PANAMA A GLOBAL DESTINATION
Why Choose Panama as an Offshore Tax Haven
As an offshore jurisdiction, Panama offers excellent advantages. Panama continues to top the list of the best places to live, particularly for expats looking for a lively, modern country in which to retire, with all the comforts of home and the idyllic allure of the tropics.
The ever-increasing creation of jobs in Panama’s thriving economy leaves the country longing for a larger and better-trained workforce than Panamanians alone can satisfy. Looking to attract the international community, the government has developed incentives for entrepreneurs, multinationals and expats to satisfy this growing demand.
Panama has very favorable laws for establishing offshore legal entities for sovereign individuals from countries around the world. It is one of the worlds most popular tax havens, with a sound banking system offering offshore bank accounts that are open to non-resident who establish a offshore company
Despite all the negative publicity, especially after the Panama Papers, the jurisdiction's offshore registration market is thriving. Though there have been a few changes since the OECD and FATF, most notably an increase in KYC laws and some tighter regulations, but with a supportive government that continues to stand behind the offshore formation industry Panama its not going anywhere anytime soon.
Benefits of Panama Offshore Company Formations
- Panama’s territory-based tax system does not levy an income tax as long as your income is earned outside the Republic.
- Panama offers the most cost-effective, and by far and away the easiest residency program in the world, with its new 'favoured nation visa'. Also popular is its long standing 'pensionado' visa for retirees.
- Government investment incentives slash tax rates and fees for entrepreneurs.
- Panama's economic growth rate is among the highest in the hemisphere, surpassing ten percent in 2011 and 2012.
- Exchange risk is minimized since Panama’s currency is the US dollar. This makes it highly attractive to American citizens and provides the foundation for one of the most stable economies in Latin America.
- Panama has a high level of privacy protection for all non-US foreigners doing business lawfully in Panama.
- Panama leads the world as the top yacht and ship registration jurisdiction.
- Panama’s advantageous Private Interest Foundations (PPIF) are similar but much more affordable than those offered by Liechtenstein.
- With an extensive list of national and international banks, Panama continues to be a robust global banking region.
- Panama is an independent jurisdiction and has a stable, democratically elected government (voting in Panama is mandatory).
- Outside of Panama City, Panama remains a relatively affordable place to live. In places like the rainforest town of Santa Fe and the beach towns in the Azuero peninsula, a typical couple can live comfortably for as little as US$1,200 per month.
- Panama’s diverse lifestyle destinations—from idyllic tropical islands and vast jungles to a booming metropolis with vibrant cultural activities—make it one of the best places to spent quality time.
- Panama is a perfect hub from which to travel throughout Latin America. The capital city’s international airport is growing by more than 50% and will provide routine flights to every country within South and Central America.
- Panama boasts a lush, tropical climate all year round.
In-Depth Information about Panama
Bordered by Colombia to the west, Costa Rica to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south, Panama is strategically situated on the isthmus connecting North and South America.
Panama took control of the Panama Canal in 2000, which connects the Atlantic Ocean and the Caribbean Sea to the North of the Pacific Ocean. Panama’s 75,515 km2 land size makes it slightly bigger than the province of New Brunswick in Canada and slightly smaller than the state of South Carolina in the U.S.
At the close of the 21-year military rule, Panama has smoothly finished four exchanges of power to contradicting political groups, thus giving footing to a strong and stable democracy. Two major parties (and several smaller parties) control the political landscape, many of which are propelled by individual leaders more than belief systems.
Panama's political structure occurs in a system of a presidential representative democratic republic, whereby the president of Panama is chief of state, head of government and of a multi-party framework. The government exercises executive power while the power to enact laws is assigned to both the administration and the National Assembly. The court system is separate from judicial and legislative branches.
Voting for national elections are general and compulsory for all Panamanian citizens 18 years and up. National races for the legislative body and the judicial branch occur every 5 years. The head of state has the power to designate the members of the judicial body. Many minor parties are represented in Panama's National Assembly due to it being proportionally represented by fixed electoral districts.
Representing the four-party Alliance for Change, conservative supermarket mogul, Ricardo Martinelli, was elected in a massive landslide victory, winning 60% of the popular vote at the May 2009 presidential election against the left leaning Democratic Revolutionary Party (PRD) nominee, Balbina Herrera. Martinelli’s business credentials attracted voters jaded by the slowing economic growth stemming from the world financial crisis. His victory was an exception to a trend of victories for socialist Latin American candidates. Martinelli’s five-year term ends on June 30th, 2014.
Economy and Infrastructure
Panama’s economic performance is, year after year, better than nearly every other Latin American country, and it is one of the fastest growing countries in the Americas. For 40 years Panama’s inflation rate averaged less than 2% per year — unheard of south of the U.S.
Annual growth continues at a rapid clip of around 10% per annum and, even during the recent economic crash of 2008, never dropped below 5%. GDP expanded 7.6% in quarter two of 2013 (as compared to Q2 in 2012). At an annual growth rate averaging 9.3% from 2010 to 2013, Panama achieved a record high of 12.2% in June of 2011 and an all-time low of 6.2% in the same month in 2010.
Economically influenced by the legendary canal that couples the Pacific and Atlantic Oceans, as well as its business-friendly regulations, Panama has a robust service industry. Accounting for upwards of 75% of GDP, Panama’s well-developed service sector is the foundation for Panama's dollar-based economy. This sector includes operations of the Panama Canal, the Colon Free Zone, banking, insurance, logistics, container ports, flagship registry, and tourism.
