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Forming
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Offshore
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Forming
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How
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Certainly at one
point or another, investors come to the decision that they would like to
find a way to reduce their tax burden, protect their assets from ridiculous
lawsuits and protect their confidentiality. Whether one is looking
for these things, or simply to pre-plan for a way to save on estate taxation,
the Panamanian Corporation and Foundation offers the most secure and least
expensive way to accomplish these goals.
.
The problem many investors have is of
course a lack of information. I would wager to guess that up to 95%
of all US based accountants, investment advisors and even most tax attorneys
based in North America are very ignorant when it comes to offshore entities.
The myth of course is that offshore structures are only for the super wealthy
or for criminals. The reality is that many individuals and business
owners have used these programs successfully for years to protect their
hard-earned assets and reduce their taxes. In addition, through an
offshore entity, investors have the opportunity to own a number of well-known
mutual funds. An example would include the offshore funds managed
by the legendary George Soros, Fidelity Investments, Guiness Flight, Templeton
and others. Also, certain real estate investments and bonds (such
as US backed Brady Bonds) become available and are also tax-free when the
owner is an offshore entity.
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How
to Establish a Panamanian Corporation
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The corporation law of the Republic of
Panama provides that any two natural persons acting as the organizers and
the subscribers may appear before a Notary Public to organize and constitute
a corporation (In Panama Public Notaries govern most entities under the
direction of a government institution). It is the usual practice
for natural or juridical persons outside of Panama to accomplish the formation
of a Panama corporation through a local Panamanian law office, a trust
company, or a professional management services firm. For the purpose of
drafting necessary documents, the following simple information and particulars
are supplied by the client to the incorporation agent:
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Company Name
- A preferred name, with two or three alternatives in the event that the
desired name may conflict with a name already in use, expressed in any
language, The name must also include a corporate ending such as (Anonymous
Society), Corporation, or Corp, Incorporated, or Inc., Limited, or Ltd.
to clearly denote that it is an incorporated company.
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Articles of Incorporation
– One must specify the purpose of the company and certainly that can be
as broad or specific, as you would wish. It is certainly possible
to indicate a number of activities, if that is desired.
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The capital of
a Panama corporation is
expressed as Authorized Capital, and there is no minimum capital that must
be paid in. I suggest that the indicated capital be no more than
US$ 10,000.00 as the initial registration
tax or fee is a function of the authorized capital. The minimum, initial
capital registration fee is US$250.00 (based upon $10,000 authorized share
capital). The annual minimum tax thereafter, assuming there are no
profits derived from any business activity in Panama, is about $250.00.
You will need the services of a notary and accountant to make this declaration
for you, but this is not a problem and costs less than $300.00 There are of course other expenses, but these are just some of the basic ones.
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Shares may
be issued in Bearer form or in Nominative form. Preferred, Class A, Class
B, voting, non-voting, and other shares structures are also permitted.
Keep in mind that the “Articles of Incorporation” are public record.
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Directors
- A minimum (with no maximum) of three directors is required. These may
be of any nationality, residence or occupation. Nominee directors are permitted
and many offshore formation firms will try and convince you to use their
nominees for this purpose. The decision to use nominee director is
yours to make and really comes down to trust.
.
Do you trust the person whose
name appears on your documents as having control over your company? In
reality, you can certainly choose anyone that you wish, but I advise you
that there are some other strategies you can employ if you wish to remain
anonymous. Juridical persons (other corporations or entities) can also
act as a director.
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Officers
- A President, a Treasurer, and a Secretary are required. These may
be natural or juridical persons, and there are no requirements as to nationality,
residence or occupation. While one person may hold more than one
office, it is customary that the President should not also be the Secretary.
One of the officers is usually named Vice-president. There may be as many
Vice-presidents as required. Managers or other positions may also be named
if desired. Normally the directors and the officers are one and the same,
but they certainly do not have to be.
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Domicile
- The company can be domiciled anywhere in the world, but I advise that
you stay with Panama or another tax haven as the domicile of the Panamanian
Company. The Panamanian Company must have a Registered Agent domiciled
in Panama. It is required that the agent is a practicing lawyer or
law firm. Domicile of registry is not necessary domicile of Business.
