Panama Corporation Tax Information & Facts

Panama Corporation Tax Information & Facts

Panama is the best offshore tax haven for doing offshore business, because in Panama we have a territorial tax system, meaning that offshore income (income derived from activities outside of Panama) is not taxed by the Panamanian government.

Non-resident Offshore Panama Corporations offer some of the following tax advantages:

No Income Tax: Panama corporations do not pay taxes on offshore income derived from sources outside of Panama.
No Capital Gains Tax: Panama corporations do not pay capital gains taxes on gains resulting from the purchase & sale of securities transacted outside of Panama (for example, the purchase and sale of publicly traded securities on non-Panamanian stock markets).
No Interest Income Tax: Panama corporations do not pay taxes on any bank interest income earned either inside or outside of Panama (for example, there is no tax on interest earned from savings accounts or certificates of deposit in Panama).
No sales tax: Panama corporations do not pay taxes on product or service sales that are conducted outside of Panama.
No Tax on Issuance of Corporate Shares: Panama corporations do not pay taxes on issuance of shares, whether bearer or nominative.
No dividend tax to shareholders: Shareholders of Panama corporations do not pay taxes on dividends, for income generated from sources outside of Panama.
Flat Annual Panama Corporate Franchise Tax

The only tax paid by non-resident offshore Panama Corporations (or Panama Foundations) is the flat annual corporate franchise tax of US$300 (referred to as the “tasa unica”).

According to the Law, the corporate franchise tax payment deadlines are as follows;



If the flat annual corporate franchise tax ("tasa unica") is not paid on or before the due dates mentioned above, the entity will be charged a late penalty of US$50 per year that the tax is not paid.

Incorporation Date:	Tax Payment Deadline:
From 1 of January to June 30:	July 15
From 1 of July to December 31:	January 15

Second Late Payment Penalty:

If the flat annual corporate franchise tax ("tasa unica") is not paid after two "deadline" periods, the entity will be charged a second late penalty of US$300 per year for every additional "deadline" period missed thereafter.

The corporate franchise taxes and late penalties mentioned above applies to all "entities" (Panama corporations, Panama foundations, or Panama trusts) registered at the public registry of Panama.

Disclaimer: *The Panama corporation tax information contained on this page is for informational purposes only and should not be relied upon for any offshore tax consulting or otherwise any offshore tax advisory services. A professional offshore tax advisor should be hired for any and all offshore tax advisory or offshore tax consultations on offshore taxes or related issues involving offshore tax planning. The law firm Panama Offshore Legal Services shall not be held liable for any information contained within this website that may be out dated, incorrect, or otherwise misused by the reader in any way for tax abuse. The reader takes full responsibility for all decisions relating to structuring his or her business affairs.
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BERMUDA TAX HAVEN

Bermuda Tax Haven

The essential point is that Bermuda’s tax regime remains one of the world’s most attractive. There are no withholding, capital gains, transfer, wealth, gift or income taxes for non-resident entities.

Bermuda Tax Haven & The PLP

Ever since the 1950s, when the basic framework for Bermuda’s current regulation was first introduced, the island’s reputation has grown steadily. This almost-unparalleled reputation has grown on the back of stringent monitoring of who gets to do business here.
Bermuda Tax Haven - Bermuda International Business Association

A spokesperson for the Bermuda International Business Association says: “Our regulation is light but very, very effective. We really do screen the people who we do business with. We really know our customers extremely well, so we don’t necessarily need to be very heavy-handed in terms of regulation.”
Bermuda’s reputation was exemplified this summer when scores of havens were left nursing their wounds following the OECD’s attack on harmful tax practices. Bermuda escaped the purge almost completely unscathed.

The island’s ability to escape the shame of an OECD blacklisting was due in no small part to the fact it agreed to a deal with the international body. Bermuda said it would implement changes to its markets. But the blacklist avoidance is also because Bermuda was in a position to bargain whereas some of its less salubrious offshore rivals were not.

Changes agreed with the OECD included altering the rules so foreign companies can own firms that trade in Bermuda. Also, Bermuda agreed to co-operate fully when national governments want information on tax evaders. As a centre that has always tried to avoid dirty money, the OECD’s criticisms of numerous other tax havens merely cast a holy glow upon Bermuda.

