Panama Offshore Company

In-Depth Information about Panama

LocationPanama Offshore Company

Bordered by Colombia to the west, Costa Rica to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south, Panama is strategically situated on the isthmus connecting North and South America.

Panama took control of the Panama Canal in 2000, which connects the Atlantic Ocean and the Caribbean Sea to the North of the Pacific Ocean. Panama’s 75,515 km2 land size makes it slightly bigger than the province of New Brunswick in Canada and slightly smaller than the state of South Carolina in the U.S.

Political Structure

At the close of the 21-year military rule, Panama has smoothly finished four exchanges of power to contradicting political groups, thus giving footing to a strong and stable democracy. Two major parties (and several smaller parties) control the political landscape, many of which are propelled by individual leaders more than belief systems.

Panama’s political structure occurs in a system of a presidential representative democratic republic, whereby the president of Panama is chief of state, head of government and of a multi-party framework. The government exercises executive power while the power to enact laws is assigned to both the administration and the National Assembly. The court system is separate from judicial and legislative branches.

Voting for national elections are general and compulsory for all Panamanian citizens 18 years and up. National races for the legislative body and the judicial branch occur every 5 years. The head of state has the power to designate the members of the judicial body. Many minor parties are represented in Panama’s National Assembly due to it being proportionally represented by fixed electoral districts.

Representing the four-party Alliance for Change, conservative supermarket mogul, Ricardo Martinelli, was elected in a massive landslide victory, winning 60% of the popular vote at the May 2009 presidential election against the left leaning Democratic Revolutionary Party (PRD) nominee, Balbina Herrera. Martinelli’s business credentials attracted voters jaded by the slowing economic growth stemming from the world financial crisis. His victory was an exception to a trend of victories for socialist Latin American candidates. Martinelli’s five-year term ends on June 30th, 2014.

Economy and Infrastructure

Panama’s economic performance is, year after year, better than nearly every other Latin American country, and it is one of the fastest growing countries in the Americas. For 40 years Panama’s inflation rate averaged less than 2% per year — unheard of south of the U.S.

Annual growth continues at a rapid clip of around 10% per annum and, even during the recent economic crash of 2008, never dropped below 5%. GDP expanded 7.6% in quarter two of 2013 (as compared to Q2 in 2012). At an annual growth rate averaging 9.3% from 2010 to 2013, Panama achieved a record high of 12.2% in June of 2011 and an all-time low of 6.2% in the same month in 2010.

Economically influenced by the legendary canal that couples the Pacific and Atlantic Oceans, as well as its business-friendly regulations, Panama has a robust service industry. Accounting for upwards of 75% of GDP, Panama’s well-developed service sector is the foundation for Panama’s dollar-based economy. This sector includes operations of the Panama Canal, the Colon Free Zone, banking, insurance, logistics, container ports, flagship registry, and tourism.

Panama’s booming logistics and transportation services segments, together with aggressive infrastructure development projects, lead the economy to continued high growth in 2012. Contributing about 10% of GDP in both 2011 and 2012, foreign investment has helped to sustain strong growth in Panama.

Panama has the largest banking sector south of Miami. Panama banks average 60% liquidity — astoundingly high. In other words, in the hypothetical event of a bank run 60% of all deposits could be withdrawn from banks before any bank assets would need to be liquidated. Only offshore banking jurisdictions such as Singapore and Hong Kong can match this.

The Panama Canal Expansion Program will more than double the Canal’s capacity, enabling it to accommodate ships that are too large to traverse the existing canal. The major users of the canal are the U.S. and China. Begun in 2007 and due to be completed by 2015 at a cost of approximately $5.3 billion – about 10-15% of current GDP, this ambitious reconstruction project continues to boost economic growth in Panama. As of mid-August 2013, the expansion project is 64% complete.

Started in 2007, a new city called Panama Pacifico is being built on the old U.S. Air Force base of Howard. The ambitious 40-year, 3,450 acre, mixed-use real estate development project is one of the largest in the world.

Aimed at attracting foreign investment, several global corporations have already moved into Panama Pacifico, including Caterpillar,3M, DELL, BASF,VF and Samtec. Due to a Special Economic Area law, Panama is highly attractive to multinational corporations looking to set up regional headquarters in Central America. Special tax, labor, and legal incentives have been granted to companies set up in these zones.

