The biggest reason why foreigners use Panama corporations is to protect their assets from lawsuits, government seizures, and home country regulations. Other countries civil lawsuit judgments or government tax assessments cannot be enforced against its corporations in Panama.
Panama only taxes corporations and individuals on sources of income gained within Panama’s borders. This is known as “territorial” sources of income. Panama corporations conducting business outside of Panama are not taxed on their income or profits. This includes using the internet to reach out to global clients and be paid for services conducted inside Panama but delivered outside of its borders. For instance, if a person living outside of Panama goes to a Panama law firm’s website and orders the formation of a Panama corporation and receives the legal documents via email or international courier, there are no corporate or income taxes levied on the Panama law firm.
Distribution of Earnings:
A Panama corporation can distribute its earning through dividends or shares to its owners and beneficiaries tax-free when the total income was earned outside of Panama.
Distribution of Assets:
Panama corporations operating outside of Panama can distribute its assets to the shareholders exempt from taxes.
Granting loans or providing lines of credit to debtors who reside outside of Panama are all tax-free.
Taxes are exempt when vessels registered in Panama earn income from international maritime commerce and trade by the vessel’s owners.
All interest paid by Panama banks to every account holder are exempt from all taxes. That means every Panama bank account owned by a Panama corporation is exempt from taxes for the earned interest.