A very important point to understand when planning tax strategies.
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Duration
- The Corporation may have a limited or unlimited life, however, it is
customary for the duration to be perpetual.
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Time To Establish
The Company A competent
attorney in Panama can get the incorporation process done in about 1 week
to ten days. If the paperwork is being accomplished by mail, and
your check needs to clear, then of course the process can take a month.
But anyone in a rush can incorporate in person in about 1 week.
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As a word of advice, stay away from “shelf
corporations” that some of these offshore firms will try and sell you.
You do not know if the offshore formation company or attorney has actually
made any material changes when you buy a shelf company and you also do
not know if the company was engaged in something that will come back to
bite you later on. The incorporation process is convenient and quick,
so why not get a new corporation from the start?
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Corporate Minutes,
Seals, Etc. - Corporate
Seals or Minutes Books are not required, especially if the corporation
does not operate in Panama. With your certified copy of the “Articles of
Incorporation”, you should not have an problem opening a bank account or
conducting other business.
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Expenses
Our experience is that some firms have charged up to $5,000 for one single corporation.
We usually work with our clients on a flat fee basis. We prefer the
flat fee basis, because we can then shop for the lowest price for our client
and truly work as an independent advocate in this way. Regardless
of what type of arrangement desired, the entire cost should not exceed
$3000.00 (with federal express fees, legal fees, etc. included in this
amount).
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Renewal and registration costs should
run no more than $850 total. There are a number of offshore formation
firms and lawyers that charge outrageous amounts of money to set up and
maintain both Foundation and Corporation structures. Some of these prices
are way out of line, but most people do not know any better and end up
paying quite a bit.
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The Myth
and the Reality –
Using Offshore
Trusts, Corporations & Foundations
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The first question I usually get from
a client centers around the legality of setting up an Offshore-structure.
The answer is quite simple. Such entities are perfectly legal.
Most Tax authorities do not like them, but they are perfectly legal.
Tax authorities try to do every thing in their power to dissuade citizens
from moving their money offshore because it becomes difficult, if not impossible,
for tracking, reporting and seizure once funds are outside the client’s
home jurisdiction. In addition, creditors or courts have a very difficult
time getting their hands on such assets when trying to settle a lawsuit.
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The tax authorities do not say, in print
anyway, that such structures are illegal. In fact, it would be theoretically
unconstitutional to prevent by law one’s right to invest or place funds
where one wants. The authorities simply want to force or coerce the
citizen to divulge such structures so they can assess taxes. To be
sure, as more and more people have in fact set up these structures in recent
years, the tax authorities are trying to constantly change the tax code.
For US citizens, This has involved the dialog box on schedule B, which
specifically asks if one has ownership of a foreign bank account, offshore
structure or insurance policy. If you say “Yes”, of course a red flag is
raised when you send back your tax return. If you say “No”, and are
discovered to have such ownership, then of course they have you for perjury.
There are of course legal and legitimate strategies for everything.
So, it really depends on what the client wants to accomplish when contemplating
the establishment of such a vehicle. We work with our clients to
ensure that they are aware of any potential issues before hand so we can
map out a strategy that works best for them. Regardless of the structure established,
it is the client’s responsibility for any reporting requirements that may
be applicable to them. Our office, and the institutions we work with, do
not send any information to third parties.
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Offshore
companies and foundations are most commonly
used for the following:
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Ownership of Bank Accounts,
Investment Accounts
or Real Estate
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As Holding Companies for other
Domestic Corporations
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As a vehicle for re-invoicing
and thus a way to reduce tax
liabilities in the client’s
home country
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As a vehicle to truly have your
business offshore (Internet based businesses, import-export businesses,
professional services, etc)
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Indeed, these are just some general ideas
and uses for such structures. More sophisticated strategies to save
on estate or inheritance taxes are also applicable. In reality, there are
a number of other strategies and reasons for individuals to set up such
entities for themselves. Write to us in order to find out if a Panama Foundation or Panama Company may be right for you.
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