Establecimientos de empresas en Panamá – Robles & Robles

Establishment of Companies in Panama

The Panamanian economy has been registering an important development, with the highest growth in GDP in the Latin America region. Panama has been an example of sustainable economic growth in the region, mainly because of the economy not being one based on commodities exports and therefore is not dependent on the greater or lesser demand of these products by the developed economies, instead being a services provider for the region taking advantage of having a fully dollarized economy which makes Panama´s financial system a safe financial center to keep foreign capital out of countries in the region that are continuously experiencing problems of devaluation of their currencies, high inflation rates as well as political instability.

Nearshoring the new trend in global supply chain matters, makes Panama the perfect center for distribution on the region connecting the new production centers to be moved into our continent and its regional consumer markets, reducing expenses and improving the effectiveness of international transactions thanks to the advantages that Panama offers in the logistics sector.

Due to having a fully dollarized economy as well as being considered a politically and economically stable country, the financial center is a safe sector to keep foreign capital out of countries in the region that continually experience problems of devaluation of their currencies, chronic inflationary problems as well as political and economic instability.

Service-Based Economy

Our economy has traditionally always been one of services, mainly financial and those related to the maritime industry, and it continues to be strong in these areas, while consolidating its position as a global logistics center for cargo transportation and services.

The creation of "Value Added Services" logistics centers (time and cost reduction) will take advantage of our privileged geographical position and the increase in the volume of ships that cross the Canal since the expansion was completed, of a wide variety of activities related to the shipping industry, including traditional warehousing, cold storage, packing and packaging, labeling, customization, and final assembly.

The creation of these types of centers are reinforced by the existence of investment laws that contain various types of benefits (Multinational Companies, Free Trade Zones), the increasing number of Free Trade Agreements that Panama has been a signatory of, and that it has already successfully carried out projects such as the Colon Free Trade Zone in the Atlantic side and the Panama Pacific Special Economic Zone on the Pacific side where companies such as 3M, Caterpillar, Dell, among others, have established regional offices.

To this day, the five container terminals that operate in Panama are managed by four of the ten most important container terminal operators in the world, and are considered among the most modern in Latin America and currently make up the largest logistics center of the region.

Also important for the establishment of an increasing number of multinational companies in Panama is the air transport Hub existent at the Tocumen Airport in Panama City, as it has become one of the largest and most well connected airports in the world, offering connections to all the most important cities in the American continent and Europe.

It is important to note that as a result of our strategic geographical position, our country is connected to the world through five submarine fiber optic cables connected to North and South America, Europe, Asia and the Caribbean, which is an important reason why Panama is the ideal place for telecommunications companies and data centers.

Panama - Global Logistics Center (Nearshoring)

Due to its privileged geographical position, the Republic of Panama has become the quintessential Multimodal Transport Logistics Center in the region, as a result of being complemented by important infrastructure assets that enhance transport logistics and cargo transshipment activities, as well as its manufacturing, assembly, consolidation and distribution.

The existence of the Interoceanic Canal makes it possible for Panama to be considered as a huge port between two oceans such as the Atlantic and the Pacific.

This engineering marvel is one of the most important commercial resources in the world, with an annual traffic of 195.1 million metric tons of cargo, which represents an estimated 5% of world traffic.

The Canal has a total length of 80 kilometers, each ship takes between 8 and 10 hours to cross from one ocean to the other, and it operates 24 hours a day, 365 days a year.

The five ports located at both entrances to the Panama Canal are managed by four of the most important port operating companies in the world, which offer goods loading, unloading and transshipment services at the highest operational performance and competitive costs to the largest shipping companies in the world.

At the entrance to the Atlantic Ocean:

At the entrance of the Pacific Ocean:

The railway runs parallel to the Panama Canal, this important means of transporting container cargo, offers an efficient and fast intermodal connection between the ports in both oceans, very aptly named as the "dry canal".

The railway's handling capacity is estimated at around 500,000 containers a year. It has plans to increase this in stages of around 250,000 movements per year, up to a maximum of 2 million TEUs per year.

«Panama Canal Railway Company» (PCRC) opera vagones de carga de doble estiba tipo “bulkhead” en dos sets de 6 vagones cada uno, acomodando un promedio de 75 contenedores. Una combinación usual comprendería 60 contenedores de 40’ y 15 contenedores de 20’.