Designed to improve public transportation options throughout Panama City, the government is currently also building a major metro system to cut through principal parts of Panama City. Estimated at $1.2 billion and scheduled for completion in 2014, this mega-project is also helping to further economic growth.

In October of 2012, the U.S.-Panama Trade Promotion Agreement was put into effect. Panama also achieved removal from the Organization of Economic Development’s (OECD) gray-list of tax havens by signing various double taxation treaties with other nations.

If you’re looking for a country of residency, Panama boasts one of the most attractive programs for foreigners on offer anywhere in the world. As a Panama “pensionado”, you are eligible for discounts on just about everything you buy. With only $1,000 USD needed in foreign-earned income (from either a social security or pension), Panama’s Pensionado program is the world’s benchmark of retirement programs.

In 2012, Panama magnified an already attractive list of programs for obtaining residency with its “favoured nations” option, making it easy for nationals of more than 47 countries, including the US, Canada, New Zealand, Australia, UK and almost all the EU countries, among others.

This was designed in recognition of the possibility that Panama’s stellar growth could be hampered by a local skills shortage. A local company with bank account with a minimum $5,000 deposit (plus $2,000 per family member), is all that is required and an intent to pursue a profession or business. Alternatively, a local job offer will also qualify you for this visa.

Despite the strong economic performance in recent years, for most Panamanians this has not translated into broadly shared prosperity. With the second worst income distribution in Latin America, Panama has about 30% of its population still living in poverty. Between 2006 and 2012, poverty was reduced by only 10%, while in 2012, unemployment slid from 12% to 4.4% of the labor force.

Looking forward, to maintain the current pace of growth, Panama’s government will need to continue to address the shortage of skilled workers, corruption and lack of judicial independence.

Population, Language and Culture

According to the 2013 census, the Republic of Panama has a population totaling 3,661,868. Seventy percent of Panamanians are mestizo (mixed Amerindian and white), 14% are primarily black and mulattoes (West Indian), 10% are white, and the remaining 6% are Amerindian. Some East Asians like the Chinese are less than one percent.

Panama has a surprisingly high literacy rate. About 92% of the population greater than 15 years of age can read and write. Approximately 93% of Panamanians speak Spanish, the country’s official language, as their native tongue. About 14% of the population also speaks English, either as a first or second language, particularly many professionals, business people and governmental employees.

The culture, customs, and language of Panama are predominantly a mix of Spanish and Caribbean. Panama has a very diverse population, which is largely of mixed Spanish, Native American, and African descent/ancestry.

Several ethnic groups that migrated to Panama from the 1800s to the 1900s make up Panama’s colorful tapestry. These include descendants of British, Irish, Dutch, French, German, Italian, Portuguese, Polish, Russian, Ukrainian (of which a large number are Jews), U.S. Americans and Caribbean (esp. Afro-Caribbean) nationalities. Thousands of Barbadian and Jamaican workers played a major role in the construction of the Panama Canal. The immigration of Arabs and Asians was also significant, in particular Chinese, Lebanese, Palestinians, South Asians (from India and Pakistan) and Syrians.

Between 1980 and 2012, Panama’s Human Development Index (HDI), which represents a broader definition of well-being and provides a composite measure of health, education and income, rose by 0.5% annually from 0.634 to 0.780 today. This gives Panama a rank of 59 out of 187 countries with comparable data, and positions Panama above the average for the Latin America and Caribbean region.

Exchange Control

None. There are zero exchange controls in Panama and there is no central bank. The U.S. dollar is used as its primary currency, that is, other than for very small transactions where the Panamanian Balboa may be used (which is at parity with the dollar).

Type of Law

Panama law is a very unique blend, centered on Spanish Civil Law, but with many influences from Common Law, particularly with respect to Company Law (based on the Delaware model).

Principal Corporate Legislation

Panama Corporation Law 32 of February 26, 1927 (Official Gazette No. 5067 of March 16, 1927).

Panama’s corporate law is founded on legislation from Delaware and New York (Corporation Law No. 32 of the 1927 Commercial Code, Decree Law 5 of 1997 and Executive Decree 296 of 1997), but written in the form of Spanish Civil Law.

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Benefits of Panama Offshore Company FormationsPanama Offshore Company

– Panama’s territorial-based tax system does not levy an income tax as long as your income is earned outside the Republic.

