Law of Panama

Setting up an asset protection plan in an offshore jurisdiction can be a relatively pain free way to secure your money, reduce taxes and increase your financial flexibility provided the correct structures and jurisdictions are utilized.

As the old saying goes: "not all offshore banking destinations were created equal". In today's post 9 /11 world the movement of money across borders has become increasingly difficult to do.

Many offshore destinations which were once considered completely private and secure such as Switzerland have recently signed tax treaties and agreements with foreign governments to pierce the privacy veil.

There is good news for investors who are not involved in illegal activity who would still like to take advantage of the benefits of asset protection offshore. There are still several jurisdictions that have rock solid banking secrecy and privacy protection laws in place which favor the investor.

The Republic of Panama falls into this category with banking secrecy laws that are enforced to the letter. Panama has not signed any tax treaties or agreements with any foreign country for fiscal crimes and bank officials in Panama who breach the confidentiality of their clients can be fined, fired or placed in prison.

In Panama, only the power of a court order will allow bank officials to provide information about their clients to authorities for major crimes. A court order can only be requested in cases involving crimes such as; drug trafficking, terrorism or international money laundering.

The local laws of other jurisdictions, such as tax evasion laws, are not enforced in Panama and are not sufficient grounds to request a court order to pierce the privacy veil.

This is not a free ticket to become a tax evader of course but an illustration of the high level of privacy protection afforded by law in Panama to foreign investors.

In practice, setting up asset protection structures is not a hard or expensive exercise in Panama. The key is to work with a offshore service provider who has developed strong relationships with the local banks since banks in Panama will not work directly with a person or entity who has not first been introduced to them by a trusted source.

Panama offers two financial instruments that can be used in combination to create a layered asset protection structure; the bearer share corporation and the private interest foundation.

Bearer share corporations can be incorporated using local nominee directors. These nominee directors names will appear on all paperwork filed for the corporation with the government and banks in Panama.

Bearer share corporations are owned by the person or entity who physically holds the share certificates. Ownership of the corporation can be passed to another individual or entity simply by handing over the share certificates.

In a typical Bearer Share corporation setup the nominee directors provide undated resignation letters placing total control of the company in the hands of the person who holds these resignation letters.

The bearer share corporation structure protects an investor's privacy because the investor's name never actually appears on any documents associated with the company. The only way a person can legally find out that the investor owns the company is to ask them under oath in a court of law.

A private interest foundation when registered is not actually owned by an individual. When setting up a foundation a nominee founder can be employed although this founder has no legal rights of ownership over the foundation since a foundation cannot have an owner.

A foundation can own a bank account, corporation or real estate but is not allowed to directly engage in for profit commercial activities.

Layered offshore asset protection can be achieved by setting up a corporation and bank account using nominee directors and then creating a foundation with a nominee founder to own the corporation and bank account.

An investor can retain total control over these entities anonymously while being fully protected by the local banking and privacy protection laws in place in Panama so long as they do not use these structures for illegal activities.

Tips & Tactics

Helpful advice for making the most of this Guide

• Banks in Panama will only work with people who have been introduced to them by trusted sources
• Utilize nominee directors and founders when setting up your corporation and foundation to ensure your name does not appear on any official documentation
• Consult with an offshore asset protection specialist or asset lawyer prior to making any investment decision