The main passenger and cargo airport in Panama is the Tocumen International Airport, located 15 minutes from Panama City, due to a modern highway (Corredor Sur) that connects it to Panama City.

Panama ranks first in Latin America as the market with the largest number of destinations and represents 21% of air traffic on the continent, surpassing Venezuela, Mexico, Argentina and Colombia, according to the International Air Transport Association -IATA-.

The Panamanian owned airline Copa Airlines, has affirmed that the main reasons that make the Panamanian hub successful are its geographical location, a complete network of routes throughout the region and to Europe, world-class products and services at competitive costs.

The Tocumen international airport continues with the 2006-2030 Master Development Plan, of which phase II has been completed with the construction of the North Pier, which will allow the airport to increase its capacity by 50%, handling up to 10 million passengers per year.

The second most important airport is Marcos A. Gelabert, also called Albrook Airport,also located in the capital city, providing services to mainly domestic flights from and to airports located in the countryside and beaches of the country, but also international flights; It is located 1.5 km west of the center of Panama City, which has had a great resurgence due to the development of tourism throughout the Republic of Panama.

The Colon Free Zone was created in 1948 and today is internationally recognized as the second most important free trade zone in the world, second only to Hong Kong, and the first in importance in the Western Hemisphere.

It is located at the Atlantic entrance of the Panama Canal, which provides quick access to the Canal, the three cargo ports in the Atlantic sector, as well as the cargo railway. In this segregated area it is allowed to carry out commercial operations, mainly import, deconsolidation, repackaging, consolidation and re-export operations of all kinds of merchandise.

It has two tax regimes, one for sales to buyers within the Republic of Panama, and the other for sales abroad from the Colon Free Zone (re-export of merchandise).

The Colon Free Zone offers the movement of merchandise to and from any part of the world from its privileged geographical location near the Atlantic entrance of the Panama Canal, cargo ports, the interoceanic railway, and Tocúmen International Airport.

The tax and operational advantages offered by the Colon Free Zone for a company located in it can be summarized as follows:

Added Value Tax/Sales Tax (ITBMS): Operations considered foreign that are exempt from Income Tax will likewise be exempt from charging this tax to their buyers.
Commercial License Tax: Companies established in the Colon Free Zone are exempt from paying this tax.
Import and Export Tariffs: Those goods that are not introduced and/or sold within Panamanian territory will be exempt from paying these tariffs.
It will not cause income tax: The sums received or accrued by people abroad in concept of Royalties from people located in the Colon Free Zone. Royalties are understood as payments, fees, percentages or compensation in any form granted to third parties for the right to use patents, inventions, formulas, processes, techniques, trademarks, or any other registered or reserved property.

For sales to buyers within the Panamanian territory from the Colon Free Zone, the normal Income Tax regime exposed and analyzed above will be applied, since these sales are considered to be of Panamanian source. In the same way, when the merchandise enters Panamanian territory from the Colon Free Zone, it will have to pay the corresponding import duty.

However, those sales made from the Colon Free Zone abroad (re-export) are not subject to the payment of Income Tax on the profits from said sales, nor the Added Value Tax/Sales Tax, nor municipal taxes, nor import and export tariffs of said merchandise to or from the Colon Free Zone respectively.

The companies established in the Colon Free Zone, must withhold the Dividend Tax, on 5% of the profits that they distribute to their shareholders from their income from "foreign operations". However, we must point out that those dividends from "internal operations" (sales within the territory) will be taxed in the manner established for local activities.

If there is no distribution of dividends, or if the total amount distributed is less than 20% of the net earnings of the corresponding fiscal period, the dividend tax shall be applied to 20% of the company´s revenues.

The Panama Pacific Special Economic Area is an area designated for business services and the production of goods with high added value and technology. It is located at the old Howard Air Force Base. Panama Pacific governs its relations with the Panamanian State by way of Law No. 41 of 2004.
The main purpose of this special area is to offer added value in terms of transformation and logistics to the production or assembly of products for export, and not this is the case for the mere re-export of products, with some exceptions.

Incentivized Activities:

Corporate Headquarters
Operations of administrative functions (back office)
Call Centers
Multimodal and logistics services
High-tech products and process manufacturing
Aircraft maintenance, repair and reconditioning
Transfer of services to the aviation industry
Offshore services
Film industry
Data transmission, radio, television, audio and video
Transfer of goods and services to ships, planes and their passengers
Sale of merchandise not manufactured in Panama Pacific, intended for export, when made by multinational companies or any of their affiliates, subsidiaries or companies of the same economic group.

