(Tax-news.com) Aided by stable, pro-business governments using the invaluable canal as a catalyst, Panama’s friendly tax and regulation system has helped to establish the country as one of the most modern and respectable business and financial centres outside the established ‘onshore’ countries, and ranks as probably the most important trading and business hub in the region.
Panama Background: A Booming Economy
Under President Martin Torrijos (in power from September 2004 to July 2009), Panama enjoyed something of a boom; growth was 8.1% in 2006, exceeded 10% in 2007 and was 8.3% in 2008. The rate of growth fell to 2.3% in 2009; but under the stewardship of conservative President and Democratic Change party leader Ricardo Martinelli, Panama’s economy rebounded quickly following the 2008–09 global crisis. Supported by strong fundamentals, political stability, and prudent fiscal management, real GDP growth rates have been among the highest in the region. Macroeconomic stability and policies to foster greater social inclusion have reduced unemployment to historic lows.
Following the 2009 slowdown, output grew by 7.5% in 2010, by 10.6% in 2011 and by 10.8% in 2012. Construction, commerce and transportation have been the most dynamic sectors, while canal traffic has been buoyed by strong demand from emerging Asia and South America. Crucially, the strength of the financial system also helped to buffer Panama against the worst effects of the financial crisis in 2008/9. Robust economic growth and steady fiscal consolidation have also contributed to lowering the public debt ratio, which fell from 43.3% of GDP in 2010 to 37% in 2012.
The IMF suggests that Panama’s macroeconomic outlook is “favourable”, with future growth likely to be underpinned by the vast Panama Canal expansion project, and other large public investment projects; economic growth forecasts for 2013 range from 7.5% to 8.5%.
The IMF also commended Panama’s success in establishing a strong banking center, which has become an important regional hub (see below).
Panama Tax Residence and Liability to Tax
General taxation in Panama is imposed on a territorial basis, meaning that taxes only apply to income or earnings derived from business undertaken within the country’s borders. The existence of a sales or administration office in Panama, or the re-invoicing of external transactions at a profit, does not of itself give rise to taxation if the underlying transactions take place outside Panama.
An individual is considered resident if he is present in Panama for more than 180 days in any one tax year. Individuals are taxed on wages, income derived from the carrying on of a commercial or agricultural business, and investment income.
Panama Tax Rates
The rate of corporate income tax in Panama has been reduced in stages from 30% as a result of a fiscal bill passed in the first months of 2010. A 27.5% rate applied from January 1, 2010 until January 1, 2011 when it fell to 25%. However, companies in the energy, telecoms, financial, insurance, banking and mining industries continued to pay corporate tax at 30% until 2012, when the rate dropped to 27.5% The rate for these companies will fall to 25% in 2014. Companies with turnover of less than PAB200,000 per year pay income tax at individual rates.
There is a withholding tax of 10% on dividends paid out of taxed income. If less than 40% of taxed income is distributed, then Undistributed Profits Tax of 10% becomes payable on the undistributed balance; this therefore amounts to a maximum of 4% tax. In effect this is an advance withholding tax, and it is creditable against the 10% tax on later distributions of the taxed profit.
From 2010, a minimum estimated tax was established for legal entities with annual revenue over PAB1.5m, imposed at 4.67% of total taxable income, although this excludes foreign income.
For businesses, capital gains made in the ordinary course of business are subject to the regular corporate tax. Capital gains tax from real estate transactions is generally paid at a flat rate of 10% in Panama by both companies and individuals. However, some changes to the tax treatment of real estate were introduced in January 2011, including a 3% advance capital gains tax on certain real estate sales levied on the higher of the sales price or the value of the property. Sales of listed shares are usually capital gains tax exempt, but unlisted shares attract a 5% withholding tax which is creditable against future capital gains tax liability.
In 2007 Panama inaugurated a headquarters company regime (sedes de empresas multinacionales, or SEM) which offers tax breaks to encourage multinational companies to set up various types of service companies. SEM companies are exempt from VAT on services rendered to non-Panamanian taxpayers, and are exempt from income tax on profits from such services. Expatriate employees of SEM companies also receive tax privileges. In order to achieve SEM status, group assets must be worth at least USD200 million. A minimum initial capital of USD2 million is required if the group’s main office is to be in Panama.
