The Republic of Panama has always played an important role in international commerce because of its geographic position, from the time of the Spanish conquerors through the California Gold Rush of 1849 and then the construction of the Panama Canal.
In addition to our privileged geographic position, there have been many other factors, which have greatly contributed to the development of Panama as a corporate and financial centre, such as well-trained bilingual manpower, the U.S. dollar as our currency, an excellent telecommunications system and political stability.
Panama is a 100% Tax Heaven
- No tax reporting requirements
- No income tax
- No capital gains tax
- No interest income tax
- No sales tax
- No tax on issuance of shares.
- No tax to shareholders
- No stock sales or transfer tax
- No capital stock tax
- No property tax
- No estate tax
- No gift tax
- No stamp tax
All of these factors, together with Law No.32 of 1927 covering the organization and operation of Panamanian corporations, have helped make Panama one of the most important corporate centres in the world and have made Panamanian corporations accepted by bankers, investors and governments.
Advantages of Panama
The advantages, which Panama offers as a tax heaven may substantially benefit persons and companies wishing to use Panama based corporations for holding purposes or for directing business activities in different parts of the world.
Among the many advantages of Panama, an interested party will find the following:
1. Panama is a 100% Tax Heaven
2. The country is virtually located at the crossroads of the world, with the best air and ocean transportation, both for passengers and freight, as well as excellent telephone, telefax, telex and cable communications with the rest of the world.
3. There is a unique banking system, which includes 160 banks with offices in Panama, among them some of the largest and best known banks operating internationally, supported by strong bank secrecy laws.
4. There are absolutely no exchange controls and there is complete freedom to transfer funds. No registration with the authorities nor any permits are required for any transaction involving the receipt or transfer of funds.
5. The monetary system of the country uses the international free U.S. Dollar as its medium exchange.
6. There are no taxes on capital (stocks, bonds and other investments) held by Panama corporations.
7. The income tax law of Panama specifically exempts from its provisions the following:
- Directing from an office established in Panama, operations which are completed, consummated or take effect abroad;
- Invoicing, from an office established in Panama, the sale of merchandise or products for a sum higher than that at which said products or merchandise had been invoiced to the office established in Panama, provided that said merchandise or products are handled exclusively abroad;
- Income from International Maritime commerce of vessels registered under the Panama flag.
- Corporate dividends or participations when said dividends or participations are derived from income not produced within the territory of the Republic of Panama, including the income derived from the activities mentioned in points a and b above.
- The interest earned for funds kept in time deposits or savings accounts.
8. Panama has signed one tax treaty with Mexico.
9. The Colon Free Zone offers unique opportunities for the duty free storage, repackaging and reshipment of goods of all sorts.
HOW TO INCORPORATE
Usually, the client will simply email to us a request to organize a Panamanian corporation and will provide the name of the corporation, its main activities, the names and addresses of the Directors, the names of the Officers and the desired capital. Once this information is received, it will take no more than five (5) working days to protocolize the Articles of Incorporation and register them in the Public Registry.
Points of Interest
With respect to cost and several other points, which may be of interest to you, we are pleased to report as follows:
1. Name reservation. After its availability has been verified, the name of a corporation may be reserved in the Public Registry for a period not to exceed thirty (30) days, by filing a written petition before the Public Registry. After this period has expired the name reservation will lapse without the need for a notation by the Registry in said respect.
2. Neither the stockholders nor directors have to be nationals or residents of Panama. As previously mentioned, there must be at least three Directors. We may provide local directors and officers if required.
3. There are no legal requirements regarding a minimum of capital. According to law, there is no need to state that the capital subscribed has been paid in.
4. As long as the corporation is not doing business in Panama, it does not incur in any tax liabilities.
5. Regarding the appointment of the Registered Agent in Panama, which is required by law, the usual procedure is to appoint us.
6. The corporation is not deemed to have legal existence, with respect to third parties, until the date it is registered in Mercantile Registry. Therefore, business should not be conducted under the corporate name prior to said date.
7. The corporation may execute in favor of one or more individuals a broad Power of Attorney to operate the company.
8. Panamanian law allows 100% foreign ownership of an offshore Panamanian corporation.
PRIVATE INTEREST FOUNDATIONS
In an effort to provide additional opportunities to the Offshore Community Law 25 of 1995 was created. Said Law contains the procedures and requirements for the creation of Private Interest Foundations.
Private Interest Foundations may be used as tax and estate planning device with the following advantages:
1. They provide a fiduciary structure for the orderly transfer and disposition of assets to beneficiaries upon the death of the Founder, keeping control of the assets during lifetime;
2. They may be established to have effects from the date of their constitution or after the death of the Founder;
3. According to Law 25 of 1995, inheritance laws that apply in the domicile of the Founder or the Beneficiaries, shall not be effective against the Foundations assets nor may these laws affect the validity or performance of the Foundations objectives;
4. Foundations are established to carry the specific goals set out in the Foundation Charter and may additionally undertake sporadic commercial activities, exercise rights pertaining to their holdings, own property, contract obligations and take part in administrative or judicial proceedings.
5. A Private Interest Foundation should be established with a patrimony destined to fulfil its objectives, which shall be no less than US$10,000.00. Said patrimony may be increased by additional contributions of the Founder or third parties;
6. The assets of the Foundation become legally independent and do not form a part of the private estate of the Founder. Such assets are not sizeable and may not be subject to any precautory action or measure, unless such action or measure pertains to obligations incurred or damages arising from the fulfilment of the Foundations objectives.
Notwithstanding the creditors of the Founder or of a third party shall have the right to contest the contribution or transfer of assets to a foundation when such transfer constitutes an act in fraud of the creditors. The rights and actions of such creditors shall lapse at the expiration of three (3) years, counted from the date of the contribution or transfer of the assets to the foundation.
7. According to article 27 of Law 25 of 1995, Private Interest Foundations are except from payment of any taxes, contributions, duties, liens or assessments of any kind arising from the acts of constitution, amendment or extinction of the same, as well as acts of transfer or encumbrance of the Foundations assets and the income arising thereof, when related to:
- Assets localized abroad;
- Money deposited by natural or juridical persons whose income does not derive from a Panamanian source is not taxable in Panama for any reason;
- Shares or securities of any kind issued by corporations which income is not derived from a Panama source, or which are not taxable for any reason, even when such shares or securities are deposited in the Republic of Panama;
The transfer of unmovable property, titles, certificates of deposits, assets, funds, securities or shares carried out by reason of the fulfilment of the objectives of the foundation or the termination of the same, in favor of relatives within the first degree of consanguinity or the spouse of the Founder shall also be exempted from all taxes.
The Foundation Charter shall be executed by the Founder by means of a private document, in which case it should be authenticated by a Notary Public, or by means of a public document directly before a Notary Public.
In order for us to provide services in the constitution and management of Private Interest Foundations, the following information will be necessary:
1. Name desired for the Foundation to check on its availability. The word Foundation must be included in the name, for example: The Clear Water Foundation, John Doe Foundation for the Children, etc;
2. Initial patrimony if other by the standard of U.S.$10,000.00;
3. Names and addresses of the members of the Foundation Council, which will be no less than three (3) members (natural persons), unless a juridical person is appointed, in which case a minimum of one member is required. We may provide nominees for these positions;
4. Domicile of the Foundation, if other than Panama;
5. Duration, if other than limited;
6. Name of the protector if required.
