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Sheltering In Panama - Put Your Trust In Hats And Umbrellas!

Mar 17, 2008
When one thinks of Panama several images immediately spring to mind. Panama hats, the canal and offshore tax havens to name but a few. The more literary may think of John Le Carre's 'Tailor of Panama', the espionage story made notable by the film it inspired starring Pierce Brosnan.

It is therefore somewhat ironic that my first thought of Panama, the hat, is a misnomer. The Panama hat does not originate in Panama at all, but comes in fact from Ecuador. The wide brimmed hats woven from the Toquilla plant got their adopted name during the construction of the Panama Canal when the workers that were imported to complete the work, wore the hats to help shelter them from the burning sun. Theodore Roosevelt was even pictured in one whilst inspecting the work on the canal in 1906.

The Panama Canal which was completed in 1914 is one of the centuries great engineering achievements. Built in two stages and by two countries, the canal took thirty three years to finally complete. Started by the French in 1881 under the leadership of Ferdinand Marie de Lesseps, who ten years earlier had completed work on the Suez canal, the canal was finally completed by an American alliance that guaranteed Panamanian independence and a perpetual lease on a 10 mile stretch that is now known as the Canal Zone.

Ever since its completion, Panama and the USA have been inextricably linked. These relations hit an all time low in 1988 with the freezing of Panamas assets following the indictment of the countries president, General Manuel Noriega on drug trafficking charges. US troops eventually invaded the country to oust Noriega in 1989 and he is now serving a 40 year sentence in the US. Following the invasion, the US announced a billion dollar aid package to the country and in the years that followed, Panama returned to democratic rule with successfully monitored elections.

Panama as a tax haven dates back to 1916 when it approved its first fiscal code. This exempted companies that carried out transactions abroad from paying taxes in Panama. By the 1970's Panama held more 'offshore companies' on its company registrar than all of the Caribbean tax havens combined. Following the Noriega crisis, some of these left to incorporate in new offshore tax havens such as the British Virgen Islands who since the enactment of its BVI International Business Companies Act of 1984 (I.B.C.) has incorporate nearly 150,000 new companies. Many of these emigrated from Panama whilst Noriega was in control.

In recent years, under the influence of stable government, Panama has evolved into one of the most efficient banking tax havens in the world. Recent tightening of privacy laws in favour of the individual, including the outlawing of the behaviour associated with the Paparazzi mean that Panama has become a leader in not only sheltering offshore profits, but combined with its pensionada provisions under Law 9, it has become a destination for the wealthy looking to acquire new residency from a second passport.

Law 9 allows anyone who registers as a pension holder, (qualification requires only a pension of $500 a month) to benefit from a long list of discounts from cinema tickets to air travel. The benefits are available to anyone who qualifies over the age of 18.

You may need to hurry though. Recent activity suggests that the Panamanian government may begin to tighten restriction on the availability of new residents. A sign maybe of the popularity of the country and its favourable tax regime.
About the Author
Panama Legal are a Panamanian based law firm that specialize in offshore trust and offshore company formation. Panama Legal can guide you through the legal procedures. Read finance articles at OMDN
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