On July 1, 2010, the other following tax changes became effective:
- Value-added tax (ITMBS) assessed on the provision of goods and services, was increased from 5% to 7%;
- Excise taxes on cars were further increased to make an effective increase of 5% (inclusive of extra ITMBS) for cars in the USD8,000-12,000 price range;
- An annual tax on total assets held by banking institutions holding a general license, ranging from USD75,000 to USD1m, was introduced. Banks with international licenses pay a fixed tax of USD75,000; and
- Income of international transportation companies derived from freight, passage, cargo and similar services originating from or destined for Panama is subject to a 1% turnover tax in Panama. As from July 1, 2010, related taxes paid in a foreign jurisdiction are deductible against other income related to international transportation.
In 2013, individual income is taxed at the following rates: the first PAB11,000 of income is exempt from income tax; a 15% rate applies on income above PAB11,000 and below PAB50,000; and a 25% rate applies on income above PAB50,000.
There is a 12.5% withholding tax on the gross income of non-residents providing services to Panamanian residents for periods of less than 183 days in a calendar year.
Panama Tax Agreements
Since Panama does not levy taxes on foreign source income, it has until recently refrained from negotiating double tax treaties. However, renewed pressure from the OECD and the G20 on the issue of tax transparency has forced the country into a rethink.
In the aftermath of the G20 Summit in London in April 2009, when Panama was listed as a country which had committed to, but not substantially implemented, the international tax transparency standard, the Panamanian Government entered into negotiations with several countries with a view to signing bilateral double tax avoidance agreements (DTAAs) and tax information exchange agreements (TIEAs). Key among them is the TIEA with the United States, which was signed on November 30, 2010 and which entered into force on April 18, 2011. The agreement permits the US and Panama to seek information from each other on various types of national taxes, in both civil and criminal matters, for the tax years beginning on or after November 30, 2007.
In total, Panama has signed 24 agreements, being 15 DTAAs and nine TIEAs.
Panama Company Formation
Although Panama is often considered an ‘offshore’ territory for tax purposes, the term is not used in Panama legislation; since taxation is on a ‘territorial’ basis, i.e. only Panama-sourced income is taxed, an entity which has its activities or assets outside Panama will automatically escape taxation. There are more than 120,000 corporate entities in Panama, of which the majority are ‘offshore’.
The Corporation (Sociedad Anonima) is the most frequently used corporate form in Panama, and is the usual choice for an offshore operation.
Corporations are formed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5).
A corporation is formed by two subscribers (or nominees in the case of absent foreign subscribers) who execute the Articles of Incorporation (Statutes) before a notary and then record them at the Public Registry Office. All commercial and industrial businesses must have a Notice of Operations in order to engage in business unless they are specifically exempt. Following incorporation, only one shareholder is necessary. Shares can be of various classes, can have par value or not, may be registered or bearer. There is no minimum capital, and no paying-up rules, except that no-par-value and bearer shares must be fully-paid when issued.
Strict regulations now apply to bearer shares: the registered agent must keep the bearer share certificate in safe custody and must notify the Registrar about such shares. There must be at least three directors, and their names must be in the Articles as filed; changes to directors must also be filed. Each corporation must have a resident Panamanian agent (a lawyer), named in the Articles; there are no other filing requirements unless the Articles are changed or the corporation is merged or dissolved.
Law No.2 of 2011 introduced new ‘know your customer’ requirements, whereby all registered agents operating in Panama must keep and maintain information on their clients in order that they can be properly identified upon request by the authorities. These new rules also cover the identity and location of holders of bearer shares.
Panamanian law also allows the following types of company to be formed:
- Foreign Corporation: A foreign company can be registered in Panama by depositing the following documents at the Public Registry Office:
- A notarised Spanish translation of the Articles of Association;
- A Board minute authorising the Panamanian registration;
- Copies of the most recent financial statements;
- A certificate from a Panamanian Consul confirming that the company is organised according to the laws of its place of incorporation;
- Notification of the allocation of capital to the Panamanian operation.
- General or Limited Partnership: A General Partnership is permitted under the Commercial Code. The partners have unlimited liability.
- Civil Partnership: The Commercial Code and Law No 24 of 1966 also govern the Civil Partnership (sociedad civil), which has legal personality, although the liability of the partners is unlimited. This type of partnership is often selected by professionals such as lawyers and accountants.
