Whatever your nationality, you should be aware of your tax responsibility to your mother country. US citizens living abroad are not exempted from their tax obligations. You may be subject to income tax on any income generated inside Cuba. The present rule states that you may claim a tax exemption up to $80,000 on "foreign-earned income" if you are a resident of another country and live outside of the country for 330 days in a 365 day period. If you reside outside of the U.S. you may wait to file your taxes until June 15th. If you have questions contact IRS International in Washington, DC at 202-874-1460 or their Mexico City office at 905-211-0042. See their Publication 54, Tax Guide for U.S. Citizens and Resident Aliens Abroad. You may also want to pick up a copy of the Expats Guide to U.S. Taxes. It is available through Amazon.com. You can obtain forms and information by using the Internet at: www.ustreas.gov.

At the end of 1996 the Cuban government established the National Office of Tax Administration to tax the self employed. Recent tax laws were passed to distribute the country's national income more equitably. New taxes were introduced gradually.

Foreigners who operate joint ventures can take advantage of several tax incentives and tax deferment programs. However, most foreigners who spend more than 180 days in Cuba yearly must pay Cuban income tax.

It must be noted that private Cuban entrepreneurs are taxed heavily in order to protect state enterprises.

If you are interested in reading about the many of tax advantages afforded US citizens residing abroad, we suggest you read Roger Gallo's "Escape From America." It is packed full of practical information about the new world economy for the expats. This book may be out of print.

We also suggest you pick up a copy of Charles Freeman's, "The Freedom Handbook". Much like Mr. Gallo's guide it contains insider information for anyone contemplating moving outside of the United States or Canada. Please see our Suggested reading section to order either one of these "must read" books.

You may also want to think of forming a Panamanian Corporation to protect your assets while living as an expatriate and while doing business in Cuba. These entities afford the maximum global protection of your assets while living in the US or abroad. Please see the article by the C.P.A. in this section for more details.

Offshore corporations enable you to act as an international citizen with complete confidentiality, privacy and safety. Offshore corporations can legally open offshore bank accounts, brokerage accounts, hold credit cards, own property, stocks, etc. and in many cases completely exempt you from any tax reporting requirements and with complete confidentiality.

For many years Panama has been recognized worldwide as a major international offshore banking center offering very attractive legal and tax incentives to Panamanian corporations. For example, Panamanian law allows Panamanian corporations to issue "bearer" stock certificates. This means the owners who control the corporation do not have to be named in any public record, since ownership is through physical possession of the "bearer" shares. Panamanian Corporations are not subject to Panamanian tax on income earned outside of Panama. Also, Panama allows you to name your corporation with an English name, which has many advantages when using your Panamanian Corporation in English speaking countries. These are just a few of the more important reasons why Panamanian corporations are so popular.

FORMING A PANAMANIAN CORPORATION:

First we recommend you select a name in English followed by: Corp., Corporation, Inc. or Incorporated. You cannot use the words Bank, Trust, Foundation or Insurance in the name of your corporation. You may use any name as long as it is not being currently used in Panama. If you own a US Corporation, you may find some advantages in using the same name for your Panamanian corporation, if available in Panama. This would allow you to have identically named offshore and onshore bank accounts as well as other similar advantages.

Panamanian corporations are typically formed with nominee directors, president, secretary and treasure. These are Panamanian citizens who are modestly paid office workers. If you wish, you may select your own directors and officers. However, the original directors and officers selected are registered with the Panamanian public registry which becomes public information available to anyone who inquires. Therefore, if you wish confidentiality, we recommend you select the nominee director option. Officers and directors can always be changed later.

Panamanian law allows corporate shares to be issued in "bearer" form. This means that whoever physically possesses the shares owns the company. This allows for total confidentiality of ownership, since the person who physically possesses the shares is not identified in any public or even private record. Having a Panamanian corporation with "bearer" shares also makes transfer of ownership completely private and not a matter of public record, since transfer of ownership is a simple process of physically transferring the "bearer" shares to a new owner. It is very similar to passing a $20 bill to someone else versus writing them a check. This feature makes it very easy to sell or transfer properties confidentially by simply transferring the "bearer" shares and ownership of the Panamanian corporation, and thus avoiding many forms of taxes and closing costs because title to the property remains in the name of the Panamanian corporation. Essentially you are simply selling the corporation which owns the property.

Your Panamanian Corporation comes with a notarized General Power of Attorney (in English) signed by two officers named in the articles of incorporation. This power of attorney provides a blank space for you to fill in the name of any person you want to act as the legal agent for the corporation with the authority to open and sign on corporate bank accounts, enter into contracts for the corporation, sign and transfer assets for the corporation, etc. Although you fill in your name or another person name as having Power of Attorney, this is not evidence of ownership. The person named is simply an agent, similar to an employee empowered to act for the corporation. You may order as many additional Power of Attorney forms as you wish.

As you can see there is a world market for Panamanian corporations because they are extremely popular. Older Panamanian corporations with established bank accounts sell for thousands of dollars or more. Selling your Panamanian corporation is a matter of physically transferring the "bearer" stock certificate together with the other corporate records to the new owner.

The one time cost for setting up a simple Panamanian Corporation is around $1500. You will have to pay an annual Registered Agent and Director's fee of $500, due one month before the anniversary date of the corporation.