Why Panama?

Why Panama?
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. A Full Fledged Tax Haven – Panama has no capital gains tax on offshore investments, no interest income tax on offshore bank account interest, no offshore income tax, no inheritance 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 from anyone, including foreign governments.

5. Stable Government - the government of the country should be a stable democracy and should use the opposite legal system of your domestic country (if your country uses common law, you should seek a country that uses civil law). 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 70 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 offers the following benefits and advantages:
1. Panama is a 100% Tax Haven: Non-resident Panamanian International Business Corporations (IBC's) and Private Interest Foundations do not pay tax on any of their income (as indicated below), nor do they have any reporting requirements to the Panamanian government.
· No income tax.
· No capital gains tax.
· No interest income tax.
· No sales tax.
· No tax on issuance of corporate shares.
· No tax to shareholders.
· No stock sale or transfer tax.
· No capital stock tax.
· No property tax.
· No estate tax.
· No gift tax.
· No stamp tax.
· No succession tax.
· No inventory 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 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 corporations 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.
· 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. With Britain's proposed regulation for removal of bank and corporate book secrecy in the UK offshore territories, 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 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 has no mutual legal assistance treaties (MLAT's) for sharing of banking information with any other nation. (Under the new internationally accepted anti-money laundering laws, they make exceptions in criminal cases of money laundering, drug related crimes, terrorism, etc.)
· 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. Our current president is Martin Torrijos, as of this writing (March 2009), whose term will end this year. Martin Torrijos has been very popular and approved the expansion of the Panama Canal.

· 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 as well as Fitch Ratings has assigned a default-risk rating of BB+/Stable/B as of March 2009. In September 2008, Moody's Assigned a Prospective (P) A2 Rating to the Senior Unsecured Debt Obligations of the Panama Canal Authority in Conjunction with the Expansion Project. The (P) A2 rating pierces the current Country Ceiling of A3 by one rating notch.
· 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.
Why Panama - Colon Free Trade Zone, Panama
Most other tax haven nations such as Bahamas, St. Vincent, Cayman Islands, St. Kitts, Nevis, Vanuatu, Bermuda, Costa Rica, Belize, Isle of Man, etc. are simply tax havens that survive primarily on offshore banking and tourism.

Panama is a genuine international trade and banking center that is well known and respected throughout the world.
· The banking and commercial trade industry is alive in Panama with the US Dollar as its’ circulating currency. There are over 100 international banks in Panama.
· Low inflation - Panama's inflation rate has been less than 2% for the last 40 years, although it has been slightly higher this year (2008).
· Panama's GDP (2008) is over US$19 Billion. In recent years, the service sector has accounted for over 80% of the country's GNP. The Panama Canal is also a large contributor to Panama's overall economic success.
· Panama is at the top of the list of the world's freest economies, according to Canada's Fraser Institute (Economic Freedom of the World: 1998/9 Interim Report, Nov. 1998). Ranked eighth with Australia, Ireland, the Netherlands and Luxembourg, Panama represents an environment conducive for the creation of companies, jobs and prosperity.
· Panama is a member of the World Trade Organization (WTO) and is a beneficiary of the Caribbean Basin Initiative (CBI). Panama has initiated formal negotiations pertaining to free trade agreements with numerous countries and regional groups.
· Panama has been ranked first in Central/South America for low cost of living, operational cost and index of labor by the Tripartite Committee, which consists of the Economic Commission for Latin America and the Caribbean (ECLAC), the Organization of American States (OAS) and the Inter-American Development Bank (IDB).
· Political Risk Services (PRS) placed Panama in the top three countries of the hemisphere with the best risk-investment qualifications.
· The Wall Street Journal/Heritage Foundation's annual Index of Economic Freedom found Panama second in the region.
· Panama's open economy offers the lowest tariffs in the region, which has helped increase foreign investment in both the public and private sectors. There are more than 40 laws and decrees that offer investors special import, tax, and operational incentives. Sectors enjoying these incentives include tourism, export processing zones, mining, reforestation, insurance and re-insurance, agro-industry, petroleum free zones, infrastructure and construction.
· The Investments Stability Law (Law No. 54 of July 22, 1998) guarantees all foreign and national investors equal rights, continuing Panama's long-standing policy of providing a foreign-investment environment that requires no special authorizations, permits or prior registration.
· Major companies in Panama include international names such as Federal Express, DHL, UPS, Price-Mart, Movistar, Kansas City Southern Railways, Continental Airlines, Copa Airlines, American Airlines, ICA (construction), Cable & Wireless, Digicel, Claro Communications, Evergreen, Hutchinson Whampoa, and many others.
7. Panama City is home to the second largest international banking center in the world next to Switzerland. Panama has the most modern and successful international banking center in Latin America, with more than 100 banks from 35 different countries.
Why Panama - Panama City
Panama is the largest international banking center in the world next to Switzerland.
Approximately 100 international banks are located in Panama.

