Panama Company Formation

ESSENTIAL FACTS – Panama

LOCATION: 9 00 N, 80 00 W
Panama borders both the Caribbean Sea and the North Pacific Ocean and is geographically located between Colombia and Costa Rica on an eastern end of the isthmus forming land bridge connecting North and South America. It controls Panama Canal, linking the North Atlantic Ocean via the Caribbean Sea with the North Pacific Ocean.

POPULATION: 3,242,173

CURRENCY: balboa (PAB); US dollar (USD)

LANGUAGE: Spanish (official), English

CLIMATE: Panama has a tropical maritime climate with an extremely lengthy rainy season – from May to January.

EDUCATION: Almost 92 percent of Panamanians over age 15 can read and write.

PUBLIC HOLIDAYS: Independence Day, 3 November (1903)

HISTORY AND GOVERNMENT
HISTORY
Panama was first settled by the Spanish in the 1500s until 1821, when it became part of the Republic of Gran Colombia. In 1903 the US assisted Panama in becoming a US sovereignty after seceding from Colombia, in return for creating the Panama Canal. The Canal remained in US military hands until 1999, when all responsibility was transferred to Panama. In honor of its new charge there have been expansion projects under way that are due to finish in 2015.

POLITICAL SYSTEM
Panama is a constitutional democracy, with a President, two Vice Presidents, and a Cabinet appointed by the president. The unicameral National Assembly or Asamblea Nacional is the legislative branch.

JUDICIAL SYSTEM
Panamanian law is based on the civil law system, and judicial review of legislative acts is the territory of the Supreme Court of Justice. There are five superior courts and three courts of appeal.

COMMERCE AND TRADE
COMMERCIAL ACTIVITY
Agriculture: Bananas, rice, corn, coffee, sugarcane, vegetables; livestock; shrimp
Industry: Construction, brewing, cement and other construction materials, sugar milling

FREE TRADE ZONE
When the US gave the Canal to Panama in 1999, it proved to be an opportunity for Panama to use the area as a type of special economic zone, utilizing the now-empty military bases previously occupied by the US military. The Colon Free Zone, on the Atlantic side of the canal, is home to over a thousand companies responsible for more than USD$9 billion in imports and exports.

Panama has what is called a Petroleum Free Trade Zone, which began in 1992 and has served as an excellent strategic tool for crude oil, oil byproducts, gasoline and other petroleum. There are several different types of exemptions and tax incentives available.

TRADE PRACTICES
Exports: Bananas, shrimp, sugar, coffee, clothing to the US, Spain, Netherlands, Sweden, Costa Rica
Imports: Capital goods, foodstuffs, consumer goods, chemicals from the US, Netherlands Antilles, Costa Rica, Japan

BANKING, FINANCE AND INVESTMENT
FINANCIAL FACTS
Fiscal year: Calendar year

STOCK MARKET
The Panamanian Stock Market, known as the Bolsa de Valores de Panamá, S. A., is organized as its own corporation. There are none Directors on its board, as well as five committees that administer the market – the Executive Committee, the Technical Committee, the Trading and Internal Regulations Committee, the Stock Market Operations Oversight Committee and the Audit Committee.

Market value of publicly traded shares: $5.074 billion (2005)

MEMBERSHIPS
BCIE, CAN (observer), CSN (observer), FAO, G-77, IADB, IAEA, IBRD, ICAO, ICC, ICCt, ICRM, IDA, IFAD, IFC, IFRCS, ILO, IMF, IMO, IMSO, Interpol, IOC, IOM, IPU, ISO, ITSO, ITU, ITUC, LAES, LAIA (observer), MIGA, NAM, OAS, OPANAL, OPCW, PCA, RG, UN, UN Security Council (temporary), UNCTAD, UNESCO, UNIDO, Union Latina, UNWTO, UPU, WCL, WCO, WFTU, WHO, WIPO, WMO, WTO

FOREIGN INVESTMENT
Panama has many investment incentives that offer many opportunities for foreigners who wish to take advantage of the Panamanian offshore business climate. Tax breaks, duty exemptions and other incentives are available for those businesses involving tourism – including hotel and resort construction and other housing developments, both in and out of the larger cities. Also in play are forestry and agriculture industries.

REAL ESTATE
Real estate taxes are paid on a sliding scale from .70 percent to 2.1 percent, depending on the value of the property as well as a number of other factors. The seller pays 2 percent on real estate transfers. New construction has tax exemptions from five to 15 years depending on the value of the property; land is not exempt.

IMMIGRATION
VISAS
Visas for entry into Panama have several categories, depending on certain requirements of the traveler and the purpose of his or her visit. These categories are as follows: Immigrants (for those with work permits of long duration), investors (with money to invest into the local economy), special temporary visitors, temporary visitors, tourists, and tourist-pensioners (for those who have proof of interest income from a Panamanian bank).

EMPLOYMENT
Normally, non-Panamanians can staff only five percent of any business. However, foreign companies can hire up to 12 percent of senior management with foreigners. In any case, the Ministry of Labour will work with your company to accommodate you as much as possible depending on your corporation’s needs.

BUSINESS
BUSINESS ENTITIES
A Panama corporation – called a Sociedad Anonima – is one limited by shares. The capital is normally USD$10,000, plus USD$60.20 capital tax, plus USD$300 every year as a registration fee. The Articles of Incorporation are notarized and then registered at the Public Registry Office.

TRUSTS
Panamanian trusts do not have to be registered in Spanish; in fact, they do not have to be registered at all, nor are any fees due. Panamanian trusts are irrevocable except when explicitly deemed otherwise in writing at time of establishment.

TAXATION
CORPORATE TAXATION
Corporate income tax is on a sliding scale with rates that go from 30 to 40 percent depending on the amount of the chargeable income. Withholding tax is 10 percent, except when less than 40 percent of taxed income is paid out, in which case the withholding tax is four percent. However, taxable income is determined only after significant deductions, exemptions and allowances are made.

OTHER TAXATION/DUTIES
Stamp duties are PAB4 per sheet of pre-stamped paper. Also, companies not in any of the Free Zones mentioned above pay one percent of the net worth of their business up to a maximum of PAB20,000 as a Commercial License Tax.

DOUBLE TAXATION
Panama does not take part in any double tax treaties.

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