Q&A: why Panama attracts wealthy foreigners
Panama's generous tax laws have long made it a haven for wealthy investers from overseas
Has Panama got a long history as a tax haven?
Yes. It was regarded as the western hemisphere’s primary tax haven for many years until it suffered in the late 1980s from the fallout from the regime of General Noriega. In the 1990s, after Noriega’s fall, it gradually regained its position as one of the most attractive offshore tax havens. It is one of the the principal channels for funds into and out of Latin America.
How does the tax system in Panama work?
It is very simple, says Justin Rix, an international tax specialist with Grant Thornton, the accountant. He says: “You pay tax in Panama only on income which is judged to have arisen in Panama. So if you are living in Panama you can receive income from all other parts of the world and pay no tax on it.”
Are there other financial advantages Panama has to offer?
Yes. Mr Rix says there has, for many years, been a general lack of transparency about ownership of assets. So if you set up trusts or companies in Panama it is very hard for outside tax investigators to discover much about what they contain.
Does this mean UK investors could set up a Panamanian trust and funnel some or all of their income through that?
They could but it would be far from plain sailing, says Mr Rix. They could be hit by a number of anti-avoidance measures now in place. If they put assets into a trust they would be likely to trigger an inheritance tax charge on the way in and also to suffer regular ten-year charges on any increase in the trust’s value. If they put shares into a Panamanian trust the dividends would probably be liable for UK tax.
How much does it cost to buy a flat there, and is it easy to do?
Panama is considered an easy place for foreigners to buy property, primarily because of the affordable prices and the fact that there are almost no restrictions on owning land in most areas. Luxury apartments in the centre of Panama City range in price between just £20,000 and £100,000. The Panamanian Government also regularly offers incentives to ex-patriates on mortgage repayments.
What kind of lifestyle can a resident lead in Panama?
For expatriates, Panama holds a number of attractions. English is commonly spoken and the American dollar is almost universally accepted. Panama City has numerous tourist attractions including hotels, restaurants, a picturesque old quarter, Cathedral and museum.