FORMING A PANAMA COMPANY

Incorporation time: 9 days

Shelf companies: Yes

Accounting: Yes

Secretary: Yes

Nominee Shareholder: Yes

Nominee director: Yes

History of Panama

The Republic of Panama is located in the centre of the American continent, where North and South America meet. Formerly part of Colombia, the country declared its independence in 1903. Today Panama wishes to protect its environment (at the expense of national defense) and for good reason: the country has, proportionally, the most national parks in the world.

Panama as an Offshore Centre

Panama is an excellent offshore destination for import/export, petroleum and mining activities, but is not ideal for trade with Europe. The country has the largest free trade zone in America (the Colon Free Trade Zone) which gives total tax exemption.

The various offshore entities available in Panama are :

• Panama Corporation : does not require a minimum capital and requires the appointment of three directors and at least one shareholder. Its creation must be approved by a notary and the Public Registry Office.
• Panama Limited Partnership : requires a capital of between USD 2 000 and 2 500 000, and the names of all members must be recorded in the Trade Register.
• Private Company : liability of shareholders is limited to the amount allocated.
• Panama Trusts : to settle a Panamanian Trust, investors must be of foreign nationality, but they must have a Panamanian lawyer.
• Panama Foundation: allows property to be held but does not allow the exercise of a commercial activity. The minimum capital is USD 10,000.

Panama Summary

Panama entities may be used to invoice the United States or South America and Asia but are not suitable for use in Europe (especially France, Germany and Italy). Since Panama has a relatively poor international reputation and is strongly associated with tax avoidance and evasion invoices are likely to be rejected by tax authorities and be subject to punitive tax measures.

Types of Panama Companies

Creating a company in Panama takes around nine days and involves six steps. There are only two types of company in Panama.

Detailed Review of Panama’s Economy

It cannot be said that Panama has suffered from the 2008 global economic crisis since its growth has never halted. This is due, in particular to many public investments. The country’s growth is estimated for the year 2014 at 6.3%.

Panama is a country where services are very important and comprises the majority of its economy, employing more than 60% of the workforce. Within the tertiary sector, the following areas are the most important: telecommunications, finance, insurance, transport, health, tourism, and maritime services. The secondary sector, industry, is less prevalent and accounts for 17% of GDP, with food preparation the main area.

Agriculture still accounts for 6% of GDP (and 15% of the workforce). Panama produces mainly bananas, vegetables, corn, sugar, rice, meat, and shrimp. The country has few natural resources, which are limited to wood, copper and gold.

The country is also a major international trader, due to the 77 km-long Panama Canal, which was completed in 1914 and enables ships to cross directly from the Atlantic to the Pacific. The Colon Free Zone is one of the largest free trade areas in the world, slightly behind Hong Kong.

Panama’s main trading partners are the United States, the Netherlands, Spain, Mexico and China, with international trade accounting for 25% of national GDP.

Panama’s Economic Strengths

• The country’s economy is stable and has sustained growth.
• Panama is an ally of the United States.
• Taxes are low.
• Loans are encouraged.
• The real estate sector is very active.
• It is easy to create a company in tourism and manufacturing.

Panama’s Economic Weaknesses

• Freedom of employment is not guaranteed.
• Corruption is rife.
• The legal system is slow and unresponsive.

Trade and Market Information

Panama is a member of the World Trade Organisation and has signed the Montreal Protocol for the protection of the ozone layer. The main import rules apply to certain products considered hazardous to health and to specific products (weapons, plants and animals). However, the Colon Free Trade Zone presents the advantage of allowing the import of all kinds of goods without taxes or restrictions. Customs duties are calculated in line with CIF values and range between 3% and 40%.

Half of the products imported are not subject to tax, but 48 types of products are taxed at over 90%. Panamanian imports do not require a licence and only permits may be requested, although the possession of a business permit allows any product to be imported even if it is not regulated.

Here is the list of the main documents to be presented when importing products: import declaration, commercial invoice, air freight letter, bill of lading, business permit (for specific activities), certificate of free sale.

The retail sector in Panama is direct and importers sell both direct wholesale and retail. There is no large-scale retail. Goods transport is mainly by sea, supported by the Canal. Modern motorways and airports enable travel throughout the country. Only 4,000 kilometres of road are paved (out of a total of 11,000 km in the country) and there is only one railway line.

The most influential industrial sectors are construction, cement production and sugar milling.

Employment Legislation in Panama

Employment in Panama is regulated by law, which distinguishes between four different types of work:

• Day work: maximum of 8 hours a day, 48 hours a week, between 06.00 and 18.00.
• Night work: limited to 7 hours a day, 42 hours weekly between 18.00 and 06.00.
• Day/night work: maximum of 7.5 hours a day, 45 hours a week.
• Rotation work: work across the different time slots given above.

The retirement age is 57 for women and 62 for men, the minimum monthly salary is 310 USD with social insurance contributions of 10.75% from the employer and 7.25% from the employee. 14.2% of employees are union members.