Bermuda Tax Haven & Offshore Jurisdictions

As one expert in the Bermudan economy says: “Bermuda is one of the most successful offshore jurisdictions. It is also one of the cleanest. It is clean business and they are making more money than other countries that have more scandal.”

On the whole, Bermuda retains its strong reputation and the government has done little to upset the apple cart. Despite the potential clouds it is still a legitimate well-regulated and sophisticated home for investment capital.
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Why Incorporate an Offshore Tax Haven Company?

An Offshore, International Company is commonly set up in a tax haven like the British Virgin Islands, Bahamas, Caymans Islands etc, where there are no corporate or personal income taxes, capital gains taxes, reporting requirements, or restrictions on company employment policies.

As the world becomes global, fewer businesses are local and many corporations are increasing going internationalization. Corporate structuring and planning have achieved higher levels of complexity than ever before while the need for anonymity remains strong.Corporation must keep pace and be constantly on the look out for new ways to profit. One way is to have a clear understanding of the characteristics offshore foreign corporations and how they may be put to advantageous use.

Offshore Companies are only applicable if you are doing business overseas and not in the country where youre offshore was incorporated. All income derived in and from the incorporated country is normally taxable. eg. An offshore incorporation in Bahamas, doing business in Bahamas will require to pay taxes in Bahamas, where else, if the business was done in USA or Hong Kong, all profit are not taxable.

Singapore and Hong Kong although not typically regarded as tax haven, has a favourable tax regime which effectively means that correctly structured, managed and administered these companies can be utilised for offshore business and international business without paying tax in Singapore or Hong Kong provided that any profits arising are not made in the respective country (non resident company) and the earned money can be remmitted back. This type of tax regulation is known as territorial taxation. With the strict rule in place for prevention of money laundering and terrorist financing, opening bank account for other tax haven jurisdictions can be difficult. On the contrary, to open a corporate bank account for companies in Singapore or Hong Kong is easier as these companies are more transparent due to the strict compliance control by the government.
What is Tax Haven?

A tax haven is normally known as a jurisdiction, which actively makes itself available for the avoidance of taxes, which would otherwise be paid in a higher tax jurisdiction. A more correct term to use would be tax mitigation or planning, because there are ways of mitigating taxes without breaking the law, whereas tax avoidance is generally classified as a crime.
Is it legal for me to have offshore companies, and bank accounts?

Yes, because most nations encourage international trade and enterprise, there are usually no restrictions on residents doing business or having bank accounts in other countries. Reporting requirements on such accounts however, differ from country to country. Sophisticated and reputable high-net-worth individuals and corporations routinely use offshore investment vehicles worldwide.

Main keys benefits for having your an offshore company.
The main reasons to incorporate offshore are:

Asset Protection Protect assets in combination with a Trust, an offshore company can avoid high levels of income, capital and death taxes that would otherwise be payable if the assets were held directly. It can also protect assets from creditors and other interested parties. From competitors, adverse claimants and other parties from whom you wish to keep your business interests private and to secure against future claims such as bankruptcy, judgment creditors and other litigants, etc.;

Confidentiality Keep business affairs confidential, Offshore Companies offer complete privacy. If the company shares are held by a Trust, the ownership is legally vested in the trustee, thus gaining the potential for even greater tax planning advantages.

Estate Planning Family and Protective Trusts (possibly as an alternative to a Will) for accumulation of investment income and long-term benefits for beneficiaries on a favorable tax basis (without income, inheritance or capital gains taxes);

Simplify the transfer of assets and properties held in several countries: The sale or probate of properties in different countries can become complex and expensive. If an offshore company collectively holds these, ownership can be transferred by company shares rather than transferring the actual properties owned by the company.

International Tax Planning Conduct business without corporate taxes: Tax havens, such as British Virgin Islands, allow the formation of International Companies that have no tax or reporting responsibilities. This means you save money not only from the absence of corporate taxes, but also from reduced compliance and other regulatory costs. Reduce payroll and travel expense administration: Allow employment or consultancy fees to accumulate in a low tax area: Offshore corporations can contract the services of professionals to employers resident in high tax locations or politically unstable areas. This allows the fees to accumulate in a low tax jurisdiction.

Conduct business as an international entity: International Companies have the same rights as an individual person and can make investments, buy and sell real estate, trade portfolios of stocks and bonds, and conduct any legal business activities so long as these are not done in the country of registration. Offshore Companies set up in offshore need not pay social security, withholding tax, or associated expenses of employees working in other foreign countries.

