Tax havens and the Panama case

Is it legal to have a company in Panama?

First, it must be stated that having a company in Panama is perfectly legal, just like anywhere else. There is no crime in creating a company and carrying out activities from Panama.

It is very hasty to assume that any person establishing a company in Panama is committing a crime per se.

In any case, the crime would be not declaring the income obtained in Panama (or anywhere else) in the country of origin.

Panama is not a tax haven

In Spain, there is only one way to know if a country is considered a tax haven: by going to the list of tax havens that the state publishes every year. Panama is not part of that list since it signed a double taxation agreement with the Spanish state in 2011.

Where do companies pay taxes?

There is a misperception that companies and individuals pay taxes in the country where they reside. This is not like this. Taxes are paid at the place where the activity is carried out.

If a Spanish company carries out part of its activity in Germany, for example, it will pay the taxes corresponding to this part of its activity in Germany.

The only thing you must do in Spain is declare this income, not tax it.

Both individuals and companies declare their worldwide income in their country of residence, that is, all of their profits, regardless of their origin.

In other words, about the names that have appeared in the press these days, the fraud would be in their declaration in Spain, where they must have declared the income obtained in Panama. Never in theconstitution of the companyin Panama.

Can I open a company in a tax haven?

Legality allows companies to be opened in any country as long as they are declared correctly. Many mistakenly think that doing so means defrauding the Treasury, but that is not the case. When opening a company in a country included in the list of tax havens, we will have to tax in Spain whatever is generated there.

If you open the company in a country not included in the list, you can do so if you pay your taxes there and note it on your global income tax return.

There is no doubt that one of the purposes of opening an offshore company is to evade taxes or launder money, but in any case, the crime is in the latter, not in the first.

If you need to know more you can consult our Tax Consulting.