Licenses are required only for financial institutions. Corporations do not have to disclose beneficial ownership, and Trusts and Foundations (see below) need not disclose the names of their beneficiaries. Limited Partnerships do however need to disclose the names of their members.
Panama Free Zones
Recent governments have sought to take full advantage of the country’s financial stability by offering significant tax breaks for firms setting up in a growing number of ‘free trade zones’ occupying sites formerly used as bases by the US military. The largest of these is the Colon Free Trade Zone, situated at the northern end of the canal in close proximity to the major ports on the Caribbean coast, which offers firms exemption from tax on all import and export movements.
Companies in the Colon Free Zone, or in other Export Processing Zones, are treated in the same way as companies with external operations, i.e. they are exempt from income tax on external (i.e. re-export) operations. They are also exempt from paying sales taxes, import taxes and municipal taxes. However, a fiscal package introduced in 2005 aimed at reducing Panama’s indebtedness included a 1% turnover tax to apply to all operations in the Free Zones, and a 1.4% turnover tax which may apply to some other types of companies. Furthermore, under a 2009 law, an exemption from dividends tax was removed for free zone companies.
In addition, Free Zone companies benefit from an absence of certain bureaucratic requirements such as licensing and guarantees. Overall, this generous incentive regime has attracted around 2,500 merchants generating exports and re-exports estimated to be worth in excess of USD16bn per year.
A draft law establishing a simplified and comprehensive scheme for establishment and operation in the free zone was approved by the Executive in December, 2010. Minister for Trade and Industry, Roberto Henriquez, explained that the initiative seeks to adapt national legislation to meet WTO standards. The bill encourages new investment in high-tech companies, logistics and environmental services as well as higher education establishments and research centres.
Seeking to capitalise on the success of the Colon Free Trade Zone, the Panamanian government in 2003 announced plans in partnership with the World Bank’s International Finance Corporation (IFC) to transform the American military’s Howard airforce base into a special economic zone equipped with high-tech logistical and telecommunications facilities with similar tax advantages for firms locating there. It is hoped that the project, now called Panama Pacifico, will attract some USD600 million in investment and create 20,000 jobs over two decades.
Fiscal benefits for companies located in Panama Pacifico are established by Tax Law 41 of 2004 and include exemption from all indirect taxes and income tax and dividend tax. Panama Pacifico companies also benefit from relaxed labour and immigration laws, including for overtime pay, compulsory rest days, employment contracts and visa rules, with three- to five-year work visas allowed instead of the usual one-year visa. The scheme also offers a five-year investment visa for those investing more than USD250,000 in the zone.
Significantly, in March 2013 the Panama Pacifico Special Economic Area was selected as one of the top-ten public-private partnership projects in the whole of Latin America by the IFC. The IFC ranked Panama Pacifico as the number one project in Panama and number seven in the region.
“Panama Pacifico is the only public-private partnership in Panama to be recognized in this Latin American ranking,” said LRP Chief Financial Officer Christian Rinkel, upon learning of the award. “Panama Pacifico is honored to be thus recognized, and included in the IFC-IJ publication Emerging Partnerships. This type of recognition puts the spotlight on the efforts of hundreds, both in the private and public sector, who have worked so hard and made Panama Pacifico what it is today…a powerful engine in Panama’s growth.”
A ‘Technopark’ has also been established at the former US Army base at Fort Clayton on the Pacific coast which has attracted the likes of Microsoft, Oracle and Cisco. Now known as the City of Knowledge, this business park also offers companies tax and immigration benefits and direct access to the land portion of five international fibre optic cables that go across Panama. The City of Knowledge hosts research centres, educational institutions, and companies in the software development, telecommunications, multimedia, logistic applications, outsourcing and IT security industries.
Panama has placed a great deal of emphasis on building up a modern, hi-tech telecommunications infrastructure, with firms having ready access to high-bandwidth fibre-optic networks, marking the country out as Central America’s e-commerce hub. Its promoters are also keen to point out that unlike other countries in the region, Panama is less prone to natural disasters such as hurricanes and earthquakes, minimising the risks of frequent and prolonged down time.
Wealth Management and Asset Protection
The Panamanian banking industry grew during the last quarter of the 20th century into a regional banking centre for Latin American and the Caribbean, due to a variety of factors including the absence of exchange controls, the rapidly increasing volume of trade being conducted through the country (and through the Colon Free Zone in particular), liberal banking legislation and tight secrecy provisions. At the end of 1997 more than 100 banks were licensed in Panama, from more than 20 countries and with assets of about USD23bn; however the country responded to international pressure by tightening up on banking regulation, and a number of banks closed their offices in 2000 and 2001. By mid-2005, 80 licensed banks remained, of which 30 had international licences.
Thanks to new financial regulation, Panama is once again developing itself into an important centre for banking. The legislation introduced a new licensing system for the industry and stricter compliance procedures, whilst subsequent laws and decrees have established modern anti-money laundering, fraud and terrorist financing rules. These initiatives helped to secure Panama’s omission from the FATF (Financial Action Task Force on anti-money laundering) ‘blacklist’ of non-cooperative jurisdictions in 2001, and have transformed the nation into one of the world’s most reputable international banking centres.
Banking assets grew steadily through 2011: in January 2012, the total assets of Panama’s banking centre stood at USD81.4bn, almost USD9bn higher than in January 2011. Domestic deposits were USD30.5bn in January 2011 and USD33.65bn in January 2012. Foreign private banking represents the largest proportion of Panama’s banking assets, followed by domestic private banking. Total banking assets in 2013 are an estimated USD82bn, of which USD26bn is domestic banking assets and the remainder foreign banking assets.
Panama is also a suitable jurisdiction in which to establish asset protection and succession planning structures with legislation allowing for the formation of both foundation and trust entities.
The Private Foundation Law 1995 governs private foundations in Panama. Unlike the common law trust, the foundation is an autonomous legal entity with no members or shareholders. It is generally used for the protection of assets and no business activities are permitted. Panamanian law specifically excludes the operation of foreign ‘forced heirship’ rules or judgements against foundation assets. Panama itself has abandoned these typical civil law provisions in its own legislation.
Panamanian trust law was updated with Law No 1 of 1984. Panamanian trusts (Fideicomiso) must be expressed in writing, so cannot be constructive. Trusts can be stated to be revocable but otherwise are irrevocable. The settlor, trustees and beneficiaries need not be Panamanian nationals or resident in Panama. A Panamanian lawyer must act as an agent for the trust. Trusts may be settled in respect of existing or future property; additional property may be included after the settlement either by the settlor or a third party. Unlike foundations, trusts are not protected by specific provisions against foreign inheritance laws, judgements or creditors. However, purpose trusts are allowed for.
As everyone in the Offshore Industry knows, Panama has a Tax System that is based on the Territorial Principle of Taxation. This principle that Panama has embraced means that only Panama-sourced income is taxed.
An entity or an individual which has its activities outside of Panama will escape the obligation to file tax returns and further pay Income Tax on its foreign source income.
Recent Amendments to several taxes in Panama
With the enactment of Law 49 of September 17 of 2009 and Law 8 of March 15 of 2010 the new Government of President Ricardo Martinelli, has introduced amendments to several taxes and imposed taxes on sectors that before were not paying any and thus not contributing to the system.
Income Tax
As indicated above, a person or entity with foreign sourced income will immediately escape the obligation to pay income tax in Panama.
According to Paragraph 2 of Article 694 of our Fiscal Code, the income derived from the following activities is not considered from Panamanian source:
- Invoice, from an office established in Panama the sale of merchandises or products for a higher amount of that for which such merchandises or products have been invoiced against the office established in Panama, always that such merchandises or products only move outside.
- Manage, from an office established in Panama, transactions that perfect, consume or have effects abroad.
- Distribute dividends or participation quotas of juridical persons that do not require an Operations Notice or that do not generate taxable income in Panama, when such dividends or participations derive from revenues that are not produced within the territory of the Republic of Panama, including those revenues derived from the activities mentioned in literals a and b of this paragraph.
The physical or juridical persons that, for reason of their activities of international business, develop operations outside the national territory that are necessary for the generation of the income declared in the Republic of Panama, will not be subject to effect the withholding over the payments that are made for those goods and services that are financed, contracted or executed completely outside the national territory, which will not be considered as taxable income.