Major savings for companies that have staff working on overseas projects. Minimize tax exposure when dealing with international transactions: An offshore corporation can buy or lease products from one country and then sell or lease them to a company in another country so the profits of the transaction are accumulated in the offshore company where there is no taxation on profits. Maximize profits from intellectual property rights, franchising and licensing: An offshore company can franchise or license intellectual property rights in other foreign countries allowing the profits to accumulate in a tax-free environment.

Protect investments in other foreign countries: International Companies can loan funds to corporations in other foreign countries. Investors may set up, but not directly own, an offshore company that loans funds to a development company set up in another country and charge interest rates that will lower tax obligations and protect the long term ability to repatriate investment funds. This can be especially important when working in countries with strict exchange controls and high tax profiles.

Own or lease ships or pleasure craft: Shipping companies may own or lease ships or pleasure craft and pay no taxes on income derived from the vessels. Registration fees are low and vessels are welcomed in ports worldwide.
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Mauritius as Low Tax Haven

At present, there are two main fiscally advantageous companies in Mauritius: "Ordinary offshore Companies" (Governed by the General Companies Act, 1984 as amended by the Mauritius Offshore Business Activities Act, 1992) and "International Companies" (Governed by the International Companies Act, 1994). In synopsis, the former can avail of the Mauritian double taxation treaty network whilst the latter are directly analogous to West Indian 'Tax Free' IBC Companies and do not enjoy tax treaty benefits. To enjoy the substantial benefits afforded by the Mauritian/Indian Double Taxation Treaty, which interestingly was signed in 1983 and hence before much of the Mauritian tax planning legislation, it is necessary to prove that the recipient is resident. Under Article 4 of the Treaty a company, including an ordinary offshore company, will be deemed so resident if:

(i) The undertaking is liable to indigenous tax, and

(ii) there is genuine proof of local management and control.

Mauritius has a significant number of local lawyers and accountants who can provide resident directors, maintain local bank accounts, record official "minutes", hold board meetings and submit the annul audited accounts. In respect to the liability to local tax there would of course be no benefits if fiscal liability was merely extrapolated from India to Mauritius. The full normal corporate tax rate for the latter being a very non Tax Haven" 35%. However, under S.59D of the Income Tax Act the proscribed rate of tax for an Ordinary Offshore Company is 0% unless otherwise elected up to a maximum rate of 35%. This provision existing for tax planning and anti-avoidance reasons. In other words, it is quite possible for a Mauritian Ordinary Offshore Company to have no indigenous tax consequences. The question therefore becomes at what level will India impose withholding taxes on investments. Under the Treaty, once a Mauritian company holds an investment stake of 10% or more in an Indian company - known as a participation exemption - India will only impose a withholding tax rate of 5% on dividend distributions. In addition, tax on realised capital gains from the disposition of shares are fully exempted from Indian taxes. Of course, it would be wrong to give the impression that Mauritius is the ubiquitous solution for investments into India. Cyprus may provide a more successful catalyst especially where a Cypriot company wishes to grant a loan to an Indian subsidiary. The withholding tax on interest payments merely being 10% as opposed to the 20% rate levied in the case of Mauritius. Cyprus can also provide protection against the imposition of capital gains taxes.

Mauritius permits the incorporation of companies under the International Companies Act of 1994 and exempts them from all taxes except for a $100 annual fee. Bearer and no par value shares are permitted. No information need be given to the authorities prior to incorporation or prior to exempt tax status being granted. There is no information open to the public about exempt companies and there is no restriction on where meetings may be held. A registered office and a representative is required and certain documents must be kept at the agent's office. Exempt companies can not however take advantage of double taxation treaties, the most important of which is with India.

As can be seen from the above, Mauritius offers substantial advantages for investors who are active in India. In addition, exempt companies, which may not avail themselves of the double tax treaty, are nevertheless private and inexpensive and may be appropriate in may other situations.

Mauritius (Low Tax Haven in the Indian Ocean)

Mauritius, in the Indian Ocean 500 miles east of Madagascar, is a little island democracy about 2/3rds the size of Rhode Island. Mauritius has a topography and subtropical climate much like the Hawaiian Islands. Oval shaped, only 38 miles long and 28 miles wide, Mauritius is almost completely surrounded by a coral reef. Average temperatures of 740 on the coast and 67o on the misty central plateau make Mauritius a land of enchantment.

