It's been more than a week – but the talks surrounding the Panama Papers and everyone who's listed in them have yet to cease. In fact, things are even escalated to a higher level.
We've witnessed the direct impacts of the leaked documents, worldwide: British PM, David Cameron, had to release his tax data to make his point about his father's involvement in an offshore trust which information is among others mentioned in the Panama Papers. Icelandic PM Sigmundur David Gunnlaugsson resigned after the mounting protests in response to his involvements in an offshore company found in the leaked documents. There are more scandals revealed if you search for them online.
Are the impacts stopping at the individual level? No.
Not only individuals, jurisdictions that are allegedly considered as tax havens are approaching everything-offshore more cautiously. Ireland feels the need to be careful moving forward; New Zealand faces dilemma, as it wants to position itself as the “Jersey of the South Pacific” by developing the country's offshore banking industry, but not with all the scandalous 'baggage'; Offshore lawyer Antony Travers felt the need to make a statement that the Cayman Islands shouldn't be considered the same as Panama; and many more.
Amid all the hype surrounding the Panama Papers, we believe that there's undeniable upside that the leak has offered to the general public: The knowledge that shed light on what you can or can't do with an offshore company and/or banking account.
There are stellar beginner's guides that you can find online. Here's one of the best: The Guardian's How to explain offshore banking (and when it is naughty) to a five year old.
So, what exactly can or can't you do with an offshore structure?
We – along with all of those who share our principles when it comes to offshore company formation and banking legalities – believe that only a small fraction of those mentioned in the Panama Papers are using offshore company structures for wrongdoings. Unfortunately, many – due to misinformation or personal opinions/assumptions – think that those who use offshore structures are bad guys. We feel the need to set the record straight.
Even after the Panama Papers, our stance is firm and clear: Offshore banking and company formation services are open for everyone – with high net worth or not – and they can use those structures legally for any legitimate purposes.
Based on what we know so far, along with the leaked documents, as well as the guides and commentaries found in the mainstream (more trusted?) media, here's a recap for you.
What you can do with an offshore structure
- - Protecting your assets: Things can be bad if you invest in your home country (e.g. Politically unstable or economically lackluster jurisdiction); asset confiscation and capital control are real. An offshore structure can help you protect your hard-earned assets.
- - Keeping your trade secrets, well, a secret: Some competitors like to find out about your investments, just in case they can spot the 'ingredients' that you use in making a particular product. An offshore structure can hide your operations from the prying eyes.
- - Keeping your occupational or business service secrets, well, a secret: You may hold an important job, which you may want to keep it a secret – e.g. Translator to diplomats, manufacturing military equipment for your government, etc.
What you can't do with an offshore structure
- - Money laundering: This is a no-brainer; illegal activities result in illegal funds, and those need to be laundered if you want to hide the trace and use it.
- - Evading taxes: There's a misconception going on; to clarify, tax avoidance is fine (who want to pay unnecessary taxes, anyway?) But tax evasion is illegal. Knowing the difference matters.
- - Doing illegal activities: Fraud, robbery, drug trafficking, terrorism, etc. Enough said.
With the Panama Papers, there will be stricter rules that regulate offshore company and banking activities, naturally. That can be a good thing or bad thing, depending on what you're planning to do with your offshore company or bank account.
One thing for sure, you can now confidently approach going offshore with a better understanding of what you can or can't do with your offshore accounts. It's only good for you and your assets.
As always, when you're in doubt, you can always consult with your lawyer or contact us for advice on how to proceed with your business and tax plan.
Read also "Panama Papers: If they can do it, why can't we?"