· Panama offers a modern and technologically advanced banking system.
· Panama is one of the most stable banking jurisdictions in the world.
· Thanks to an excellent, diversified economy, and very strict banking regulations, very few banks have failed in Panamanian banking history. The USA, UK, and even Switzerland have had several bank failures within the last 10 years, not to mention many other tax haven's bank failure rates. Even during the recent (2008 - 2009) global banking crisis, not one Panamanian bank has been reported to have any liquidity problems.
· The Panamanian government has enacted strict bank auditing guidelines, to monitor banking practices, credit guidelines, and overall bank administration. Each bank must submit monthly auditing reports to Panama's Banking Superintendence and National Banking Commission, together with the government owned Banco Nacional de Panama (National Bank of Panama).
· The Panamanian banking system is set up to ensure depositors the security of their deposits. The National Banking Commission (NBC) and the Banco Nacional de Panama (BNP) execute the functions of a central clearing bank. The NBC oversees the banking system, sets the reserve requirements and regulates interest rates. The BNP functions as the Panamanian governments principal depository, manages the country's international reserves and is the clearing-house for the banking system.
· Panama's new comprehensive banking law (Decree No. 9) meets the standards of leading financial centers around the world for transparency and regulation, and conforms to the statutes of the Basle Commission.
· Some of the banks present in Panama's banking center are: Citibank, HSBC / Banistmo, Bank of Tokyo, Bank of Boston, Banco Nacional de Paris, International Commercial Bank of China, Banco du Brasil, Societe Generale, Banque Sudameris, BBVA, Metrobank, Banco General, Global Bank, Multi Bank, Banco Aliado, BancoLat, BIPAN, Bank of Nova Scotia, Banvivienda, Credicorp Bank, and much more.
· The Panama Stock Exchange is the fastest growing in the region with an average total trading volume of US$900 million.
· Some of the brokerage firms present in Panama are (some through affiliates): Merrill Lynch, Pershing / DLJ, Paine Webber, Solomon Smith Barney, Credit Suise, EFG Securities, Thales Securities, PanAmerica Capital Group, Financial Pacific, and several others.
8. Panama's communications systems and infrastructure are the equivalent of any first world country such as the USA, Canada, or the United Kingdom. Telephone, fax, internet, and cellular communications are all offered in Panama by the worlds’ largest communications companies.
· Panama has the highest level of communications infrastructure for telephone, fax, internet, and cellular communications in all of Central & South America, including the Caribbean.
· Panama's privatization efforts in the telecommunications sector were initiated in 1995, with the restructuring of the state-owned monopoly operator, INTEL, the subsequent concession to Bell South in 1995 to operate one of the two (2) cellular mobile telephone licenses and the sale of 49% of the shares of INTEL to Cable & Wireless (a UK company) in 1997.
· Cable & Wireless enjoyed complete management responsibility, exclusivity in certain telephone services (including international long distance services) for a period of five years (which expired in 2003) and has a license to operate in the mobile cellular communications sector. Movistar has the second largest share in the mobile cellular communications sector. Digicel and several other companies also operate in the cellular communications sector in Panama.
· Panama has the best access to multiple high-bandwidth continental fiber optic networks in telecommunications infrastructure. The extremely low risk of natural disasters (hurricanes etc.), gives the Panama telecom sector security and reliability of service as well as a competitive advantage over other offshore jurisdictions.
· Panama is extremely easy to access from almost anywhere. Due to its central location in the middle of the Americas, Panamas’ COPA Airlines (partly owned by Continental Airlines) has converted Panama into a major hub for international travelers. Panamas’ proximity to large cities with direct flights from North America, Central America, South America and Europe makes it relatively cost effective to bring in specialist know-how for installation and maintenance. Direct flights are available to Panama from most major cities around the globe.
· Panama's long history as an international banking and services jurisdiction, has resulted in the availability of technical know-how in internet technology and information technology as well as sufficient human resources to install and maintain e commerce operations. The MAYA-1 and ARCOS-1 ring systems link the continental Americas and the Caribbean Basin, which was completed in December of 2000.
· All the preceding advantages, incentives and infrastructure place Panama as an ideal location for: Internet Service Providers, E-Commerce Providers, Applications Outsourcing ASP, Broadband Content Providers, New Media Content Providers, and Exchange Traffic.
9. Panama's official language is Spanish, however, English is the second most widely spoken language. 8 out of 10 Panamanians living within the banking sector of Panama City are bi-lingual in English and Spanish.
· English is a widely spoken language in Panama.
· 9 out of 10 educated Panamanians have traveled to the USA.
· Panama has a very high literacy rate in comparison with other Central and South American countries.
10. The Republic of Panama is located at the narrowest point of the Central American Isthmus, which connects the continents of North and South America. It is just 2.5 hours by air from Miami, FL, USA and located in the same time zone as the U.S. East Coast (five hours behind Greenwich Mean Time).
· Panama is located between Costa Rica & Colombia.
· Panama is on Eastern Standard Time (same as New York, USA).
· Panama is just 2.5 hours away by air from Miami, Florida, USA.
Panama is the ideal jurisdiction for international investors and businessmen to operate their offshore corporations, banking, investing, finances, and all other areas of international trade!
Take the next step to financial freedom, and incorporate in Panama Today!
Offshore Pro Group