Panama’s booming logistics and transportation services segments, together with aggressive infrastructure development projects, lead the economy to continued high growth in 2012. Contributing about 10% of GDP in both 2011 and 2012, foreign investment has helped to sustain strong growth in Panama.
Panama has the largest banking sector south of Miami. Panama banks average 60% liquidty — astoundingly high. In other words, in the hypothetical event of a bank run 60% of all deposits could be withdrawn from banks before any bank assets would need to be liquidated. Only offshore banking jurisdictions such as Singapore and Hong Kong can match this.
The Panama Canal Expansion Program will more than double the Canal's capacity, enabling it to accommodate ships that are too large to traverse the existing canal. The major users of the canal are the U.S. and China. Begun in 2007 and due to be completed by 2015 at a cost of approximately $5.3 billion – about 10-15% of current GDP, this ambitious reconstruction project continues to boost economic growth in Panama. As of mid-August 2013, the expansion project is 64% complete.
Started in 2007, a new city called Panama Pacifico is being built on the old U.S. Air Force base of Howard. The ambitious 40-year, 3,450 acre, mixed-use real estate development project is one of the largest in the world.
Aimed at attracting foreign investment, several global corporations have already moved into Panama Pacifico, including Caterpillar,3M, DELL, BASF,VF and Samtec. Due to a Special Economic Area law, Panama is highly attractive to multinational corporations looking to set up regional headquarters in Central America. Special tax, labor, and legal incentives have been granted to companies set up in these zones.
Designed to improve public transportation options throughout Panama City, the government is currently also building a major metro system to cut through principal parts of Panama City. Estimated at $1.2 billion and scheduled for completion in 2014, this mega-project is also helping to further economic growth.
In October of 2012, the U.S.-Panama Trade Promotion Agreement was put into effect. Panama also achieved removal from the Organization of Economic Development’s (OECD) gray-list of tax havens by signing various double taxation treaties with other nations.
If you're looking for a country of residency, Panama boasts one of the most attractive programs for foreigners on offer anywhere in the world. As a Panama 'pensionado', you are eligible for discounts on just about everything you buy. With only $1,000 USD needed in foreign-earned income (from either a social security or pension), Panama's Pensionado program is the world's benchmark of retirement programs.
In 2012, Panama magnified an already attractive list of programs for obtaining residency with its 'favoured nations' option, making it easy for nationals of more than 47 countries, including the US, Canada, New Zealand, Australia, UK and almost all the EU countries, among others.
This was designed in recognition of the possibility that Panama's stellar growth could be hampered by a local skills shortage. A local company with bank account with a minimum US$5,000 deposit (plus US$2,000 per family member), is all that is required and an intent to pursue a profession or business. Alternatively, a local job offer will also qualify you for this visa.
Despite the strong economic performance in recent years, for most Panamanians this has not translated into broadly shared prosperity. With the second worst income distribution in Latin America, Panama has about 30% of its population still living in poverty. Between 2006 and 2012, poverty was reduced by only 10%, while in 2012, unemployment slid from 12% to 4.4% of the labor force.
Looking forward, to maintain the current pace of growth, Panama’s government will need to continue to address the shortage of skilled workers, corruption and lack of judicial independence.
Population, Language and Culture
According to the 2013 census, the Republic of Panama has a population totaling 3,661,868. Seventy percent of Panamanians are mestizo (mixed Amerindian and white), 14% are primarily black and mulattoes (West Indian), 10% are white, and the remaining 6% are Amerindian. Some East Asians like the Chinese are less than one percent.
Panama has a surprisingly high literacy rate. About 92% of the population greater than 15 years of age can read and write. Approximately 93% of Panamanians speak Spanish, the country’s official language, as their native tongue. About 14% of the population also speaks English, either as a first or second language, particularly many professionals, business people and governmental employees.
The culture, customs, and language of Panama are predominantly a mix of Spanish and Caribbean. Panama has a very diverse population, which is largely of mixed Spanish, Native American, and African descent/ancestry.
Several ethnic groups that migrated to Panama from the 1800s to the 1900s make up Panama’s colorful tapestry. These include descendants of British, Irish, Dutch, French, German, Italian, Portuguese, Polish, Russian, Ukrainian (of which a large number are Jews), U.S. Americans and Caribbean (esp. Afro-Caribbean) nationalities. Thousands of Barbadian and Jamaican workers played a major role in the construction of the Panama Canal. The immigration of Arabs and Asians was also significant, in particular Chinese, Lebanese, Palestinians, South Asians (from India and Pakistan) and Syrians.
Between 1980 and 2012, Panama's Human Development Index (HDI), which represents a broader definition of well-being and provides a composite measure of health, education and income, rose by 0.5% annually from 0.634 to 0.780 today. This gives Panama a rank of 59 out of 187 countries with comparable data, and positions Panama above the average for the Latin America and Caribbean region.
None. There are zero exchange controls in Panama and there is no central bank. The U.S. dollar is used as its primary currency, that is, other than for very small transactions where the Panamanian Balboa may be used (which is at parity with the dollar).
Type of Law
Panama law is a very unique blend, centered on Spanish Civil Law, but with many influences from Common Law, particularly with respect to Company Law (based on the Delaware model).
Principal Corporate Legislation
Panama Corporation Law 32 of February 26, 1927 (Official Gazette No. 5067 of March 16, 1927).
Panama’s corporate law is founded on legislation from Delaware and New York (Corporation Law No. 32 of the 1927 Commercial Code, Decree Law 5 of 1997 and Executive Decree 296 of 1997), but written in the form of Spanish Civil Law.