There are many entrepreneurs, especially in the online business, who work out of their laptops and travelling around the World for doing business. Many of them are looking for a solution in order to keep their financial privacy and/or simply gain protection of the assets they accumulate and flexibility to do business.
Many countries offer permanent residence and second citizenship programs, but from an Immigration point of view will not be sufficient for the banks. They recently do more due diligence to determine where is a client tax resident. Faking a relocation will not work, you will effectively have to choose between playing by the new rules or leave your country and relocate to countries that are friendly to you.
Showing a bank that you have a utility bill with an address from a country may not be enough in the future. Therefore, you should start planning how to become tax resident in a country that offers you stability, good communications, good infrastructure and flexibility tax wise.
Residency program in Panama
Panama has perfect climate, beautiful beaches, good infrastrucure and internet and political stability. But above all your income is not taxable in Panama, so long as such income derives from foreign sources. It’s not even reportable to the Panamanian Revenue Agency. It means that Panama has a Tax System that is based on the Territorial Principle of Taxation. This principle that Panama has embraced means that only Panama-sourced income is taxed.
Incomes arised from the following activities are not considered from Panamanian source:
Invoice, from an office established in Panama the sale of merchandises or products for a higher amount of that for which such merchandises or products have been invoiced against the office established in Panama, always that such merchandises or products only move outside.
Manage, from an office established in Panama, transactions that perfect, consume or have effects abroad.
Distribute dividends or participations of juridical persons, when such dividends participations derive from incomes that are not produced within the territory of the Republic of Panama, including those incomes derived from the activities mentioned in literals a and b of this paragraph.
Panama is the perfect location for clients to relocate their business and create the necessary history, to acquire a tax resident status.
The process to become a tax resident
You have to choose from the several residency programs which Panama offers.
One of the most popular programs is the Friendly Nations Visa, that allows nationals of 50 countries to apply for Permanent Residence in Panama.
The applicant have to prove economic solvency to the immigration service and professional and economic connections with the Republic of Panama. The immigrant must own a Panama corporation or a company. Although they cannot own a Panama retail business.
Second option is to be employed by a professional Panama company, obtain a work permit and local social security.
To prove the economic solvency, the foreigner would need to open a personal bank account in Panama and deposit a minimum of USD5,000 (plus USD2,000 for each dependent – spouse and children under 18 or up to 25 years of age if still studying).
Applicant can also aquire Retiree visa and the Self Economic Solvency Visa (Requires an investment of minimum USD300,000).
If you want to become a Panamanian tax resident these are the requirements:
Applicant should be a fiscal resident who remain in the national territory for more than 183 calendar days or alternates in a fiscal year or the year immediately preceding.
Likewise, they shall be considered fiscal residents of the Republic of Panama, those natural persons who have established their Permanent residence in the territory of the Republic of Panama.
They are also considered fiscal residents of the Republic of Panama, legal entities incorporated under the laws of the Republic of Panama and have material means of Direction and administration within the Panamanian territory.
There is a list of requirements set forth on Resolution Number 201-0354 of 13 of January of 2016, in regards to the attainment of the Tax Residence Certificate.
Applicant should provide evidence that he/she has economic or family ties to Panama, thus providing a utility bill, groceries receipts, rental agreement, among others will help to access this certificate, which will serve to prove to your bank, whether in Panama, Switzerland, Hong Kong or anywhere else in the world, that you are tax resident in Panama and therefore to not share your financial information with your previous country of residence. It will not matter, if the bank shares the information with Panama, if the income you receive in those bank accounts outside Panama is exempt in Panama, as per the Territorial Principle of Taxation.