This notice is intended for U.S. citizens, U.S. tax residents, and other persons who may be subject to U.S. tax or information-reporting obligations. Living, investing, opening a bank account, or forming a corporation or foundation in Panama does not by itself eliminate those obligations.
In general, U.S. citizens and U.S. tax residents must report their worldwide income when they are required to file a federal income tax return. In addition, ownership, participation, control, or signature authority involving certain foreign accounts, corporations, foundations, trusts, or other foreign assets may create additional reporting obligations, depending on the taxpayer’s individual circumstances.
Foreign Financial Accounts and Assets
A U.S. person who has a financial interest in or signature authority over foreign financial accounts may be required to file the Report of Foreign Bank and Financial Accounts, commonly known as the FBAR or FinCEN Form 114. In general, this requirement may apply when the aggregate value of the person’s foreign financial accounts exceeds $10,000 at any time during the calendar year.
Certain taxpayers may also be required to file Form 8938, Statement of Specified Foreign Financial Assets, with their federal income tax return. The applicable thresholds depend on factors including the taxpayer’s filing status and whether the taxpayer resides inside or outside the United States.
The FBAR and Form 8938 are separate reporting obligations. Filing one does not automatically replace the requirement to file the other. Each person should obtain U.S. tax advice to determine which accounts, assets, and forms must be reported.
Panama Corporations, Foundations, and Other Entities
Forming, acquiring, or participating in a Panama corporation, private interest foundation, trust, or other Panamanian structure may create U.S. tax or information-reporting obligations.
These obligations depend on factors such as the entity’s classification under U.S. tax law, the person’s ownership percentage, level of control, transactions, activities, and relationship with the entity.
Depending on the circumstances, potentially applicable filings may include Form 5471 for certain relationships with foreign corporations, Form 8865 for certain foreign partnerships, or Forms 3520 and 3520-A for certain transactions or relationships involving foreign trusts. This list is not exhaustive, and creating an entity in Panama does not by itself determine which form must be filed.
Before forming, acquiring, transferring, or using a Panamanian entity, any person subject to U.S. tax laws should consult a qualified U.S. international tax professional.
Scope of International Relocation Firm’s Services
International Relocation Firm is a law firm established in the Republic of Panama that provides advice concerning Panamanian law. Subject to satisfactory completion of due diligence and all applicable legal and client-acceptance requirements, the firm may assist U.S. persons with the formation and maintenance of corporations, foundations, and other Panamanian structures.
International Relocation Firm does not provide tax, legal, or investment advice under the laws of the United States. Our services do not include determining which tax returns, information-reporting forms, elections, or payments a client must submit to the Internal Revenue Service, FinCEN, or any other U.S. authority.
All services are subject to the execution of our professional services agreement and the client’s delivery of complete, accurate, and current information and documentation.
Client Responsibility and Independent Advice
Each client is responsible for properly reporting income, accounts, assets, ownership interests, and transactions to the appropriate authorities. Clients must also inform their U.S. tax advisers of any changes involving a Panamanian entity, including changes in shareholders, ultimate beneficial owners, directors, officers, bank accounts, assets, or activities.
Before using a structure or service in Panama, U.S. persons should obtain independent advice from a qualified U.S. attorney or tax professional experienced in international matters. The applicable obligations may vary according to tax residence, the selected structure, ownership percentage, level of control, and the taxpayer’s individual circumstances.
The information on this page is general and educational. It does not constitute U.S. tax or legal advice and does not replace an individualized professional evaluation.
If you require assistance with the formation or maintenance of an entity under Panamanian law, you may contact International Relocation Firm to discuss the available services and applicable due diligence requirements.
Official United States Resources
For current information, consult the following official resources directly: