A Trust is a contract…. a private legal agreement… an expression of an understanding.An offshore trust is the same.The major difference is that it’s constituted abroad, beyond the laws of the country where you live… offshore.
The Common Law Trust has served for centuries as a favourite vehicle in financial planning and asset protection. The Trust is finding even greater life in today’s increasingly complex society as we see our privacy diminished by the very cyber-world you’re travelling right now!
The Republic of Panama is considered one of the oldest and safest tax havens in the world, located in Central America, between Colombia and Costa Rica. Since its independence from Colombia in 1903, Panama has had convenient and attractive legislation for offshore operations, based exclusively on the territorial principle of not taxing foreign source income.
Due to its structure, geographical position, political stability and characteristics of its economy, Panama has become one of the most important tax havens of the Western Hemisphere. It has excellent international transportation and communication systems; the United States Dollar has been a currency of legal tender for more than ninety years in Panama; there are neither exchange controls nor government regulations and there is a complete freedom in the movement of funds. Also, confidentiality and banking secrecy are recognized by law.
Panama’s success as a tax haven is primarily based on its tax structure. According to article 694 of the Fiscal Code, the income earned by any person, either an individual or a corporation, from sources outside of Panama, is exempt from taxes. Panamanian legislation expressly provides that the following transactions are not subject to income tax in Panama:
a) Invoicing to a company abroad, from an office located in Panama, the sale of goods for an amount greater than that at which said goods were invoiced to the office located in Panama, provided those goods are handled exclusively abroad.
b) Directing or managing, from an office located in Panama, operations and transactions that are executed, completed or take effect abroad.
c) Distributing dividends from income earned by a company when that income is produced or earned abroad.
Also, the Fiscal Code exempts from income tax: a) The interest paid by banks located in Panama to their customers for savings accounts and time deposits kept in Panama and b) The salary or fees earned by Directors, Officers and Executives of Panamanian corporations located abroad.These benefits have made of Panama the tax haven that it is today and the reason why others from the region have tried to imitate us.