Offshore Myths and Facts

As introduction, we are going to describe how it works the offshore industry, step by step, why is very important in the world and how you can take a look around it from this site. We want you to know first, in Offshore industry there are too many factors involved in the choice of the offshore solution most trustworthy for the customer . Before that , one of the best parts of this industry is the myths generated, let's go ahead and look some of them.

Panama Offshore fact: Is it true that offshore industry controls more than the half of the bank industry in the world?

Yes, it is. According some experts, between Switzerland, Cayman Island, BVI, and other Offshore Financial Centers including Panama combine together control more than the half of the money of the world and it is for Offshore purposes. See more inside our Directory.

Panama Offshore Tax fact: Is it true that many 500 fortune use offshore tax haven to cover expenses to avoid taxes?

No, not at all. The offshore outsourcing is one of the best way to save money, for instance big companies such as DELL Inc, SPRINT, NEXTEL, AT&T, DIRECT TV, etc, are using offshore outsourcing services and this is not a way to avoid pay taxes, it is a way to minimize expenses. A recent study by the McKinsey Global Institute proved that every dollar spent on a business process outsourced, the U.S. economy get at least $1.12. The biggest part goes to the employer (58 cents).


Panama Offshore regulation fact: Is it true that offshore regulations protect the terrorism?

No, it is not. In every reliable offshore jurisdiction is a major crime protect terrorism, however you can tell me, yes I know, but How do we know this truly happen?, Every customer need to complete due diligence in order to access offshore services, there is some cases that somebody else complete the due diligence, but that is out of the question. It is not a secret that September, 11th's implicated received the money in United States. The regulations exist.

Panama Offshore relationship with the US fact: Is it true if the US Government find out that a US citizen owns an offshore structure he most likely will go to jail?

No, it is not true. If US government find out that your are deliberately avoiding taxes that means you are not declaring anything to the Internal Revenue Services or if your are in money laundering you will be in jail. But if you are diversificating your invest that is not a crime. What will happen if you buy a private interest foundation in Panama with a nominee services with your kids as beneficiaries and your as administrator, it is crime, no it's not. The US history is clear generally when IRS put somebody in jail is a recognize drug dealer or a notorious crime organized member.

