Panama’s Offshore Corporate and Banking Sector – Where Next?


The Republic of Panama stands out in Latin America as a major offshore tax haven and financial hub. Offshore bank accounts, IBCs (Panama Corporations), Private Interest Foundations and other similar privacy tools make for a business-friendly environment. The recently installed Martinelli government has promised to continue development of Panama’s liberal economy at least for the next five years.

But self-made supermarket magnate Martinelli is also in favor of closer ties with the U.S.A., including a new free trade agreement which has American leftists fuming with indignation. And whether free marketeers can hold power after this five year term will depend on whether Martinelli can deliver on his promises.

More and more Americans are seeking secure offshore homes for their assets. Contrary to opinions in the popular press, tax is usually not a major motivation in such decisions. In my role as an offshore writer and consultant, I very often come across American citizens who are simply disillusioned with the state of the economy at home = for example with the Obama government’s nationalization of banks and industry.

Those businesspeple and professionals who have worked hard all their lives to build up something for their retirement see their nest-eggs threatened by inflation (the reckless printing of money), by devaluation (many economists believe the dollar has a lot further to fall) and by the court system which routinely awards unrealistically large sums in civil lawsuits whether in negligence or family matters. The best alternative these people can see is to move their assets offshore to countries that have a traditional respect for privacy and private property rights.

Of course, it is not just Americans who use Panama as a safe haven. Money from Latin America, Europe, and Asia is also a substantial part of the offshore economy there. Panama City is a truly global center of finance and banking.

Panama has traditionally been such a privacy haven, having been a strategic business hub ever since its independence. Panama has never taxed non-resident income and Panamanian courts have respected private property. The country is seen as a safe port in a stormy world. It helps that it is also a very ‘liveable’ place with attractive real estate, safety and first world services – you can even drink the water!

In 1995 the Panama Private Interest Foundation was launched, based on the European asset protection tradition of the Liechtenstein ‘Anstalt’ or Family Foundation.

Today, however, many commentators are speculating that in pursuing trade agreements with the U.S., Panama will be forced to give up its bank secrecy and the culture of privacy that still allows, for example, anonymous corporations controlled only by bearer shares.

The way I see it is different. Panama still has lots of potential in international tax planning and asset protection structures. However, in a globalized world we must look for global solutions. I typically recommend to clients incorporating their structure such as IBC or Foundation in Panama, then opening the bank account elsewhere – perhaps in a European private bank.

This way, statutory privacy is strongly enhanced because actually nobody in Panama need have any information about who is the end user (client or beneficiary). “What we don’t know, we can’t be forced to tell,” says a lawyer friend of mine in Panama City.

This multi-jurisdictional approach has another advantage. Nominee directors are traditionally used in Panama, since the company’s directors appear on the public register which is freely available over the internet. These persons, typically junior law firm employees, nominally control the corporation so that the beneficial owner’s details remain private. By opening a bank account in another country, the client avoids the need to tell nominee directors where the entity’s assets are held. This is in contrast to Panama banks, where nominee directors are always required to sign the bank account application forms.

In summary, tax evasion through the ownership of non-declared bank accounts is a thing of the past. Anybody who tries this is likely to get caught, fined and even face jail time. Global attempts at enforcing ‘transparency’ will probably mean that Panama banks will in future co-operate in tax investigations of this nature. Persons with undeclared bank accounts should take action to regularize their situation immediately.

However, I think Panama has the Foundations in place (forgive the pun!) to develop a sophisticated financial services infrastructure over the coming decade that can compete on equal terms in a ‘transparent’ world with London, New York and Frankfurt. The entrenched culture that welcomes foreign capital will not disappear. And clients who are prepared to go beyond hidden bank accounts will be able to continue to make use of compliant Panamanian offshore investing and banking services while legally protecting what is rightfully theirs.


Source by Peter Macfarlane

Agnes Brown

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