).

The only time in which the Republic of Panama may search into your past, and this only applies under extenuating circumstances, is if a person possesses a criminal record particularly if under the suspicion of money laundering, drug dealing, child pornography and terrorism charges.  Prior to this however, the Panamanian government would urge the state in which said person resides in to handle the issue as domestic as opposed to having the Panamanian government intervene. These all fall under the jurisdiction of the Mutual Legal Assistance Treaty (MLAT). There is also the newly formed tax information exchange agreement (TIEA), which provides the United States the powers to gather any information necessary to enforce its tax laws.  Therefore, they are able to access all banking records that are in Panama with permission of the Panamanian government.