Offshore fact: Is it true that you can't send money to an offshore jurisdiction because your government will investigate you?

Somewhat, it depends. If you send more than 9,999.00 you need to fill out an IRS form and probably you will be investigated a little bit, you need to prove the origin of the money, as well you need to declare the purpose of this transaction. The best way to transfer that amount of money is making business or investment, Real Estate investment by loans, or simply send it because you will receive more interest in an offshore bank then your domestic banks.

Panama Offshore fact: Is it true that I need to give somebody else my money to protect it in an offshore jurisdiction?

No, it's not. if you give away your money to a trustee without any legal document you will be an idiot, nobody do that. I see some offshore critics sites, they said if you transfer some money to an offshore account, its a matter of time the offshore provider will take your money, because you have to denied this money is yours because it will be a tax crime. This is absolutely false, I am going to give you an example, if you purchase an offshore corporation with an offshore bank account, you will get the control of the company and the control of the bank account, you can sign the book check as an administrator a reliable offshore jurisdiction never will tell the US or any Government, you must to pay anyway the income taxes as a person and you are going to be able to be a part of the payroll. If for any reason you don't want to sign the check book you will get a letter that the money is yours.
Offshore Pro Group

The Right Way to Use Offshore Business Entities

The Right Way to Use Offshore Business Entities

Could you benefit from an offshore business entity? Here are a few of the most common ways they're used:

To hold an investment portfolio.
For asset protection purposes.
To achieve greater privacy.
To operate an offshore business.
To own foreign real estate.
Foreign corporations, generally organized as international business companies (IBCs) are the most commonly used offshore business entity. Most countries with IBC legislation are in low or no-tax jurisdictions (e.g., the British Virgin Islands) and income from the IBC, particularly if earned outside the country of formation, isn't taxed there.

However, for U.S. persons investing overseas, foreign corporations usually aren't a good choice. This is due to the unfavorable tax treatment imposed on the foreign corporation 's U.S. shareholders. In virtually all cases in which U.S. shareholders use a foreign corporation to hold assets that generate passive income, they become entangled in a complex web of rules designed to prevent U.S.-based multinational corporations from diverting profits into foreign subsidiaries where tax can be deferred indefinitely.

These controlled foreign corporation (CFC) rules are among the most complex in the U.S. Tax Code. Here's a highly simplified summary:

If U.S. shareholders own more than 50% of the shares in a foreign corporation (e.g., an IBC), by vote or value, the foreign corporation is classified as a CFC. U.S. shareholders are defined as U.S. natural persons, partnerships, corporations, trusts, and estates that own, respectively, 10% or greater interests in the foreign corporation.

If you're a U.S. shareholder in a CFC, and it generates what the IRS calls "subpart F" income, you can't defer tax on that income. Subpart F income includes passive investment income, income from personal service contracts, income from transactions with related U.S. persons or entities, and income from certain industries such as insurance, banking, mining and others. Naturally, exceptions apply to many of these general rules.

If that's not enough, if your foreign corporation is classified as a CFC:

The 15% income tax rate on capital gains and dividends isn't available.
Losses on investments can't be allocated against gains until the IBC is liquidated.
Any investments in the United States may result in double taxation.
The basis of the stock does not step-up to its fair market value at the death of a shareholder for estate tax purposes. (For 2010 there is a step-up because of no estate tax).
Complex IRS reporting requirements also apply.
With a foreign corporation, you also won't receive much more asset protection with a corporation chartered in a U.S. state. While IBCs are less visible than domestic corporations, if you suffer a judgment, a creditor can simply obtain a court order to seize your shares. If you own more than 50% of the shares, the creditor can even liquidate the IBC.

Because of the tax traps in CFCs, offshore limited liability companies (OLLCs) are often a better choice for U.S. persons investing or doing business offshore. While you lose the opportunity for tax deferral on income and realized gains, by making the proper election with the IRS, you eliminate the potential tax problems of a CFC. However, you'll still need to pay tax on the OLLC's income or realized gain, and file an annual information return with the IRS.