Tax Regime:

1. Provision of services abroad
2. Sale of all types of merchandise manufactured in the area abroad, other free zones (with certain exceptions), and to ships that transit the Canal or arrive at Panamanian ports, as well as the sale or services for the passengers of said vessels
3. Sale of products and provision of services to national airports as well as to aircraft
4. The manufacture and export of high-tech products, or products in which high-tech processes are used
5. Multimodal logistics services
6. Call Centers
7. Development of technologies related to digital information and intranet and internet networks
8. Transmission signal link

Dividend Tax: Dividends distributed from profits from any of the activities described above will be exempt from payment of dividend tax.
The dividend tax will apply only to those profits from the provision of services or sale of products that are provided or sold to companies established within the Panamanian territory, in which case they must withhold the Dividend Tax or Participation Fee on 5% of profits distributed to its shareholders.
If the tax is applicable due to the existence of income from a Panamanian source, then if there is no distribution of dividends, or if the total amount distributed is less than 20% of the net earnings of the corresponding fiscal period, the dividend tax shall be applied to 10% of the company´s revenues.

Added Value Tax/Sales Tax (ITBMS): Invoices for the sale of products or provision of services (including financial leasing) of any of the activities described above, will be exempt from the payment of ITBMS tax.
Commercial License Tax: By virtue of the law that creates this special area, companies located within it will not require this Operation Notice, and therefore will not pay the tax caused by it.
Import and Export Tariffs: Exemption from the import tariff on all raw or prefabricated materials, machinery, materials, containers, inputs, fuels, final products, vehicles, supplies and spare parts introduced into the area; as well as the exoneration of export tariffs of all types or classes of merchandise, products, equipment, goods or services, within the activities described above.
It will not cause tax: Tax on remittances or transfers abroad, as well as import duties on those activities considered "foreign operations", export duties, Property Tax, Tax on international calls, Property Tax, among others.

Work Incentives:

Fixed rates for overtime (25%) and work on employees' days off (50%).
Flexibility to assign days off to employees.
Businesses may be open on Sundays and holidays.
Foreign workers: possibility of exceeding the percentage rule of the Labor Code. Companies may request additional expatriate employees beyond 15% if the workforce does not exist locally.
Higher Education Training Center.
Just cause for dismissal due to losses and/or market fluctuations.

Migration Incentives:

The site's one-stop shop handles all visa and work permit procedures for your employees.
Special investor and worker visas are available (3 to 5 years is the standard time period).
Visa benefits are extended to the worker's immediate relatives: spouse, dependent children up to 25 years of age, dependent parents over 62 years of age.
One-time tax-free importation of any personal and household belongings (up to US$100,000).

The Government, together with the private sector, has created the legal conditions for our country to become a destination for Multinational Companies thanks to Law 41 of 2007, where various Incentives and Benefits were framed. The function of a Multinational Company under this regime will be to provide services only to the business group to which it belongs, in attention to the permitted activities.

Permitted Activities:

Management and/or administration of operations in a specific or global geographic area of a business group company.
The logistics and/or storage of components or parts required for the manufacture or assembly of the products they manufacture.
Technical assistance to companies of the same business group or to customers who have purchased a product or service from the company.
Business group accounting.
The preparation of blueprints that are part of designs and/or constructions, or part of them, that constitute part of the typical line of business of the parent company or any of its subsidiaries.
Advice, coordination and monitoring of marketing and advertising guidelines for goods or services produced by your business group.
The electronic processing of any activity, including the consolidation of the operations of the business group.
Financial management (treasury), to the business group.
The support of operations and research and development of products and services of the business group.
Any other similar service previously approved by the Government.

Tax Regime of Multinational Companies:

Income Tax Exemption: For those companies registered in Panama as multinationals, they will be exempt from paying income tax regarding the services they provide to entities established outside of Panama or that do not produce taxable income in Panama.
Dividend Tax Exemption: The distribution of dividends for the aforementioned activities will also be exempt from Dividend Tax.
Exemption from Added Value Tax / Sales Tax (ITBMS): This tax is commonly known in other jurisdictions with the acronym IVA or VAT, and those multinational companies for the provision of the aforementioned services will not be subject to charging it on their billing.