If the income of a Natural or Physical Person is determined to be of Panamanian Source is therefore obligated to submit a tax return and pay an income tax on their net taxable income following a scale that ranges from 0% to 25%. Persons with a net income of US$11,000.00 per year or less will not be subject to pay the income tax.
Corporate or Legal Entities will have to pay a fixed income tax of:
- 27.5% of the net income starting January 1, 2010;
- 25% of the net income from January 1, 2011 onwards
For companies engaged in the following businesses a rate of 30% is applied for 2010, 27.5% starting January 1 of 2012 and it goes down to 25% starting January 1 of 2014:
- Generation and distribution of energy
- Telecommunications in general
- Insurance and reinsurance
- Financial companies regulated per Law 42 of 2001
- Cement manufacturers
- Operation and management of gambling companies
- Mining in general
- Banks
Companies whose annual net income surpasses US$1,500,000.00 will pay the sum that is higher between: applying the normal income tax to the aforementioned net income (depending on the activity per the above paragraphs) or to the net income that arises by applying to the total revenues of the company a rate of 4.67%.
Additional amendments have been made but they are too cumbersome to cover in one article, however, the above are the most relevant amendments to the Income Tax regime.
Taxes on Dividends
A company with Panamanian source income that distributes among its partner’s dividends will have to withhold a 10% tax if the shares are nominative and 20% if the shares are issued to the bearer. By way of this mechanism the shareholder will not have to file a tax return of its own, thus preserving the anonymity of the shareholder.
Law 8 of 2010 introduces an amendment to Article 733 of the Fiscal Code whereby any legal entity that according to Law 5 of 2007 (Business Licenses) is obliged to obtain an Business License will be required to withhold a Tax on Dividends or Participation Quotas of 10%, when the dividends derive from Panamanian source income. When such income derives from a foreign source or from export operations, the withholding will be of 5%.
This amendment affects all types of companies doing business in Panama and that are required to have a business license, including those companies established in the Free Zones, which although are exempt of obtaining the License, nevertheless have to apply the same rules, however, for these companies located or operating in Free Zones, the withholding is of 5%, notwithstanding the fact these dividends derive from a local or foreign source.
It is important to point out that said Law 8 also introduces a paragraph that refers to the application of the rules regarding the distribution of dividends set forth in Treaties to Avoid Double Taxation negotiated by Panama with different countries. Where there is not a Treaty in force the Law states that the company will need to apply the 10% withholding tax to dividends that derive from Panamanian source income and 5% to those that derive from foreign source income.
Business License Tax
An increase on the business license tax payable by all companies or individuals that are obliged to obtain a business license was introduced also by Law 8 of 2010. The new tax on business licenses is of 2%. Such tax is applicable to the capital of the company, with a minimum payable tax of US$100.00 and maximum of US$60,000.00.
The amendment offers an exemption of this tax for companies whose invested capital is less than US$10,000.00.
For companies or individuals operating within a Free Zone the tax on business licenses will be 1% with a minimum tax of US$100.00 and a maximum of US$50,000.00.
This tax is also applicable to financial entities that will pay 2.5% tax and it will not exceed US$50,000.00.
Banks are subject to pay an annual tax depending on the assets. Such tax ranges from US$75,000.00 to US$1,000,000.00. Banks with international license will pay an annual tax of $75,000.00 notwithstanding the assets of the bank.
Currency Exchangers will have to pay an annual tax of U$10,000.00.
Tax on Transfer of Movable Assets and Services
Currently this tax is payable almost on every item one would normally purchase at the supermarket and services. The rate will be of 7% starting July 1, 2010. with the exception of food, medical expenses, school materials, such as books, pencils, pens, etc., among others of basic necessity. Staring January 1, 2010 banks and other financial institutions will also have to collect this tax at a rate of 5% on all the commissions generated for banking and/or financial services and starting July 1, 2010 it will be 7%.
Annual License
This refers to the annual fee that is payable to the government by any legal entity registered in Panama, whether they are Companies incorporated under Law 32 of 1927, Limited Liability Companies incorporated under Law 4 of 2009 or Private Foundations, incorporated under Law 25 of 1995. Such annual fee corresponds to the sum of US$300.00 payable at incorporation and US$300.00 payable from the second year onwards for companies and $350.00 at incorporation and $400.00 payable from the second year onwards for Private Foundations.
