Panama as an offshore banking center has strong bank secrecy and confidentiality protection laws. An account may be opened in the name of an anonymous corporation with the details kept secret and accessible only to the bank. The third party can get access to client information, if he/she gets an order of Panamian court that is only given out, in case the serious crimes, such as money laundering and drug trafficking are committed. Panama is tries to reduce number of cases client information is given away to sustain an image of an offshore banking center that is devoted to ensuring high levels of confidentiality.

Opening personal bank account is much simpler in Panama than opening a corporate one. However personal offshore banking account has serious disadvantages. Most countries require reporting accounts owned overseas and it is easy to track such account through money transfers in and out of your offshore account that will be labeled under your name. This destroys your attempts to keep the account confidential.

Contrary to personal accounts corporate accounts are shielded by corporate name. In other words, transfers are made from the name of some corporation shareholders of which are unknown.

Panama banks are highly reputable due to conservative and careful lending practices they use. There is no central bank in Panama, therefore there is no moral hazard for banks. They know that if they lend not in a very careful way, they may go bankrupt and there is no one to come and bail them out. In addition, Panama banks do not engage in sub prime mortgage business that makes the system even more stable.

Interest rate on Panama offshore banking deposits is comparable to their onshore counterparts. In some cases interest rates make 7%, while average interest rate is 4.5%. Interest income is tax free in Panama and this make Panama banking even more attractive.

Panama’s Corporation Law 32 of 1927 states that corporations can be founded by two persons that are residents or non-residents. Panama’s Corporation Law in many cases resembles Delaware Business Corporation Law of 1926. Unlike many offshore banking Panama treats both domestic and offshore companies in the same way. All corporations in Panama pay taxes for domestically generated income, while income generated from foreign sources is exempted from taxes.

Legislation of Panama obliges corporations to have minimum of three directors and minimum of three officers. Three managers can also be three officers of a company (President, Secretary and Treasurer or other positions they desire). Legislation of Panama Offshore Banking center allows appointing officers that are not at the same time shareholders and they can be non-residents of Panama. In addition, directors can be physical persons or companies.

Following concepts can not be used without license or special permission:

Bank, Investment Fund, Fund Management, Trust, Assurance, Re-Insurance, Savings, Building Society, etc and their foreign translations;

All local corporations are required to use “Corporation”, “Incorporate”, “Sociedad Anonima” or the abbreviations “Corp”. “Inc” or “S.A” in their company name;

Typical share capital is $10,000 that is divided into 100 common shares of no par value. Minimum emission is either one share of no par value or one share of par value. Higher capitalization of a company is subject to higher government fees.

Advantages of establishing offshore company in Panama are:

1. High degree of secrecy and anonymity;

2. No obligation to disclose final owners;

3. No obligation to submit financial statements or hold general shareholder meetings;

4. Exemption from taxes: all transactions conducted in Panama are exempted from taxes;

5. Moderate establishment and annual costs and fees;

6. No Capital requirements;

7. Small registration fee on capital;

8. Corporations established in Panama are free to conduct any legal transactions in any country and in any currency;

9. Corporations are free to issue “non-standard securities”;

10. Shareholders, directors and officers may be residents of any country. Directors do not need to be shareholders;

11. Shareholders are allowed to vote by proxy voting;

Offshore Banking License
Panama Offshore Banking Company is a tool through which offshore banking sector operates. Panama offshore banking company is established as a normal corporation in Panama and then applies to Panama Ministry of Commerce to receive the license fro conducting financial services. These services include:

1. Opening and maintaining offshore banking accounts and receiving deposits;

2. Managing, investing funds and making loans;

3. Receiving interest and dividends on third party funds;

4. Serve as a part of payment system;

5. Conduct consulting, advisory and audit services;

6. Making precious metal buying/selling though the Internet;

7. Factoring;

8. Providing leasing services, if company share capital exceeds $100,000

Companies established in Panama that do not possess a license granted by Ministry of Finance are prohibited to conduct offshore banking services.