Dear Colleague,

This week:

• Tax-news Headlines
• Liechtenstein
• Panama
• Updated - Offshore Service Provider's Directory
• 25% Discount: LowtaxLibrary

I hope you find this update useful. Please remember that you can customise your mailing preferences by visiting your own profile page to choose from 29 offshore tax and law subjects in order to receive just the information you want. You can also unsubscribe completely by following the instructions at the bottom of this page.

Kind regards,

Kate James

Offshore

Liechtenstein

EU External Relations Commissioner Talks On Deepening Relations With India, by Ulrika Lomas, for LawAndTax-News.com, Brussels 08/01/2008

EC Seeks To Boost Online Content Market, Protect IP, by Ulrika Lomas, for LawAndTax-News.com, Brussels 07/01/2008

European Patent Convention Enters Into Force in Two New Countries, by Ulrika Lomas, for LawAndTax-News.com, Brussels 08/01/2008

Liechtenstein is in the EEA but Not In the EU

Liechtenstein is a constitutional monarchy, has a land area of about 160 sq km (60 sq m), a population of 34,250, and is sandwiched between Switzerland and Austria. It has a customs union and a monetary union with Switzerland.

Liechtenstein belongs to EFTA, and since 1995 to the EEA; it is member of the UN. The official language is German; English and French are also spoken, with a local dialect used in everyday life.

A referendum held in March, 2003, gave the ruling Prince Hans-Adam II sweeping new powers, including the right to veto parliamentary bills, sack the entire government and introduce emergency rule.

Economy Buoyant Based on Industry and Financial Services

Liechtenstein was primarily an agrarian country until its economic union with Switzerland (1922 and reinforced in 1980) propelled it into rapid industrial and financial development. The princely family is highly active in leading the country economically. GDP per head is $36,000, inflation and unemployment are below 2%. Until recently there were trading and budget surpluses, but in 2002 the government fell into deficit. However, the country has substantial reserves and there is no national debt. The currency is the Swiss Franc, and there are no exchange controls. Membership of the EEA gives Liechtenstein access to the single market of the EU in most respects.

In October, 2003, in a dramatic development, Liechtenstein refused to sign an agreement to expand the EEA to incorporate the ten nations due to accede to the EU in 2004, apparently in order to get back at the Czech Republic and Slovakia for the 'Benes' decree in the 1940s which resulted in the expulsion of Liechtenstein nationals and the expropriation of their property. But at the end of November Liechtenstein gave in and signed up.

Liechtenstein's Lowtax Specialisations

Liechtenstein has moderate domestic taxes, but has specialised and very flexible types of 'holding' and 'domiciliary' company as well as 'establishments' and 'foundations' which are tax-exempt, but cannot usually trade inside the country. There are 35,000 of these 'offshore' entities, which provide 30% of state revenues. There is also a trust regime based on common law, although Liechtenstein is a civil law jurisdiction. The headline Liechtenstein product is private banking, although holding companies must run it close in terms of asset value; trusts have also been successful.

After the EU reached final agreement on its Savings Tax Directive, under which an information-sharing regime was initiated by 12 out of 15 existing member states in 2005, Liechtenstein chose, like Switzerland, to impose a withholding tax on returns on savings paid to citizens of EU member states, rather than compromise banking secrecy.

Learn more in our full Liechtenstein Knowledgebase.

Directory

For Visitors

Our aim is to offer you the ability to locate a service provider specialising in the field of your choice, in the jurisdiction of your choice, with just a few clicks. We only list confirmed entries to reduce the number of dead-ends and strictly enforce categorisation criteria to ensure that you find exactly the service you are after. As of September 2007 we have begun to implement a new, expanded format to make the directory even more user friendly and comprehensive.

Click here for the new directory home page.

For Service Providers

The Lowtax Offshore Service Provider's Directory offers firms the ability to highlight their services to one of the web's largest specialised tax, legal and offshore audiences. Our visitors include large numbers of corporates and HNWIs. Standard entry in the directory is free as long as your details are kept up to date. Premium entry options are available. Please contact Daniel Cookson for further details.

Click here for the new directory home page.