With Law 8 of 2010 the government amended Article 318-A of the Fiscal Code to include not only Anonymous Companies and Private Foundations, but also Limited Liability Companies and any legal entity, national or foreign, as contributors for the purpose of this annual license.
In addition, it is notable that the amendment introduced what is known in other jurisdictions as the re-activation fee and this would apply when a legal entity incorporated in Panama does not pay the annual fee for an uninterrupted period of ten (10) years is legally declared dissolved and one can apply for re-activation by paying all annual licenses owed, plus the corresponding penalties, fines and an extraordinary penalty of US$1,000.00. This re-activation must be applied to within the term of 3 years after the company has been officially dissolved.
Tax Exemptions and other fiscal benefits
It is important to note that the Panamanian Fiscal Laws allow for exemptions and benefits that are clearly an advantage for the investor.
Among the exemptions we can find that interests accrued in accounts in Panama are not levied any type or kind of tax.
There are other tax exemptions contemplated in our laws that benefit the industrial, tourism and construction activities as well as companies established in the Colon Free Zone.
There are no taxes levied on wealth or capital, nor there is an inheritance tax, taxes on assets. There is only a tax on unmovable property (Real Estate), which is levied taking as base the cadastral value of the property over $30,000. Properties with a cadastral value under $30,000 are exempt from paying Real Estate tax. In addition, newly constructed properties enjoy an automatic exemption on Property Taxes that ranges from 5 to 15 years. It all depends on the value of the property as follows:
- For residential use:
Value of the property Exemption in years Up to $100,000 15 Over $100,000 up to $250,000 10 Over $250,000 5 - For other uses (commercial, industrial, etc):
Value of the property Exemption in years Any value 10
Double Taxation Treaties
The Republic of Panama has manifested that it will cooperate with the OECD in an effort to have Panama taken off the grey list. In this sense, Panama has signed Treaties to Avoid Double Taxation with Mexico, Barbados, Portugal, Qatar, United Arab Emirates, France, Israel, Italy, Luxembourg, Spain, South Korea, The Netherlands, Singapore, Belgium, United Kingdom, Ireland and the Czech Republic.
Currently the Treaties in full force are: Mexico, Barbados, Qatar, Spain, Luxembourg, The Netherlands, Singapore, France, South Korea, Portugal and Ireland.
Other countries will surely follow soon after, effectively making Panama a more competitive jurisdiction and attractive for M&A operations, the establishment of banks and multinational companies and in general all sorts of business activities.
Tax Information Exchange Treaties
Currently Panama has in effect only one of these treaties with the United States of America, but it has signed similar treaties with Canada, Denmark, Finland, Greenland, Iceland, Norway and Sweden.
Other International Agreements
- Mutual Assistance Treaties: Panama has concluded mutual legal assistance treaties with the US, Costa Rica, El Salvador, Guatemala, Honduras, Nicaragua and Colombia. The treaties operate at the administrative level: in other words, Court procedures are not required, although there is an appeal procedure. The treaties cover serious international crimes, but do not include tax matters.
- Free Trade Agreements: At the conclusion of the fourth Taiwan-Latin American leaders’ summit in Taipei in October, 2003, the Presidents of Panama and Taiwan signed a Free Trade Agreement that has already entered into effect and makes provision for greater market access between the two nations, as well as reduced duties on agricultural and industrial products, investments, services and telecommunications.
A trade agreement between the United States and Panama is pending approval at the U.S. Senate; however, Panama has effective free trade agreements with Canada, Singapore, El Salvador and its negotiating agreements with several other countries.
Business Opportunities and Permanent Residence in Panama
Why Panama? The answer is simple: Panama has it all and is now a proud member of a select group of Latin American countries (Chile, México, Brazil and Peru) that have Investment Grade. On March 23, 2010, Fitch Ratings granted Panama the rating of BBB- with a positive perspective. This accomplishment has brought more investments to the country than ever before.
Panama is no stranger to foreign investment. For centuries the Spaniards used Panama as a trade and distribution center. On more modern times, Panama is not only used for trade and distribution, but also as a Financial Center and a suitable jurisdiction to establish regional offices for multinationals as well as other types of businesses and of course, tourism.