Work Incentives:

Migration Incentives:

Tax Regime for local activity:

Dividend Tax: Companies must withhold the Dividend Tax or Participation Fee, from 10% of the profits distributed to its shareholders from Panamanian source income, and from 5% of the profits distributed from exempt income, as well as well as income from a foreign source and/or export (if you only have income from a foreign source, this tax does not apply). then if there is no distribution of dividends, or if the total amount distributed is less than 40% of the net earnings of the corresponding fiscal period, the dividend tax shall be applied to 40% of the company´s revenues (complementary).
Added Value Tax/Sales Tax (ITBMS): This tax is applied to the sale of products and provision of services. The rate of this tax is 7% on the amount for which the service is contracted or the product is purchased, with a rate of 10% when it involves the sale of liquor and 15% when it involves the sale of cigarettes. There are exceptions to the collection of this tax, some of which are the sale of agricultural products, food products, export and re-export of goods, petroleum derivatives, certain pharmaceutical products, health services, certain types of leases, insurance, game chance, among others.

The authorities of the Municipality of Panama also have the power to charge a tax which will vary depending on the total value of gross sales made by the company on a monthly basis.

This tax is not very onerous, it is established in a staggered table of monthly gross sales values, to give an example those months in which between US$200,000.01 and US$300,000.00 are billed, the tax to be paid would be US$75.00, between US$450,000.01 and US$600,000.00 a tax of US$100.00 must be paid.

In the case of Taxes for Publicity Sign, the label is understood to be the name of the establishment or description, distinctive, the form or title as described in the Municipal Registry or any other way in which the respective taxpayer is distinguished, whether it is natural or legal persons. that any business, company or activity subject to municipal tax is established or has been established, they will pay for a sign as follows:

The publicity signs when they are physical distinctive and are placed on any of the facades of the building, will pay US$. 15.00 per year.
When the sign is a physical sign resting on the ground inside the property, they will pay US$. 30.00 per year..
When the sign is a physical distinctive with a height not greater than 5 meters. Outside the property, they will pay US$. 40.00 per year.

To place the sign outside the construction line, prior permission from the Municipal Works Directorate is required, and it may not be at a height of less than 3 meters. above floor level.

Social Security Regime in Panama

Registration of the company in the Social Security: Any company that carries out for-profit activities in Panama must register with the Social Security, and must report monthly to said Social Security Fund the corresponding worker-employer quotas for the purposes of the different programs provided by said institution.
The part of the contribution corresponding to workers must be retained by the employer with the obligation to deliver it to the Social Security Fund.
The distributions of quotas between employers and workers are in the following proportion:

Professional Risks: Every company must pay a minimum sum for professional risks in accordance with a rate established after an inspection of the company. The premium may range between 0.42% and 7.00% of the total wages paid to workers and in accordance with the activities carried out by them.
Educational Insurance: Every company must pay educational insurance as follows:

Labor Regime in the Republic of Panama:

a) Annual Vacations: The Panama Labor Code establishes one paid vacation per year, at the rate of one (1) vacation day for every eleven (11) days of work.
b) Thirteenth Month: Consists of a special compensation equivalent to one (1) day for every eleven (11) days worked or fraction, whether continuous or interrupted. This compensation is paid by the company in three (3) items, in the months of April, August and December.
c) Seniority Premium: Upon termination of the employment contract, regardless of the cause for termination, the worker who is hired for an indefinite period of time shall be entitled to receive compensation equivalent to one week of salary for each year worked since the beginning of the employment relationship. If less than one year has been worked at the time the employment relationship is terminated, the worker will be entitled to the corresponding proportion.
d) Minimum Wage: Todo trabajador tiene el derecho de devengar un salario mínimo establecido que varía dependiendo de la Región donde se establezca la empresa y la actividad que desarrolla la misma

Operating Licenses:

Operation Notice: Regardless of the type of service to be provided by a company, every company needs to obtain an Operation Notice (old business license) issued by the Ministry of Commerce and Industries in order to carry out business legitimately in Panama.
Companies may register throughout the year, and said registration may be obtained in a period of 5 business days.
It is important to note that, at the time of requesting registration, the company must have a suitable Technical Professional who will have to endorse the application, likewise, it must present a contract with said suitable professional.