Looking for an overseas jurisdiction to open a bank account? You may want to consider Panama. The tiny nation in Central America attracts many foreigners who want to bank there. In Panama, banking opportunities are abundant, including privacy, stability, flexibility, and various investment options. However, this coin also has its reverse side that you need to know about before opening an account in Panama. Without further ado, let’s explore the positives and negatives of bank accounts in Panama for foreigners.
Bank accounts in Panama for foreigners: what they may give you
Stability: Panama has a stable and modern banking system that is regulated by the Superintendency of Banks of Panama. The Superintendency ensures that banks comply with international standards and best practices, as well as monitors their operations and financial performance. Panama has a dollarized economy, which means that it uses the US dollar as the country’s official currency. This eliminates the risk of currency fluctuations or devaluation that could affect your deposits or investments.
Privacy: With strict banking secrecy laws in Panama, the confidentiality of your personal and financial information is reliably protected. Without a court order or consent from you, local banks are not allowed to disclose any information about you or your account. Panama is not a member of information exchange agreements or treaties that would require it to share financial data with foreign authorities. This means that your money is safe from prying eyes and potential tax liabilities in your home country.
Flexibility: Panama has no capital controls, which means that you can freely move your money in and out of the country without any restrictions or fees. Here, you will enjoy an opportunity to hold funds in different currencies, such as USD, EUR, GBP, CAD, CHF, or JPY, depending on your preference. In Panama, you will experience no issues with accessing your money through ATMs, online banking, or bank branches.
Investment opportunities: With its vibrant and diverse economy, Panama offers multiple opportunities for growth and diversification. The main sectors are tourism, real estate, construction, agriculture, mining, and services. You can invest in them through various instruments, including stocks, bonds, mutual funds, or real estate. Panama offers higher interest rates on USD deposits than most places. It means that your money will earn more income over time.
Bank accounts in Panama for foreigners: why stay away from them
Documentation: Opening a bank account in Panama as a foreigner requires more documentation compared to what banks in Europe or North America demand. You will have to provide a copy of your passport or other valid photo ID, a copy of your utility bill or other proof of address, one or two bank reference letters, a reference letter from a professional (lawyer, accountant, etc.), a personal or business profile that describes your background, activities, and source of funds, and a minimum deposit amount that ranges from USD 500 to USD 10,000 depending on the bank and the account type. If you open an account in Panama remotely, you may also need to verify your identity by phone or video call.
Fees: Compared to other countries, banking in Panama may cost quite a lot. It is possible that you will face fees for various services, such as opening or maintaining an account, sending or receiving money, withdrawing cash, using ATMs, or paying with credit cards. These fees depend on the bank and the account type, but they can lower your returns over time.
Compliance: When banking in Panama, you will have to comply with local and international laws and regulations regarding taxation, anti-money laundering, and counter-terrorism financing. You may be required to report your income and assets to the Panamanian tax authorities if you become a resident or earn income from sources within Panama. Under the Foreign Account Tax Compliance Act, an obligation may arise to report your foreign bank accounts to the US tax authorities if you are a US citizen or resident. You may also have to comply with other reporting requirements from your home country or other jurisdictions where you have ties.
Risks: Banking in Panama is not without risks. Although the banking system is stable and regulated, political instability, economic downturns, natural disasters, cyberattacks, frauds, or scams that could affect your money are always possible. Be careful about choosing a reputable and reliable bank that suits your needs and preferences. Not all banks in Panama accept non-resident clients or offer them the same services or features. You may encounter compliance issues, as opening a bank account in Panama requires you to comply with local and international laws and regulations regarding taxation, anti-money laundering, and counter-terrorism financing. If you become a resident or earn income from sources within Panama, you may be obliged to report your income and assets to the Panamanian tax authorities. Liquidity issues are a thing as well, as some banks in Panama may have low trading volumes or limited access to international markets.
It’s a wrap!
Banking in Panama for foreigners can be an excellent option for anyone who wants to enjoy the benefits of a low-tax, stable, and attractive jurisdiction. By opening an account in Panama, you will gain access to a range of services that can help you protect assets, diversify your portfolio, invest in the local economy, or obtain a second citizenship. However, you should be aware of the disadvantages that come with banking in Panama. Here, we mean documentation requirements, fees, compliance issues, and risks. So, carefully weigh all the pros and cons before you make up your mind about opening an account in Panama. Consulting a professional advisor is not a bad idea either.
If you are interested in banking in Panama as a foreigner or have eyes for any other offshore banking solutions, International Wealth is here to help you find the best option. We are experts in offshore banking with access to a network of reliable and reputable banks around the world. The International Wealth team will eagerly assist you with opening an account abroad either remotely or in person, depending on your convenience. To achieve your financial goals, don’t hesitate to contact us without further delay!