The first Westerners to visit Mauritius were the Portuguese in the 16th century, and they found the island totally uninhabited. Since then much of the original plant and animal life has been displaced, including the flightless dodo bird. After the Portuguese came the Dutch, who gave up establishing a settlement there in 1710. The French took possession next, introducing sugar, spices, coffee, tea and other crops to the island.

During the Anglo-French wars of the 1700s the French made the mistake of attacking British shipping from their I’le de France (Mauritius’ French name). In 1810 the British captured the island and renamed it Mauritius. Today, Mauritius is an independent nation and member of the British Commonwealth of Nations. A governor general is appointed by Great Britain representing the Crown.

Political Stability


Mauritius is politically stable, although the government is run by former leftists who balked at carrying out radical socialistic policies in 1983 to redistribute the sugar cane fields owned mainly by French-Mauritian families. As Minister of Finance V. Seethanah Lutchmeenariaidoo said… “Either we had to nationalize the land and distribute it to co-operatives in a Mexican style agrarian revolution, or we had to use consensus and dialog. We chose the second route.”

Ministry official Emmanuel Arouff insists that the “spirit of democracy and free enterprise are deeply ingrained in Mauritius. We are only too happy that our socialist experiment lasted only 9 months. We value our little bit of prosperity and independence.”

Mauritius maintains ties with the government of South Africa yet openly opposing apartheid. The Mauritian government believes there should be a negotiated settlement. Tourists that visit Mauritius are struck by the island’s lack of racial friction and a 94% literacy rate.

Currently, trade (mainly food and machinery) with South Africa account for 10% of Mauritius imports. With its one economy crop Mauritius must import foodstuff heavily.

Territorial System of Taxation


Mauritius is not a no-tax haven like the Bahamas. Its tax system can best be described as territorial, somewhat like Singapore’s but with lower rates. All companies in Mauritius, whether resident or nonresident, are taxed only on their net profits earned in Mauritius. There are no capital gains taxes, and stocks and bonds in publicly traded companies and private companies can be sold tax-free. There is a land development tax, called Capital Gains Morcellement tax, which is levied on real estate developers who parcel out land for development (resale) purposes. Mauritius tax system is designed to make it a regional warehouse and re-export center to Africa.

Corporate Tax Rates


There are two brackets for the corporate taxpayer. Special Certificate Companies pay a flat rate of 15% and Non-Certificate Companies pay at a 35% rate. Generous allowances can often reduce the effective tax rate to a much lower level. For example, investment tax credits for industrial, manufacturing, shipping or tourist activities permit a deduction from income tax equal to 30% of the cash actually paid up as share capital. The credit is spread out over three years, but limited to R$30,000 for individuals and R$100,000 for companies.

Individual Tax Rates


Resident individuals are taxed on their gross personal income on a sliding scale from 5% to 35%. Personal income consists of earned income (salary, wages, bonus, commissions, fees, pensions and benefits in kind) and unearned income (dividends, trade profits, rents, interest partnership profits). Capital gains are not taxed. Dividends paid on shares of Special Certificate Companies are exempt from tax during the first 10 years starting from the company’s production date. Dividends that accrue to foreign investors who get approved status may be repatriated without tax being levied.
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Mauritius Not A Tax Haven, Says Vice Premier

The Vice Prime Minister of Mauritius, Ramakrishna Sithanen, on a visit to India, is concerned that India should not set Mauritius aside for special treatment in its efforts to address tax treaty misuse.

On the agenda for his meeting with India's Finance Minister, Pranab Mukherjee, would have been the tax treaty with Mauritius, which currently provides for exemption of capital gains tax on sales of shares.

According to a written parliamentary answer last year, amendments to this particular treaty were planned by India to "prevent its misuse for avoiding taxes and enhance exchange of information, including banking information."

Other treaties entered into prior to 2004 are also weak in their anti-abuse provisions, the Indian government believes; these include agreements with the Netherlands, Australia, Cyprus, and the US. The parliamentary written answer recorded that 60% of Indian foreign investments in the last year involved countries listed as "tax havens," the main ones cited being Mauritius, Cyprus, and Singapore.

“Mauritius is definitely not a tax haven,” said Sithanen in an address to businessmen. “Financial services form just 12.5% of our gross domestic product.” Although Sithanen, who is also the Finance and Economic Development Minister, promised to cooperate with India in combatting tax evasion, he also said his country would not welcome "fishing expeditions."

