Starting a Panamanian Corporation


Starting a Panamanian Corporation

(4 votes)

Written by Claire Saylor

Saturday, May 19 2007

Many people who invest in Panamanian real estate choose to register their land or property under the name of a Panamanian corporation instead of directly under their own name. This process is also common among Panamanians for several reasons – the major one being anonymity. This is not necessarily some Machiavellian tactic reserved for shady criminals – it is more of a mainstream loophole that will benefit almost anyone who uses it, including shady criminals.

Because the Panamanian Public Registry is technically public information, the reality is that the U.S. government or, say, an ex-spouse, can at any time uncover information about your property investments overseas. If you have a property directly under your name, it is a one step process to find you. If you have it under a corporation, although that information is technically public as well, it takes much more effort to find you. It is even possible to find a trustworthy third party to sign for you on the corporation, so that your name is completely hidden from curious authorities.

This anonymity can bite you in the butt if you are trying to prove your investment in Panama for the sake of applying for residency – although it is possible to connect your name to your investment in a round about way or you can choose a different path to obtaining your residency. It is beneficial, however, when you want to avoid paying capital gains and income taxes.

If you are purchasing a property with the intention of reselling for a profit, starting a corporation should be a no-brainer. Instead of re-registering the property under the new buyer’s name, you simply transfer shares of your corporation over to the buyer. This allows you to avoid the 2% fee for transferring the property to a different name through the Public Registry. Also, because the seller doesn’t have to document these earnings, the capital gains tax (a hefty tax placed on the profits made when property is re-sold ranging from 3 to 30%) can be avoided. In 2006 the law was changed to try to prevent this by instating a flat rate 10% capital gains tax on the sale of corporate shares, but a good lawyer could probably get around that. It is important to note, however, that if you are renting a property, you will have to pay income tax.

These days, developers are catching on to property speculators and trying to write a large fee (often 5 to 8% of the purchase) into the contract if you are not the end buyer. Once again, if you register the property under a corporation, the transfer is not registered in the Public Registry so you can avoid this fee as well.

The final reason to place investments under a Panamanian corporation is for asset protection. If a property cannot be directly connected to you, it cannot be declared an asset in a lawsuit if you are sued or going through a divorce.

To form a corporation you must have at least four signing members who are also shareholders in the corporation. A couple might choose to put the corporation under their names, and then use their lawyer and his assistant as the last two signing parties. The perk of investment in Panama, is the modernity of the business process. This should only take about three days for the corporation to be created, and you pay about $1000, with yearly maintenance fees of about $300, depending on the law firm you choose.