tax havens! [panama]

7/27/2019 Tax Havens! [Panama]

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TAX HAVENS:PANAMAEmile Justin CebrianFar Eastern University Institute of Law


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The State

Full designation:

Republic of Panama

Nature of territory:

Isthmus

Location:

Central America

Capital city:

Panama City

Population:

3,661,868 (2013 census)

Currency: Panamanian Balboa (PAB)

GDP per capita:

$9,526 (2012 estimate) // Total: $36.253 billion


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The Haven

Overview:

Panama is widely used by individuals

and corporations as a base for theirforeign operations. It is notable for thecombination of tax and businessadvantages it offers...(Starchild, 2001)


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The Haven

Territorial method of taxation:

Panama does not assess any income tax on income produced from sources outside thecountry, including proceeds of sales made outside of Panama. (Sovereign, 2002)

Benefits for certain off-shore business companies:

Panama does not impose taxes on off-shore business companies who do not engage inbusiness operations within the national territory; off-shore undertaking business operations

therein will be subjected to local taxes

Off-shore business companies not engaging in business operations within Panama areentitled to the following exemptions:

No corporate taxes

No income taxes

No local taxes

No withholding tax

No capital gains tax

No inheritance tax

No estate tax, gift tax, etc.

Such companies need only pay an annual license fee to the Panamanian government.Exceptfor the $300 corporation renewal there are no taxes to be paid.(TaxHour.com, 2009)


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The Haven

Laudable bank secrecy laws:

Panama still holds some of the strongest bank secrecy laws inthe world. While other countries have been forced to water downtheir legislation, these jurisdictions have up to date managed toavoid the spotlight and uphold their sovereignty. (CapitalConservator, 2008)

Article 74 of Panamas Decree 238 prevents the Panamabanking commission from conducting investigations on individualclients; information uncovered during its regulatory activitiescannot be revealed, unless subpoenaed by court order; violationof Art. 74 warrants monetary fine without prejudice to criminaland civil liabilities as provided for by Art. 101

Art. 170 of same decree provides that in case the informationreferred to above is disclosed without the consent of theconcerned party, or when such disclosure was not necessary tosafeguard a higher interest, punishment shall be by way ofimprisonment of 10 months to 2 years or a comparable fine, plusinability to practice his occupation, employment, profession or

activity for not more than 2 years


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Export Processing Zones

Export Processing Zones:

By virtue of Law No. 25 of Nov. 23, 1992

The incentives coming with EPZs benefit export companies, they beingentitled to the following:

Total exemption from import duties, sales taxes on the import of machinery, etc.,and materials used in construction/maintenance of infrastructure within the zone

Total exemption from real estate taxes on land/buildings within the zone

Total exemption from income taxes for 10 years from the date of the effectivity ofthe contract, and total exemption from the 11th year, but only on the profitsreinvested in the development/expansion of the zone's infrastructure in excess oft20% of the total taxable income in the fiscal year

Total exception from taxes levied on capital or assets, save franchise tax

Special provisions to carry over losses for income tax purposes for deductionpurposes re: the taxable income of the three years immediately following (can bemade during any of the three or prorated among said years)


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Coln Free Trade Zone

The CFTZ is a large entity near the Atlanticentrance to the Panama Canal, dedicated tore-exporting a wide variety of merchandise to

Latin America and the Caribbean Manufacturing companies therein that produce

for export may be granted 100% tax exemptionfrom income, export, sales and capital taxes

for five years and are subject to the reducedrates of 2.5% to 8.5% on export incomeearned there after the tax holiday expires


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Tax Rates

Corporate tax: 30% (on income up to 100K balboas [$100K]) ~ 42% (on

income over 500K balboas [$500K]) Corporate dividends/earnings of branches of foreign

corporations are subject to 10% withholding tax Interest paid/credited to the account of a foreign lender is

subject to 6% withholding tax Interest on bonds, notes and other registered securities is

taxed a flat 5% withholding tax unless traded on aregistered exchange in Panama

Royalties paid to a foreign movie or television productioncompany or distributor also are subject to a 6% withholdingtax

Companies must withhold a 10.75% social security tax onemployees' salaries


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Tax Rates

Individual tax:

Tax rates begin at 3,000 (first 3,000 balboas ofincome are not taxable)

52% rate between 3,000 and 3,250 balboas 4% between 3,250 and 4,000 balboas

33% between 50,000 and 200,000 balboas

30% over 200,000 balboas 7.25% social security tax imposed on employees

on wages and salaries withheld by the employer


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Sources:

http://www.citizenstrade.org/ctc/trade-policies/panama-free-trade-agreement/who-says-panama-is-a-tax-haven/

http://www.capitalconservator.com/offshore-companies/panama-corporations.php

http://www.taxhavens.biz/caribbean_tax_havens/tax_haven_panama/

https://www.offshore-protection.com/panama-tax-haven2.html

http://panamabusiness.tripod.com/taxhaven.html

http://en.wikipedia.org/wiki/Col%C3%B3n_Free_Trade_Zone

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tax havens! [panama]

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