The term 鈥渢ax haven鈥 commonly refers to countries whose laws allow for anonymous ownership of legal entities like corporations, private foundations and trusts, as well as limited taxation on specific types of corporations. Tax haven also refers to countries with bank secrecy laws which protect customer鈥檚 accounts from being spied on by outsiders. Panama has been referred to as a tax haven country due to its strong bank secrecy laws and anonymous legal entities, including Panama corporations and Panama foundations. However, Panamanian banks are now obligated to provide banking information in certain cases due to the information exchange agreements that are now in place with several countries.
The best tax haven countries are those that have both high banking secrecy and anonymous legal entities. Anonymous ownership of an 鈥渙ffshore鈥 corporation (offshore because it is outside the owner鈥檚 home country) can be achieved in several ways. Some tax haven countries allow what are known as 鈥渘ominee鈥 board of director鈥檚 members and corporate officers such as the President, Treasurer, and Secretary. The term 鈥渘ominee鈥 means that a person is nominated by the corporation to serve in that capacity rather than naming the true owner as a board member or officer for the corporation. Usually an attorney or law firm residing in the “tax haven”, which formed the corporation, supplies three of its employees to serve as the nominees. Some owners may worry that these tax haven nominees could control the corporation. This can be avoided by the corporation鈥檚 bylaws dictating their limited role and the power resting with the majority shareholders. Some tax haven law firms even provide the owner with pre-signed, undated letters of resignations from all of the nominees. This allows the owner to be able to replace the nominees at any time. This is in fact what we do for our clients.
Another method used by a few tax haven countries is the usage of 鈥淏earer鈥 stock certificates where the actual stock certificate simply says 鈥渂earer鈥 rather than an actual person鈥檚 name. This means the bearer of the majority of shares is the true owner of the tax haven corporation. Panama is one of the few remaining bearer shares countries. Hand the bearer shares to a third person and now that person is the owner of the Panama tax haven corporation. Panama recently changed the law requiring that all bearer shares certificates must be held in custody by the corporation鈥檚 resident agent.
Panama Tax Benefits
Tax havens are called that because they normally do not impose any type of income or corporation tax on their offshore corporations, private foundations, or trusts. A true tax haven effectively levies a 0% tax rate on offshore corporations. Some tax havens will not tax any income made outside of the country but will tax income derived from the sale of products or services to people or companies residing within the country. This is usually known as 鈥渢erritorial鈥 income subject to taxation. Panama is a territorial income tax country. Other tax havens do not have any taxes on their offshore corporations, foundations, or trusts no matter where their source of income is from.
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