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Myths About IBC and Offshore Corporations

Myth about IBC and Offshore Corporations in PanamaMany business owners believe myths that prevent them from starting offshore corporations and IBCs. These mistaken beliefs could cost them more money and prevent them from conducting their businesses freely.

If you've thought about forming an IBC or offshore corporation, you should learn about these common myths. Once you know the truth about these organizations, you might decide that it makes sense for you to move your business to a jurisdiction that helps you meet your goals.

Myth #1: Offshore Corporations Are Used for Illegal Activities

The Facts: Panama offshore companies have a lot of flexibility. They get to participate in practically any business ventures that they can develop. But Panama does not let them commit acts regarded as crimes around the world.

According to Panama law, IBCs have privacy protection that prevents the government, or anyone else, from investigating their finances... unless the government has evidence that the company participates in illegal activity. If investigators have evidence, they can access a company's bank records to make sure they only work in legitimate industries.

That means Panama offshore companies cannot participate in things like:

  • drug trafficking
  • prostitution
  • murder for hire
  • extortion

Yes, your Panama IBC gets to make its own business decisions without much government interference, but Panama still takes illegal activity seriously.

Myth #2: Offshore Corporations and IBCs Are Completely Unregulated

Some people seem to believe that offshore corporations do not have to follow any regulations. That simply isn't true. Panama offshore corporations often have more freedom than companies located in countries like the United States, France, and Japan, but that doesn't mean they get to evade all regulations.

Panama requires offshore corporations and IBCs to follow very specific guidelines. A Panama IBC must have at least three directors. Panama offshore corporations also have to file articles of incorporation before they can conduct business.

It isn't a free-for-all that lets anyone do anything they want without any oversight, but it does give companies more freedom to make business decisions without political interference. For instance, companies in the United States cannot do business with Cuba because the U.S. has sanctions against the Communist country. By opening a Panama IBC, the company doesn't face such unnecessary restrictions.

Myth #3: All Offshore Corporations Are in Corrupt Countries

There are some corrupt countries that do their best to attract offshore corporations. Those countries, however, are not where informed businesses want to relocate. Government corruption doesn't benefit anyone for very long. Smart businesses know this, so they head to jurisdictions where everyone must follow the law.

Panama stands out as an example. Panama's court system is based on the one used in the United States. It has a system of checks and balances that help prevent corruption. The people in Panama also have a commitment to the rule of law. Legitimate business in Panama don't make backroom arrangements or pay off officials. Doing so is illegal, and they can be punished for breaking the law.

This system brings a stability that attracts more offshore corporations and IBCs to Panama.

Myth #4: Offshore Corporations Never Pay Taxes

Business owners need to understand that each jurisdiction sets its own tax laws. While some offshore corporations pay little to no taxes, others don't get that benefit.

It makes sense to find an offshore jurisdiction that gives you a sizeable tax incentive. Panama offshore corporations pay a flat annual rate. No matter how much money your company earns, it pays the same amount as other offshore corporations.

This offers two major advantages. First, it keeps your business's expenses lower. Second, it lets you plan for your annual expenses. When you know exactly how much money you have to pay the government, you can make better plans for expanding your IBC into new markets or industries.

Myth #5: Offshore Corporations and IBCs Are Illegal


This is perhaps the most damaging myth because it prevents otherwise savvy entrepreneurs from taking advantage of the benefits offered by offshore jurisdictions.

It's important for you to know that offshore corporations are not illegal. In most countries, you are free to start businesses wherever you please. That includes forming a Panama offshore corporation or IBC.

Like other pernicious myths, this one is built on a misunderstanding of the law. It is not illegal to own an offshore corporation. Some offshore corporations do, however, break laws. This confuses the public so that some people believe all offshore corporations are illegal.

Owners need to understand that their home countries might have tax laws that force them to reveal how much money they earn. Depending on where you live, you might have to pay your home country some taxes. It varies from country to country. If you don't follow those laws, then you could be found guilty of tax evasion.

No one needs that problem, so make sure you meet the legal requirements of your home and host jurisdictions. Delvalle and Delvalle have experienced attorneys who understand how Panama's laws interact with those of other countries. These experts can help you stay within the law so that you get the most out of your Panama offshore companies without getting into trouble at home.


Over 15 years of experiences advising clients from all over the world.

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