Presently Panama has engaged several mega projects; most notable is the expansion of the Panama Canal with a cost of 8 Billion US Dollars. Another ambitious project is the construction of a metro rail system in Panama City at a cost of approximately 350 Million US Dollars and the replacement of the current bus service to a more friendly, safe and faster Metro Bus service. These projects provide an array of opportunities for companies that wish to offer their goods and services to the companies that are currently working on these projects. Everything from the supply of technology, to training and security, to more simple, but yet important things, like the provision of food.
Tourism is another area of opportunity. Panama has great incentives for the investor in the Tourism Industry as set forth in Law 8 of 1994, ranging from exemptions in income tax, to exemptions in import duties for constructions materials, cars, boats and any other means of transportation to be used in the tourism facility. The stability of the country, along with the incentives offered by Law 8 has attracted many hotel chains, which presently are either in the middle of construction of or at least on the initial stages of their respective projects. Many, if not most of these projects, are located on the Pacific Coast of Panama City and the “Dry Arch” area of the Pacific Coast of Panama with investments totaling Hundreds of Millions of US Dollars.
Panama has many other opportunities for business, such as those offered at the Colon Free Zone or the Panama Pacific Economic Area. Both have their incentives, but most notable, of course are the exemptions of taxes (except the 5% tax on dividends generated from foreign sourced income) and the multitude of businesses than can be done.
The Free Zone exists since 1948 and is located in the city of Colon at the Atlantic entrance to the canal, and has been extremely successful – more than 1,000 companies are established there, shipping more than $9 Billion of goods annually. It is the second largest Free Zone in the world, next to Hong Kong. All kinds of processing and manufacturing are permitted within the Free Zone, while administration can be conducted from inside or outside the zone.
As for the Panama Pacific Economic Area, it is less known as the Colon Free Zone being that it was established only 5 years ago, but since its creation it has attracted major players because of the favorable business environment and of course, the tax incentives, facilities and location. The most notable companies that have established themselves in this area are DELL, Caterpillar and 3M.
The more salient features of this particular economic area are:
- A functioning airport on site
- Stability and flexibility for business growth and expansion
- Tax breaks, labor and legal incentives, through Law 41 of 2004
- Immediate access to infrastructure and if needed, the project has plans to accommodate future growth
- Immediate availability of all utilities
- Access to state of the art communications
In general Panama offers opportunities in all areas of business, whether it’s in trade, manufacturing, services and tourism and above all, political stability, tax incentives, protection of investments through special Laws to name a few.
Permanent Residence in Panama
Acquiring permanent residence status has never been so easy in Panama. With the enactment of the “Friendly Nations Visa”, nationals of the following 48 countries can apply for permanent residence in Panama for a minimum investment: Andorra, Argentina, Australia, Austria, Belgium, Brazil, Canada, Chile, Costa Rica, Croatia, Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hong Kong, Hungary, Ireland, Israel, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, Malta, Monaco, Marino, Montenegro, Netherlands, New Zealand, Norway, Poland, Portugal, Serbia, Singapore, Slovakia, Spain, South Africa, South Korea, Sweden, Switzerland, Taiwan, United States of America, Uruguay, United Kingdom (Great Britain & Northern Ireland).
The immigrant must prove economic solvency to the immigration service and professional and economic ties with the Republic of Panama. An “Economic Activity” means the applicant owns either a Panama corporation or a Panama company (new or bought an existing business) which is doing business in Panama. Foreigners are prohibited from owning a Panama retail business.
Another option is to prove “Professional Activity” by means of being employed by a professional Panama company, obtain a work permit and registered with Panama’s Social Security system.
To prove the economic solvency the foreigner would need to open a bank account in Panama to his name and deposit a minimum of $5,000 USD (plus $2,000 for each dependent). Whether an applicant is solvent enough is not clearly defined leaving the matter up to the discretion of the immigration officials, but the trend since the program started has been to accept this as sufficient economic solvency proof.
We invite you to come by and see for yourself this beautiful country and everything it has to offer.
For more info contact:
Cambra La Duke & Co.
Banking District, 50th Street, Global
Plaza Tower, 19th Floor, Suite H
P.O.Box 0834-1987, Panama City, Panama
Phones + 507 263-1042 / 5752
Fax + 507 263-2475
Web: www.cambraladuke.com
Email: info@cambraladuke.com