Tax Advantages of Offshore Banking in Panama
There are a lot of beliefs and myths about offshore banking in countries like Panama. Some people believe it's nothing more than a tax-free money haven for rich people, while others think that it is just a form of tax evasion and intrinsically illegal.
In actuality, Panama offshore banking is a valid method to protect assets whether you are a large or small corporation. And while there are some illegal practices that can be done in this system, it is not, in itself, an illegal activity. Having said that, though, it is important to note that different regions have different tax laws, and before you begin looking at your offshore options, you need to make sure you understand the difference between tax preparation/asset protection and tax evasion.
The Most Obvious Benefit
Why is offshore banking in Panama so popular? The most obvious reason is that Panama only taxes income produced or generated by economic endeavors that took place inside the country. Aside from a small, $300 annual corporation renewal, all those economic activities are tax free. There is no need to file annual returns or financial statements because all the business transactions that took place outside Panama remain fully exempt.
This is extremely beneficial in difficult economic times, but it is also what gives the appearance of questionable business practices. Just remember, the practice isn't intrinsically illegal, and it is up to you to make sure you don't get involved with unethical practices. While it's hard to sum up what is legal or illegal, for our purposes it is enough to say that if you are hiding or not reporting your income, you are probably doing something very wrong.
There are, of course, many legal ways to reduce the amount of taxes you owe, and if you stick to those practices, you won't have to worry about ensuing trouble.
What Can You Do?
There are a number of possibilities for legal offshore banking that can provide a lot of tax benefits. You could, for example, have a Panama foundation take ownership of all your intellectual property rights, which will cut down on the income generated onshore.
Another common method is to split your corporation from a single onshore business into several onshore and offshore companies. In other words, you can move your HQ offshore while handling order fulfillment, marketing, and product development onshore. These parts of your company will act as their own businesses, earning money which will not be taxed in Panama.
There are, of course, a lot of regulations regarding this kind of behavior. For example, you may not be allowed to own both the onshore and offshore companies, so you will either have to set up a Panama foundation to own the HQ, or your onshore businesses will have to actually behave like independent entities (and possibly even do business with your competition).
In the end, there are many tax advantages to banking offshore. You just have to make sure you follow all of your local regulations and tax laws to ensure that you are well within the range of "tax planning" rather than straying into the darker territories of "tax evasion." Always consult with a professional to make sure you understand the difference before you make any decisions.
Suggested Reading
Asset Protection : Concepts and Strategies for Protecting Your Wealth
