Where is Panama?

The Republic of Panama lies in Central America between the Caribbean Sea and the North Pacific Ocean. There are land borders of with Colombia on the west and with Costa Rica on the east. The land area totals 75,990 sq km. The capital is Panama City and the country is divided in 9 Provinces, namely, Bocas del Toro, Chiriqui, Cocle, Colon, Darien, Herrera, Los Santos, Panama and Veraguas.

Topography is varied. You will find mountains towards the Caribbean coast, while small hills and vast plains towards the Pacific side. The climate is tropical with prolonged rainy periods between mid April and mid December. There is a brief dry season between January and mid April.

The highest point is Volcan Barú in Chiriqui at 3,475m above sea level, from where you can see both Oceans.    

History

On October 10, 1502, Christopher Columbus discovered the Isthmus of Panama. Several weeks later he came upon a beautiful protected bay, which he baptized with the name Portobelo.  It was on Panamanian soil that Spain founded the first city on solid ground: Santa María la Antigua del Darién.  On September 25, 1513, Vasco Núñez de Balboa discovered the southern sea and connected the Pacific Ocean with the Caribbean Sea for the first time, forever sealing Panama’s fate and strategic importance as the bridge of the world.  

In 1821 the isthmus seceded from the Spanish crown and became part of Simón Bolivar’s Gran Colombia and on November 3, 1903 seceded from Colombia aided by the Government of United States of America and became an Independent sovereign country.

Today Panama is known for its natural beauty, great fishing, numerous beaches, and the more than one thousand paradise islands that make up its archipelagos and for its friendly, festive and hospitable people.  The magic that captivated adventurers over 500 years ago still awaits anyone who wants to experience Panama.

Tax Regime

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 or assets outside of Panama will automatically escape taxation. On the contrary, an entity or an individual which engages in a business activity within Panama, receiving Panamanian sourced income, will be subject to pay taxes annually.

There are more than 300,000 corporate entities in Panama, of which the majority operates 'offshore', meaning, outside of Panama.

·         Double Taxation Treaties

                        Since Panama does not levy taxes on foreign source income, it has no double taxation treaties.  However, some bilateral agreements have been entered  with some countries to avoid taxation of income from international maritime and air transportation.

·         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. The Panamanian authorities do not entertain requests for information on fiscal 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 being negotiated at this time.  Additional agreements are in force with El Salvador and Singapore, while another is being negotiated with Chile.

Doing Business in Panama

Since its independence, the Republic of Panama has enacted a number of laws intended to promote foreign investment in the country. The following are some of the more important aspects of the legal regime related to foreign investment in Panama.

            Offshore Corporations

            In 1927, the National Assembly enacted Law Nº 32, which governs Panamanian Corporations. This law remains in force with some Law Decrees and Executive Decrees that complement it.

            The anonymity of the shareholders of a Panamanian Corporation is an essential condition that makes this vehicle so appealing to foreign investors. The only legal  way to disclose the shareholders of a Panamanian company is if the company is involved in money laundering, a procedure that is in compliance with international    anti-money-laundering standards.

            Free Trade zone

            The Colon Free Zone was established in 1948 and it is the second largest Free Zone in the world, next to Hong Kong.

            The Free Zone 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.

            All kinds of processing and manufacturing are permitted within the Free Zone, while administration can be conducted from inside or outside the zone.

            Location is one of the main keys to the enormous success of the Colon Free Zone. Its proximity to the markets of the Pacific, to North America and its relative proximity to Europe make it an ideal hub in this age of globalization of the world's economy. To this end the Zone is constantly reconstructing and modernizing   warehouse, shipping and transit systems for all types of merchandise, keeping one step ahead of modern technology and always ready to offer the best multimodal services.

                        Advantages:

                        The Colon Free Zone has a number of elements which support commercial activity on such different levels as transport and financial operations.  

                        All of these advantages, together with the American Dollar as national currency, make an ideal climate for international commerce. A modern communications system and an efficient tourism service add to the facilities enjoyed by the Colon Free Zone Users.

            Banking

            The Panamanian banking industry, next to Switzerland, is one of the most important in the world and particularly in the region. It grew during the last quarter of the  20th century into a regional banking center for Latin America 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 $23 Billion, but after September 11^th,  many closed their offices, leaving a still impressive figure of over 70 Banks, of those, 38 banks have General Licenses, 36 have International licenses; and there      are 5 representative offices. Branches of major international banks are particularly welcome as they will be able to offer not only traditional retail banking, but also    services such as investment management, back-to-back loans and documentary credit facilities, credit card services and Trust management.

            Only banks with General Licenses will have any tax liability in Panama, and then only in respect of Panamanian income.

            Family assets, Inheritance

            Goods acquired through succession or inheritance are not subject to inheritance tax in Panama, so investments in panama may pass fully to the heirs.

            Private Foundations and Trusts

            Panamanian private foundation structures allow the founder to give his heirs more direct access to de assets they are entitled to. The assets of a foundation may  be donated by the founder; these assets are not part of the state and are not subject to probate procedures. These assets are separate from the personal assets  of the founder or his beneficiaries.

            Panamanian trusts have a similar structure; and assets belonging to the trust that are located abroad are not subject to tax in Panama.

            Immigration law

            Panamanian immigration law provides for a list of visas that allow the bearer to reside in Panama and to obtain a Panamanian personal identity card (cédula).

            Foreigners can apply for example for a “solvency” visa. As soon as the person submits evidence of an account in Panama the immigration authority grants him a  visa that may be renewed until can obtain a cédula. There are also visas available for investors and small investors with the same rights.

            For persons interested in coming to Panama often but without being considered for permanent residence, there are multiple-entry visas. As with temporary visitors, they allow the bearer to stay in the country for five years.

            It is possible for a foreigner in Panama to change his or her status (for example from temporary to immigrant with right to a cédula).

WHY PANAMA THEN?

• The legal tender is the US dollar as Panama's official currency.
• Panama offers low taxes and favourable investment and financial incentives.
• Unregulated money exchange and unrestricted movement of capital.
• No tax liability on interest earned from bank deposits or CD'S held in banks located in Panama.
• Import and export of goods and merchandise.
• An attractive fiscal structure that operates on the "local source income" principle, meaning taxes are levied only against income generated by operations conducted in the territory of Panama.
• Strong bank secrecy laws.
• The best corporate book secrecy laws in the world.
• "Piercing the Corporate Veil" is not a principle contemplated in Panamanian Law.
• Panama has no mutual legal assistance treaties (MLAT's) for sharing of banking information with any other nation and does not recognize court rulings from other countries.
• Panama Corporations offer "Bearer Shares", for shareholders to maintain complete anonymity and privacy.
• Panama Private Interest Foundations allow for Private Protectorate Documents and Private Letters of Wishes, enabling controllers (Protectors) and beneficiaries of foundations to remain completely anonymous and private.

With all this advantages is no wonder why over 70 banks and foreign companies have chosen Panama as their strategic base of operations for the Latin American region!

You don't even have to come down to Panama! You just place the orders and we'll do everything for you, however, we strongly recommend that you visit this very beautiful country and see for yourself why people from around the globe prefer Panama as a tourism and retirement destination.