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Tax PlanningPlease see also: Capital gains taxes due on the sale of real estate; Clarification of common misconceptions about capital gains taxes; Estate taxes in Panama; Real Estate Tax Exemptions; Applying for Real Estate Tax Exemptions. The objective of corporate or personal tax planning is to minimize or defer income taxes payable. This requires a thorough understanding of Panama’s Income Tax Code, plus the ancillary laws and regulations adopted by the Ministry of Economy and Finance (MEF), along with court or administrative rulings. As in other countries, the Income Tax Code is a wide-ranging document, dealing with broad issues like income from employment, a business or property, while at the same time outlining specific rules in many areas. Although Panama does not have a capital gains tax, many capital gains are treated as general income. There is also a withholding tax payable on overseas payments, in some cases. Personal or corporate tax planning includes a concerted effort to minimize or defer taxes payable, a practice that is generally accepted. The Income Tax Code includes a general anti-avoidance rule, like the laws of many other countries, which allows the MEF to reassess any transaction which is not considered to be an arm's length transaction. Unless a transaction is considered to have taken place primarily for bona-fide purposes other than obtaining a tax benefit, it may be subject to adjustment. We usually work closely with accountants to ensure that proper advice is given regarding specific transactions and the taxable consequences thereof.Panama is not a "tax haven" insofar as it does actually have taxation. Nevertheless, the taxation is of a territorial nature, which is especially attractive to foreign investors. For example, with respect to income tax, the territorial principle applies so that income generated outside of the country is tax-exempt, even though the individual or corporation generating the income is domiciled in Panama. There are certain earnings that are exempt from income tax because they are considered to be of foreign source and others that, although they arise from a Panamanian income source, are exempt from income tax in Panama. This territorial method of taxation is only one of the many advantages of incorporating and residing in Panama. Before requesting the establishment of an offshore company or structure of any kind, we recommend that clients seek appropriate tax advice in their country of origin rather than simply relying on information found on the internet. Although we are completely comfortable with the use of offshore entities for asset protection and privacy purposes, we are aware that many clients seek to use offshore entities for tax planning purposes also. As lawyers licensed to practice in Panama, we are only qualified to provide advice regarding the laws of Panama and not those of other jurisdictions, and therefore recommend that you seek appropriate counsel in your country of residence and/or citizenship. See also Registration of Immigrants and Residents with the Tax Department. Please see also: Capital gains taxes due on the sale of real estate; Clarification of common misconceptions about capital gains taxes; Estate taxes in Panama; Real Estate Tax Exemptions; Applying for Real Estate Tax Exemptions.
Last modified 08-May-2009 12:07 -0400 |
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