OLLCs provide more asset protection than domestic LLCs. Attorney Christopher Riser explains why:

"A creditor of a member of a U.S. LLC with a U.S. manager may be able to obtain a court order forcing the manager to make distributions which, combined with a charging order, will satisfy the member's judgment debt. The creditor of a member of an offshore LLC with a non-U.S. manager in most cases will not be able to obtain jurisdiction over the non-U.S. manager. Even if an order were issued by a U.S. court, the non-U.S. manager could not be forced to comply unless and until a successful action was brought in the non-U.S. manager's jurisdiction."

OLLCs can also be used as estate planning tools in the same manner as domestic LLCs or domestic limited partnerships. If the OLLC is properly structured, minority membership interests should be discounted for estate and gift tax purposes for lack of marketability and lack of control. Proposals before Congress would eliminate these discounts for gifts of minority interests to family members.

Particularly if you're considering an offshore business entity to hold a portfolio of passive investments, an OLLC is one of the best ways to do it. Chapter 5 of my book THE LIFEBOAT STRATEGY contains an extensive discussion of offshore business entities, including OLLCs.
Offshore Pro Group

Offshore Company Administration

There are two options when it comes to offshore company administration in a tax haven. The first option is to have an offshore incorporation that is directed by the owner. This simply means that as the beneficial owner of the international business company “IBC”, you can be appointed as the company director. This appointment is not directly registered on the public file in the Registrar of Companies in most tax havens, but it, along with the relevant resolutions; have to be kept in the registered office of the company by the Registered Agent. Of course the details of the company director will also be found in the main documents of the company.


The second option is to have a company that is directed by an appointed director, called a nominee. In this case a professional third-party director takes on the directorship of the company. This position is often called that of “Nominee Director. The incorporation agent usually provides the nominee service or you can choose to outsource it to another reputable company management service provider. In actual fact, the owner of the company has the right to ask anyone they want to be appointed as the company director.


In certain tax havens, where the law permits it, the nominee director may be a corporation.


A third-party company manager’s main purpose is to protect the actual owner of the offshore company from any outright relation to the company. Realistically, the appointed third-party director does not have an active involvement in the regular affairs of the company. Instead, he simply fills the official position. In fact, this is why he or she is called by the term “nominee” director. Really the owner of the company personally transacts the daily business of the company. To be able to serve an active function, he or she is usually appointed a “representative” of his or her own company through the enactment of a special resolution or a power of attorney. This means the client personally signs all the company’s correspondence, contractual documents, and raises invoices, operating company bank accounts with his own signature, acting as if he were a director.


Having the owner of the offshore incorporation appear as a shareholder will reduce the level of confidentiality. So in order to further conceal the owner’s direct link to the company, he might enlist the services of a nominee shareholder. This is quite a passive position, which is different from the directorship, the incorporation agent typically provides a nominee shareholder service.
Offshore Pro Group

Bank Secrecy For Your Offshore Account

One of the most important reasons that you have for opening an offshore account to place your offshore company’s funds or to make offshore investments is the privacy and confidentiality that comes with such accounts. Most tax havens have strong laws that protect against unwanted and unauthorized disclosure of financial matters. What bank secrecy means is that by law no bank employee may reveal information regarding a client’s account without a court order. This prohibition is backed up by criminal sanctions that impose large fines and imprisonment for those breaking financial privacy laws. Offshore banks and the countries offering offshore incorporations must enforce their privacy laws strongly; if not there business will disappear fast. In most tax havens a court order can only be obtained if the law you may have broken for example in your home country is also a crime in the tax haven where you bank. And there are tax havens where tax evasion is not a crime.


Even if the offshore bank with which you do transact business adheres to strict secrecy laws, this does not mean that no one will know you are banking offshore. It usually is not the bank’s fault if someone discovers your offshore account. You may have left a paper trail to your account by depositing checks or wiring money. Or more commonly by letting people know you went offshore. To keep it secret, keep it quiet. Have a low profile and being discreet will insure that your business will stay confidential and away from the prying eyes of governments, creditors, spouses and litigants.
Offshore Pro Group

Lord Ashcroft non-domicile tax status under attack

The recent revelations of Lord Michael Ashcroft’s tax status, specifically his standing as a ‘non-dom’, has again thrust a politician into the spotlight, and created a wave of furore and questions in the process.

