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Panama

 
   
Executive Summary
The Republic of Panama has gained its independence from Colombia in 1903 with the help of the US that favored the construction of the famous Panama Canal. The canal has become of the Panamanian property in 1999 providing to the country even major economic opportunities. The country follows a presidential sovereign democracy model.

Spanish is the official language of Panama, but the knowledge of English is significantly increasing, especially in business circles. US dollar is a state currency, where Balboa is used only for smaller transactions.

The economy is in a rapid growth which is mainly based on the services sector – over 77%, including tourism, commerce and financial services. The Panama  Canal’s facilities are being viewed as a great  development opportunity and it is used for the investment and transit purposes.

Panama’s legislation is in accordance with the FATF and OECD principles, meaning that the country and its economic activities correspond to international standards. It participates in anti money-laundering intergovernmental cooperation  and constantly updates its internal regulations in accordance to the supra national recommendations.

Panama experiences territorial taxation, but external activities are not taxed. The jurisdiction provides fast and not complicated company incorporation opportunities with a high level of confidentiality. It is possible to register companies with bearer shares in Panama. The country is known for its active banking activities, and it is the world’s largest registry of vessels.

Geography
Panama is situated between Colombia and Costa Rica in the waters of Caribbean Sea and the North Pacifica Ocean. It covers almost 76,000 sq km and its population exceeds 3,3 million people. It has a tropical climate with tropical rains in the period between May and January. Panama City is its capital. The Panama Canal lies between the North Atlantic Ocean (Caribbean Sea) and the North Pacific Ocean. Mountains, small hills and plains are characteristic to the Panama’s landscape. Copper, mahogany forests and fish represent Panama’s main natural resources. The time zone is GMT – 5.

Map, Flag and Coat of Arm


Types of Company

Panama Corporation (Sociedad Anonima)

This company is the most frequently made choice for offshore business purposes. After the company is incorporated only one shareholder is a must-be. Shares can be either registered or bearer. There are no minimum capital requirements. The Articles of the company should contain the names of three directors of the company and a resident Panamanian lawyer. No other filing requirements are necessary to conduct unless a company is merged or wound up.

Panama Foreign Corporation
It is possible for a foreign company to be registered with the Panama Public Registry Office, submitting a list of required documents. Capital taxes on formation and annual fees should be paid in accordance to the rules of Panamanian Corporation.

Panama General Partnership
The partners of this structure have unlimited liability and it is regulated under the Commercial Code.

Panama Limited Partnership (Sociedad de Responsabilidad Limitada)
This organization may have two to twenty partners of any nationality and a required capital ranges between US$ 2,000 and US$ 500,000. All the names of the partners have to be registered and the amount of capital paid in by each of them should be specified. In case of a loss each partner is liable for the amount commited. Partners may appoint an administrator of the partnership.

Panama Civil Partnership
This organization has a legal personality, while partners have unlimited liability. This structure is often chosen by accountants and advocates.

Panama Commandite Company
This is a mix of a corporation and partnership. At least one of the partners should have unlimited liability. This is a rarely used structure nowadays.

Panama Foundation
It is an autonomous legal entity that does not have shareholders. It is used for holding and protecting assets, while no business activities are allowed to this structure. The minimum capitals is of US$10,000. Tax is payable only on incomes generated within Panamanian boarders and no accounts and audits are an obligatory requirement.

Panama Trusts
Panamanian trust should be formalized in writing, where a settler, trustee and beneficiary should be Panamanian citizens or residents. There are no minimum capital required to form a trust, and standard fees are absent as well; the documents can be constituted in Spanish or English. A trust should pay Panamanian taxes if it generates profits within the country’s boundaries.

Taxation
Panama Fiscal Code coordinates taxation policies, taxes are applicable only to profits generated in Panama. If business activities and transactions are conducted outside the country, taxes are not payable. Neither the dividends derived from external earnings are taxed.

Personal
Residents of Panama are individuals that pass at least 180 days in Panama during the taxation year and are recognized as such by the government. However, the jurisdiction does not distinguish between resident and foreign employees, and individual taxations rules are similar to the corporate taxation principles: taxes are payable only on the profits generated within the territory of Panama.

Corporate
The major part of companies incorporated in Panama are “offshore structures” thus being exempt from local taxation. Such organizations as Corporation, Foreign Corporation. Civil, General and Limited Partnerships, Trusts and Foundations can take advantage of such a fiscal environment. Beneficial ownership does not have to be disclosed (except Limited Partnerships), and governmental licenses should be obtained only by regulated financial institutions.

 
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