The Republic of Panama is considered one of the most well-established pure tax havens in the Caribbean due to extensive legislation that strictly regulates the country's offshore jurisdiction and financial services.
Panama's Offshore Financial Sector
Panama's offshore jurisdiction offers a wide array of excellent financial services, including offshore banking, the incorporation of offshore companies, registration of ships and the formation of Panama trusts and foundations. There are no taxes imposed on offshore companies that only engage in business outside of the jurisdiction. Offshore companies incorporated in Panama, and the owners of the companies, are exempt from any corporate taxes, withholding taxes, income tax, capital gains tax, local taxes, and estate or inheritance taxes, including gift taxes. Panama offers an additional benefit not available in many offshore tax havens: being able to conduct business within the offshore jurisdiction. However, any business conducted within the jurisdiction is subject to local taxes.
There are extensive laws in Panama to protect corporate and individual financial privacy. Strict confidentiality laws and regulations apply to documentation of offshore corporations, trusts and foundations, with severe civil and criminal penalties for violations of confidentiality. The names of corporate shareholders are not required to be publicly registered. Panama also has very strict banking secrecy laws. Panamanian banks are prohibited from sharing any information about offshore bank accounts or account holders. The only exception is a specific Panamanian court order in conjunction with a criminal investigation.
Panama has few tax treaties with countries that have strong economic ties to it, further protecting the financial privacy of offshore banking clients who are citizens of other nations. Panama also offers the benefit of having no exchange controls. This means that for individual clients of Panama's offshore banking, as well as for offshore business entities incorporated in Panama, there are no limits or reporting requirements on money transfers into or out of the country.
For more on the Panama Papers leak see Panama Papers Reveal The Secrets Of Dirty Money.