But who is Lord Michael Ashcroft? What, if anything, has he done wrong? What is a non-dom anyway?

Michael Ashcroft, according to his personal website, is a “businessman, philanthropist and politician” who was born in 1946 in the United Kingdom. He was educated in England and upon finishing his education he embarked on a journey to create himself a fabulous fortune. At 26 he formed his own company Michael A Ashcroft Associates, and acquired an ailing cleaning outfit for the meagre sum of one pound. Fast-forward three years later and the cleaning company finds a new owner, but this time Ashcroft pockets the tidy sum of £1.3 million. As he gained a strong foothold in the business world Ashcroft left the UK and made Belize, a place where he spent time as a child, his new base of operations.

His business interests in Belize soon amassed him a huge amount of money and in 1997 he sold his cleaning and security empire, ADT, and is thought to have gained £500m in the process. Then in 1998 he began his love affair with the Conservative party when then-leader, William Hague, appointed him as the Tory treasurer. He started ploughing money into the Tories and it is then that the question was raised, where was he domiciled England or Belize? How much tax was he really paying?

Then, in 2000, he was inducted into the House of Lords as a fully working peer. William Hague set out to clear up any confusion by stating that Ashcroft would now return to the UK, become a UK resident and subsequently pay many millions of pounds a year in taxes. However, this issue never really went away, and even though Ashcroft was essentially fuelling the Conservatives with huge donations, in 2004 the House of Lords expense register revealed that his main residence was indeed Belize. With questions coming thick and fast, Ashcroft, his people, and the Conservative Party all neglected to shed any light on the matter.

Soon, the Labour Party began to take notice. They claimed that Ashcroft, number 37 on the Sunday Times Rich List and worth an estimated £1.1 billion, was giving the Tories an unfair advantage. He was using his vast wealth as well as his business acumen to help the Tories win seats in marginal constituencies. The Labour party said that he is essentially buying votes for the Conservative party and that it was difficult to compete against such practices. More controversy followed Ashcroft, he also made large donations through the company Bearwood Corporate Services however an investigation is now under way so to whether these donations may have in fact breached electoral law. Baron Oakeshott, Liberal Democrat member, came out at this time and said “Democracy is in danger if Lord Ashcroft has been pouring millions into Conservative campaigns through an offshore pipeline from a Caribbean tax haven”.

Finally, on 1st March 2010 Ashcroft admitted that he is a non-dom- which means he is not domiciled in the UK and thus does not pay UK income tax on any of his international earnings, a highly lucrative status.

Non-doms are able to protect their wealth from UK income tax even if, like Ashcroft, they live in the UK. The main way of being a non-dom is by having non-dom parents. Through this one can claim that, even if one spends a bulk of time in the UK, the UK is not their permanent place of residence.

The high flyers, the jet setters and the super rich that traditionally establish themselves as non-doms do so through the aforementioned parental option, or show that they have strong business and personal connections to other countries, or establish that they plan to leave the UK at some point in the future. It is estimated that there are over 120,000 non-doms currently living in the UK. Non-doms spend a vast amount of money and contribute highly to the British economy, in 2007 they spent a whopping £17 billion.

Non-doms still have to pay tax on any income earned in the UK, but since they traditionally make their highest earnings on foreign shores, this is generally a tiny sum compared to the money they make worldwide.
Offshore Pro Group

Offshore Tax Havens: The World's 10 Best Tax Havens

A tax haven is of course a country or territory where certain corporate or individual taxes are set very low or do not exist at all, generally with the sole intention of attracting big spending individuals to help create a vibrant and prosperous local economy. Whilst their are many objectives to the principles of tax havens, with arguments that they take too much money out of other economies, there are also some generally unacknowledged advantages to global communities gained through their existence. One such benefit is to create an environment of tax competition between governments, thus helping to drive down taxes, although not particularly to the free spending governments of the USA and UK who like to spend more money on social policy than their tax revenues generate - but that's an altogether different topic which has been covered once too often! Of course, a tax haven simply supplies a service to the large numbers of people who seek to participate in tax avoidance.