Offshore

Panama

World Banks Predicts 5.1% Growth For Caribbean And LatAm Economy, by Amanda Banks, Tax-News.com, London 01/01/2008

WIPO Hosts LDC Forum, by Ulrika Lomas, for LawAndTax-News.com, Brussels 03/12/2007

Latin American Investors Want Simpler Taxes, by Leroy Baker, Tax-News.com, New York 03/12/2007

Panama Is An Independent Country With A Canal

The Republic of Panama, between Colombia and Costa Rica, has a population of 3,242,173 (July 2007 est) and a land area of 76,000 sq km. The climate is tropical. Panama is a sovereign democracy with a presidential style of government. A pro-business government fell from power in 1999 and a new president, Mireya Moscoso made populist promises. However, In May, 2004, Martin Torrijos (son of Omar Torrijos, who ruled Panama between 1968 and 1981) was elected President. After losing the presidential battle in 1999, Torrijos assumed leadership of his father's party, sought to reform it, and created a platform based on combating corruption, boosting employment, and reforming Panama's fiscal system.

Panama was part of Colombia for a while until the US helped it to become an independent country alongside construction of the famous canal, beginning 1903. As of the end of 1999, the canal and all its US facilities and bases reverted to Panama, creating a major economic opportunity for the country. The official language is Spanish, but English is understood in business circles. Panama's currency is effectively the US dollar, with the official Balboa pegged to the dollar but used only for small transactions.

Highly-Indebted Economy Is Recovering

The service sector contributes 77.6% (2005 est.) of Panama's economy, which is based on banking, tourism, mining and commerce. The Colon Free Zone is very successful, accounting for around 10% of GNP. The Balladares administration pulled Panama back from a very poor situation between 1994 and 1999, reorganising debt, trimming state expenditure, liberalising and privatising. The government is trying to make productive use of the canal's facilities with export processing zones and many investment incentives. Growth had been running at 4% with low inflation, however growth fell from 2.5% in 2000 to only 0.3% in 2001 and about 0.8% in 2002, then rebounding to 4.1% in 2003 and 6% in 2004, partly due to property investment incentives.Growth levels in 2005 were 6.4%. Under Torrijos Panama is enjoying something of a boom; growth was 8.1% in 2006 and, according to some estimates, could exceed 10% in 2007.

GDP per head is $8,200 (2006 est.) and unemployment levels were at 9.8% in 2005.

FATF/OECD Blacklists

In June 2000, Panama was identified by the FATF as a non-cooperative tax haven in the global fight against money-laundering. The result of this was that Panama was one of fifteen tax jurisdictions placed on an FATF blacklist. Each offending tax haven had a year in which to correct its regulations and legislation.

The FATF released its annual report in June 2001, in which the organisation revised its list of countries and territories deemed non-cooperative. Only four were removed from the list, including Panama (the other three being the Cayman Islands, Liechtenstein and the Bahamas). Panama was praised by the FATF for its substantial efforts to conform to forty recommendations set out in a code of good practice governing money laundering.

Although along with many other offshore jurisdictions Panama issued a 'commitment' letter to the OECD in 2001, following agreement on the EU's Savings Tax Directive in 2003, Panama told the OECD that it considered there was no longer a 'level playing field' and that it did not consider itself by by its commitments.

Panama's Lowtax Specialisations

Panama has territorial taxation, thus only locally-sourced income is taxed. There are no 'offshore' regimes as such other than the Colon Free Zone and the export processing zones. There are more than 120,000 companies in Panama, most of which trade or hold assets externally. It is reasonably easy to form corporations, and privacy is assured. There are no tax treaties. Banking and shipping are Panama's two main 'offshore' industries.

In mid 2005, there were 80 licensed banks, of which 30 had international licences, and Panama is the world's largest shipping registry. Once, it would have been fair to say that drug running and money-laundering were well-rooted in Panama, but with lots of US pushing and shoving, the country seems to have moved in a better direction lately. There is a small but growing stock exchange, and there is 'captives' legislation which is little used.

Moderate Taxation For Local Business

Locally-sourced profits are taxed at up to 30%; for individuals, 27% is the top rate of a sliding scale. There is no capital gains tax but gains on real estate count as income. There is a small withholding tax. All foreign-source income is tax-free. There is VAT, and import duties, but these have been reduced substantially in recent years. The Government's extensive investment incentive programmes give substantial tax benefits to incoming investors in many sectors; and the free zones are ideal for locating regional distribution centres. No company with exclusively external assets and commercial operations will pay tax.

The promised fiscal reforms which were implemented in 2005 involved some extra turnover taxation and changes to VAT which were unwelcome to business but helped to improve the country's standing with rating agencies and the IMF.

Learn more in our full Panama Knowledgebase.