More than 40% of the USD80bn foreign direct investment into India in the last 10 years has been routed through Mauritius, because, it is assumed, of tax benefits related to the double taxation treaty.

Sithanen told CNBC-TV18 in an interview that he "would like footprints of Indian investors to become bigger." Sithanen also told Reuters that Mauritius' Financial Services Commission, which is responsible for licensing global businesses, would revoke the licenses of entities which were found to be deliberately attempting to evade Indian tax.

"We have never received any complaint about money laundering. However, there has been a request in the course of the investigation that is being carried out and we have submitted all the information that we have," Sithanen said.
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Advantages of Offshore Companies in Tax haven

Advantages of Offshore Companies in Tax haven:

No restrictions on nationality
No requirements to disclose ownership
No restrictions on foreign owned corporations
No restrictions concerning ownership of shares
Shares could be suscribed to the Bearer or By Name
No residence requirements for Directors/Officers
No paid-in capital requirements
No Income Tax is paid or reported if the corporation operate outside the jurisdiction
No exchange controls
No restrictions on Mergers, Acquisitions or Joint Ventures
No requirements to file annual Financial Statements
No requirement to hold annual General Meetings of Shareholders or Directors
Secrecy and Anonymity
Total tax exemption on all and any business activity or transaction carried on outside the jurisdiction
Total business privacy
Registration takes between 10-20 days depending on the jurisdiction and shelf companies are readily available
Reasonable Annual Registration and Resident Agent Fees
The accounting books for the corporation could be kept in any part of the world and in any language
Amendments can be made to the incorporation documents upon the needs of the corporation
Established base of bilingual accountants and lawyers specialized in banking, corporate and trust services
Flexible corporate laws permitting foreign corporations to rotate their domicile or seat between Panama, BVI, Bahamas and other locations.
While not providing any specific legal or tax counsel, nevertheless for some individuals or companies, offshore companies may offer specific tax advantages over other jurisdictions. Any potential client seeking legal or tax advise should consult with their individual legal or tax advisor
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The Republic of Ireland -A new tax haven?

A recent report has found that Ireland is the most profitable country in the world for U.S. corporations.
The report, which was recently published in the U.S. tax journal Tax Notes, found that profits made by U.S. companies in Ireland doubled from 1999 to 2002, while profits in the rest of Europe plunged. While Luxembourg showed greater profitability rates for U.S. corporations, Ireland has a much larger "real economy" and produced the greatest profitability.

The report found a huge shift in the movement of capital towards tax havens.
" In low-tax Ireland, for instance, profits of subsidiaries of U.S. multinationals have doubled in four years, from $13.4 billion to $26.8 billion. Profits from operations of U.S. multinationals in no-tax Bermuda have tripled, from $8.5 billion to $25.2 billion. Not surprisingly, those two tax havens rank as the number one and number two locations in terms of profitability for U.S. corporations operating abroad - surpassing long-time leading investment partners like the United Kingdom," the report stated.

The report, written by Martin Sullivan, a former U.S. Treasury Department international taxation specialist, found that U.S. multinationals made $2.01 profit in Ireland in 2001 for every $1 they made in 1999.

In Britain, U.S. multinational profits dropped sharply to 67 U.S. cents in 2002 for every $1 profit made in 1999. In Germany, profits fell even more, slipping to 46 cents in 2002 for every $1 made in 1999.

While U.S. corporations in Ireland were involved in real productivity and the country was only a "semi tax haven", locations such as Bermuda were found to have returns that bore little relation to productivity on the island.

Sullivan described the movement of profits to tax havens as "a seismic shift" in international taxation. He told The Irish Times it was clear that U.S. corporations were locking large amounts of profits in Ireland but it was difficult to assess how much of this money was a result of genuine economic activity in the country, and how much was placed there to avoid U.S. tax rates. "I haven't attached dollar figures to it because no one knows the normal rate of return. It's an elusive number," he said.

The report has already caused a considerable stir in Washington. A columnist for the Washington Times, Bruce Bartlett, said that U.S. tax laws needed to be rewritten to stop American companies from receiving tax credit for profits earned and held abroad.

If you would like more information regarding asset protection, trusts, family limited partnerships or the subject of this article please call or email our office.
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