My opinion on tax havens is split, on one hand the super rich are depriving their home countries of large amounts of much needed public money - thus placing more of a burden on those with moderate or low incomes. We have seen this for many years in the UK and the USA, where a small proportion of people control a large proportion of the wealth yet the burden of public spending is placed firmly on those who struggle. On the other hand, there is nothing to suggest that tax havens should only be the reserve of the super rich and to the contrary I know many people who relocate to these countries to run small businesses.

A real life example is a friend of mine who relocated to Bulgaria to take advantage of its low 10% income tax, and 10% corporate income tax. He runs a small underground record label with a turnover of around $150k, using modern technologies to run his entire business from a small home office and production suite. He estimates his annual savings, when all costs are taken into consideration (not just tax but also general operation costs), at around $38k. His own drawings in the 2009 financial year were around $30k, not a lot of money in the UK but a huge amount of money in Bulgaria. The efficiencies achieved through relocation effectively make the difference between him making a living overseas, or having to run a loss making business in the UK. I can see nothing wrong with this, whats the alternative for him? To move back to the UK and claim unemployment benefits? There are numerous tax havens in the world, all of which have benefits for different needs.

 

10. Andorra

In Andorra there is no income tax, gift tax, inheritance tax, or capital transfer tax. Since 2007 there has been a capital gains tax, introduced on a sliding scale to counter rising house prices which were problematic for the native Andorran communities, although this is the only government tax. Andorra also has single digit tax rates on imports, and has become a very popular destination for Spanish and French people seeking duty free or low duty goods. In fact, over 10 million people visit the country each year to buy cheap commodities and luxury goods - a big industry for a country with a population of just 83,000!

9. New Zealand

New Zealand is an unlikely tax haven, and an unintentional one too. New Zealand made the list partly on the basis of how attractive the country is to live in, with it being cited recently as the most popular destination for people emigrating out of the UK. New Zealand did intentionally attract overseas investment when it introduced zero tax on trusts, when the beneficiary and the settler are both based overseas, and succeeded in bringing in a lot of foreign money. Now for the REAL stuff.... all new settlers in New Zealand are treated to a 4 year tax exemption on money coming from overseas. The result is many individuals moving to New Zealand from countries such as the UK and Australia, and running businesses such as websites or - like my example - small record labels! Chances are that many of these individuals will move on again after their 4 years are up, but the small number who stay and begin to pay taxes are of course the governments reasoning behind the scheme.

 

8. Switzerland

Switzerland does not like to refer to itself as a 'tax haven' but, whether it likes this label or not, it is. Some 21% of the countries population are non-Swiss and most of those people are in the country because of the clear fiscal benefits. The primary prized tax break is the 'lump sum concession' which allows any resident who works outside of the country to pay tax only on the annual cost of living, rather than their income. The annual cost of living is simply calculated by multiplying the individuals annual rental expenditure by 5, and then taxing this figure at 40%. If you earn $200k per year, and pay $10k per year to rent and live in a Swiss apartment, you will pay just 40% of $50k in tax ($20k). In this hypothetical example, lets say he is a banker, he is paying just 10% in tax. It is of course also a beautiful country!

 

7. Hong Kong

Hong Kong has relatively low tax rates of 17%, plus no capital gains tax, but its fiscal policy was not originally intended to create a tax haven. Instead, it claims that its low rates are designed to attract investment into the countries service based economy. Hong Kong is not a cheap city, so it generally only appeals to the very wealthy, particularly those who can afford to purchase a property outright or the super rich who prefer a very metropolitan lifestyle. Whilst not the best in terms of financial savings, certainly a great place for the wealthy to hang about getting a little richer!

