Forming a company in an offshore jurisdiction like Panama is not a way a get out of paying your taxes at home. It seems like the only time the offshore services industry is mentioned in the press is when a large criminal enterprise has been exposed. Despite what the media would have you believe there are numerous reasons to pursue offshore company formation that are perfectly legal.

What is Offshore Company Formation?

Forming an offshore company simply means incorporating a business in a country other than the one you reside in. It need not be construed to mean incorporating in an uncooperative tax haven. You can incorporate a business in the UK which would be offshore to you if you lived in Canada for example.

The media at large has had a field day with the offshore industry and in particular, tax havens, seemingly only reporting about them when a serious crime has been uncovered. Since these tax havens make their money promoting privacy it does not make sense for them to fight the media onslaught since this will bring unwanted attention to them and their clients which is the opposite effect they are looking for.

Why Form an Offshore Company?

There are a number of positive benefits that can be realized through offshore company incorporation. The lion's share of people that are drawn to offshore company formation are seeking greater privacy in their financial dealings, increased layering for asset protection purposes and a reduced tax burden on capital gains.

Forming your business offshore does not preclude you from paying your fair share of taxes on income in your home jurisdiction. The advantage of having an offshore business is once you have paid the taxes in your home country and moved this money to an offshore tax haven, your money can grow there tax free. In general, tax havens will not charge a capital gains tax nor will they tax foreign derived income.

Why Incorporate in Panama?

Incorporating a company offshore also provides many privacy benefits in your financial dealings. Specifically, the Panama IBC, can be incorporated in bearer share form. This essentially means that ownership of the company is anonymous and can be changed simply by passing the share certificates to another person.

Bearer share corporations can own real estate, boats, cars, bank accounts, trading accounts among other assets. This "anonymous" ownership provides a layer of privacy in that your personal name is not associated with any of the transactions for the business nor in any public registry. Panama also offers the ability to layer asset protection by having a Panama foundation own the corporation. As with the bearer share corporation the Foundation ownership can remain private and is virtually untouchable even by the court system since Panama foundations have no owner.

Depending on what services and level of privacy protection you desire there are quite a few different scenarios you could pursue when considering Panama to form your offshore company.

The first step would be to do some internet research trying to identify good sources of unbiased information about offshore company formation in general and then specifically about Panama. As you research you will start to get a feel for the industry in Panama as well as identify potential service providers.

For the best results it is definitely worthwhile to invest in the services of a Panama lawyer or law firm to help you with your corporation formation. Your first and strongest layer of privacy protection can only be achieved if you use a law firm to form your offshore company. Any communications between you and your law firm are covered by attorney client privilege.