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The World’s Top Offshore Haven And Our Preferred Jurisdiction

31 Mar
A view of Panama City, Panmaa on a sunny afternoon

The World’s Top Offshore Haven And Our Preferred Jurisdiction

The World's #1 Offshore Haven

The need for a Plan B has never been greater.

The question is… where?

How should you choose where’s best for you to diversify your life, your assets, and your investments offshore?

Factors to look at for any jurisdiction you’re considering include:

  • Approach to taxation and tax rates
  • Incorporation laws
  • Privacy laws
  • The stability of the currency
  • The stability of the government
  • The banking system
  • The economic outlook
  • Accessibility
  • Costs and fees associated with banking, investing, incorporating, and setting up other structures

Every offshore expert and service provider has his favorite destinations.

In this month’s issue of my Simon Letter service, I look at my top five picks for world’s best offshore havens… starting with Panama.

Why Panama Is The World's Top Offshore Haven

Despite the Panama Papers controversy and a reputation for money-laundering scandals, Panama remains one of the world’s top offshore havens… and my preferred jurisdiction.

The country welcomes both foreign retirees and investors with open arms. It is one of the easiest places in the world to obtain foreign residency thanks to its Friendly Nations, pensionado (which gives you permanent residency), and more than one-dozen other residency program options. The government has even recently created a long-term visa specifically for digital nomads.

Panama remains our pick for the best place in the world to run an internet, consulting, or other laptop-based business… which is why our own Live And Invest Overseas HQ is located in Panama City. If you’re shopping the globe for where to launch or relocate an international business, Panama should be at the top of your list.

Panama’s Advantages

One of Panama’s greatest advantages, particularly for the entrepreneur, is its approach to taxation. This is a jurisdictional tax regime. Any person or entity is taxed in Panama only if his, her, or its income is earned in Panama.

Further, Panama doesn’t impose tax on interest income from deposits in Panamanian banks. Organize your life and business interests appropriately, and you can live in Panama free of any Panama income tax liability. Don’t earn any money in Panama, and you owe no tax in Panama. It’s as simple as that.

If you’re an American, you still could be liable for U.S. taxes, but you don’t have to worry about reporting non-Panamanian income in Panama for your company or yourself.

Banking Is Not Panama’s Strengths

Panama is heralded as an international banking center. With 55 banks currently licensed to operate here, it qualifies.

However, I wouldn’t say that banking is a strong suit for this jurisdiction. There is no longer any pretext of banking privacy or secrecy… not since Panama signed an exchange-of-information agreement with the United States in 2010. And I’m hard pressed every time someone asks me to recommend a bank in this country to come up with an answer. I’ve done business with more than a dozen of them over the past two decades and wouldn’t endorse any. They’re all difficult to deal with, inconsistent in policies and requirements, and devoid of customer service.

Financial Services In Panama

Panama’s financial services sector is a significant contributor to its economy, and I do recommend the jurisdiction in this context. This can be a good choice for setting up a corporation, trust, or foundation. Again, Panama corporations pay no income tax in Panama if they don’t earn money in Panama, making a Panama corporation an appealing structuring option for business operations in other locations.

The important thing to keep in mind when it comes to structures in Panama is that the associated fees vary by provider. I’ve known some attorneys charging multiples what they should to form a corporation, for example. Shop around.

The country uses the U.S. dollar, so you won’t benefit from currency diversification living or investing here. On the other hand, you face no exchange-rate risk.

The Isthmus is centrally located with easy access to all of the Americas and even Europe, with many direct flights across the Atlantic.

This is a safe, stable country that is pro-foreign investment, pro-business, and investor-friendly. Its Canal is a cash cow, pumping more than US$2.7 billion annually into a country with a population of just 3.5 million people. That’s a lot of guaranteed per-capita cash flow.

Long term, Panama will be recognized as one of the world’s primary global business hubs, competing with the likes of Singapore.

Lief Simon