 

5. Guernsey & 6. Jersey

Guernsey and Jersey are both part of the Channel Islands, an Archipelago in the English Channel which separates England and France. The Islands are considered British Crown Dependencies but are entirely independent from both the UK and the EU, each has their own government. The small state of Jersey (population 91K) is famous for its diary products, but is even more famous for its financial services, and is one of the worlds richest countries on a per capita basis at $57000. The most famous tax benefit of Jersey is the non-existence of value added tax (VAT) for items under £18GBP, VAT is set at 17.5% in the UK. The result is hundreds of retailers, including Amazon UK, setting up distribution channels in Jersey and selling low value goods such as CDs, DVDs and lingerie to the UK consumer with a significant competitive advantage. Most major online retailers of low value goods in the UK now operate from Jersey, or the neighbouring Guernsey (population 65k) where the system is exactly the same. There are also no capital gains tax or capital transfer tax to be paid in Jersey, and many corporations are exempt entirely from taxation too. This is also the same in Guernsey. A one bedroom property in Jersey would cost you a minimum of £150k, whilst a small office building for commercial operations would cost you a minimum of £500k.

 

4. Panama

Panama has long been a tax haven for the wealthy foreigner, and is one of the principle channels of global funds into and out of latin America. The tax benefits really are simple, probably the most simple, basically an individual or corporation will only pay tax on income which is judged to have arisen from Panama. All outside income is entirely tax free, making it one of the most attractive tax havens in the world. Panama is however, unfortunately, a haven for illegal activities. A lack of transparency means that it is almost impossible for outside tax investigators to determine the value of assets or capital held by a Panama resident, this has left the system open for abuse. A luxury apartment can be purchased in Panama City for as little as £25k/$40k and the city is a very attractive place for those from the English speaking world, with English being widely spoken and the US dollar being universally accepted.

 

3. The Isle of Man

The Isle of Man is a small island just off the coast of England, and a favourite of UK multi-millionaires. There is no general capital gains tax, no tax on business turnover, no stamp duties, and no tax on capital transfer. The only significant tax is income tax which is set at a maximum of 18%, significantly lower than the 50% paid by the rich in the UK! Those based on the Isle of Man can get to anywhere in England within 30 minutes from catching a flight, meaning that many CEOs of UK based businesses choose the Isle of Man as their primary residence. The lower tax rate, for those on the island who earn a moderate or low income, is just 10%. In addition, the island charges zero income tax for certain areas of the islands economy; these include manufacturing, film, e-gaming, tourist accommodation, fishing, agriculture, insurance, fund management, and shipping. Their is a 10% tax on corporations with banking licenses or those who take income from the rental of land or property on the Isle of Man. I should also point out that the Isle of Man is a beautiful island, if you dont mind weather which closely resembles that of Britain, in other words..... invest in a brolly!

 

2. The Bahamas

The Bahamas, like Panama, does not tax money judged to have been earned overseas. Anybody can get a permanent residence in The Bahamas with an investment of $150k or over, although real estate and the cost of living is very expensive. The Bahamas isn't really a tax haven suitable for the lower middle classes (I hate that word, in other words the non-rich), probably best suited to those with a few million to their name. I'm sure that I don't need to mention how nice The Bahamas is! It is generally recommended that those who choose to avoid income tax in The Bahamas do not put their money in the national banks, and instead choose to bank overseas.

 

1. Monaco

Legal residents of the tiny state of Monaco do not pay any personal income tax whatsoever, although you do actually have to be in Monaco for a minimum period per year to be considered a resident. Monaco is home to the super rich, with the British billionaires Sir Philip Green and Stelios Haji-loannou being prime examples. The British newspaper contacted 650 British company directors who gave their residence as Monaco, and established that the 10 richest Brits in Monaco account for $13.5bn alone. Quite astonishing for a country with a population of just 35000. A Monaco 'resident' can actually spend 90 days per year outside of the country, plus one day travel out and one day travel back, whilst it actually only takes about an hour and a half to fly from the UK to Monaco - less than the time it takes to travel from Birmingham to London on the train. This means that these businessmen and company directors can spend 4 days a week for most weeks of the year in the UK and still be considered a resident of Monaco. If you flew to the UK one day, and flew back the next, you will not have used any of your 90 days. A 30 metre squared studio flat will cost you at least $1m.