– Panama offers the most cost-effective, and by far and away the easiest residency program in the world, with its new “favoured nation visa”. Also popular is its long standing “pensionado” visa for retirees.

– Government investment incentives slash tax rates and fees for entrepreneurs.

– Panama’s economic growth rate is among the highest in the hemisphere, surpassing ten percent in 2011 and 2012.

– Exchange risk is minimized since Panama’s currency is the US dollar. This makes it highly attractive to American citizens and provides the foundation for one of the most stable economies in Latin America.

– Panama has a high level of privacy protection for all non-US foreigners doing business lawfully in Panama.

– Panama leads the world as the top yacht and ship registration jurisdiction.

– Panama’s advantageous Private Interest Foundations (PPIF) are similar but much more affordable than those offered by Liechtenstein.

– With an extensive list of national and international banks, Panama continues to be a robust global banking region.

– Panama is an independent jurisdiction and has a stable, democratically elected government (voting in Panama is mandatory).

– Outside of Panama City, Panama remains a relatively affordable place to live. In places like the rainforest town of Santa Fe and the beach towns in the Azuero peninsula, a typical couple can live comfortably for as little as $1,200 per month.

– Panama’s diverse lifestyle destinations—from idyllic tropical islands and vast jungles to a booming metropolis with vibrant cultural activities—make it one of the best places to spent quality time.

– Panama is a perfect hub from which to travel throughout Latin America. The capital city’s international airport is growing by more than 50% and will provide routine flights to every country within South and Central America.

– Panama boasts a lush, tropical climate all year round.

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Why Choose Panama as an Offshore Tax Haven

As an offshore jurisdiction, Panama offers excellent advantages. Panama continues to top the list of the best places to live, particularly for expats looking for a lively, modern country in which to retire, with all the comforts of home and the idyllic allure of the tropics.

The ever-increasing creation of jobs in Panama’s thriving economy leaves the country longing for a larger and better-trained workforce than Panamanians alone can satisfy. Looking to attract the international community, the government has developed incentives for entrepreneurs, multinationals and expats to satisfy this growing demand.

Panama has very favorable laws for establishing offshore legal entities for sovereign individuals from countries around the world.

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Panama Offshore Company

Overview of a Panama Offshore CompanyPanama Offshore Company

A Panama Offshore Company, or International Business Corporation (IBC) as they are commonly referred to in other jurisdictions, is one of the longest standing offshore formation jurisdictions in the world. Established in 1927, it has since registered some 400,000 corporations and remains one of the premier destinations for offshore business formation. The Panamanian offshore model has since become the world standard due to its flexible formation structure, methods to ensure customer privacy and supportive legal framework.

Panama is strategically located as a bridge between the Americas and has become an international center for trade, finance, and baking services. Thanks to a stable political environment, the Panamanian economy has achieved rapid growth over the last two decades due to its open business environment, free trade zones, and low tariffs that have encouraged investors and business enterprises in the country. Panama remains one of the best places to due business due its financial opportunities, low risk investments, and thriving banking center.

A Panama Offshore Company gives individuals and corporations the ability to incorporate in a country that has a long reputation for financial and offshore excellence. Offshore formation in Panama offers complete confidentiality, attractive tax-free opportunities, a favorable legal environment, and a supportive banking infrastructure all of which account for why Panama is one of the premier destinations for offshore corporations.

Advantages & Top Uses of an Panama IBC

Advantages of a Panama Company

Anonymous Ownership

Panama corporations share certificates can be issued in Nominative or Bearer form (Bearer Shares are an anonymous form of ownership), with or without par value.

No Reporting Requirements or Taxes

Panama does not impose any reporting requirements or taxes for non-resident Panamanian corporations.

No Piercing the Corporate Veil

Panama does not allow “piercing the corporate veil”, so your corporate books are maintained 100% private and confidential by law.

Nominee Directors

We offer our clients the optional service of using our “Nominee Directors” for their corporation(s). For purposes of confidentiality, most of our clients prefer that we provide nominee directors/officers for their corporations, since unlike IBC’s set up under Belize, Nevis or other British Commonwealth tax haven corporate laws, directors have to be in the public registry.

When we appoint nominee directors for the entities that we establish for our clients, we always provide our clients with pre-signed, undated letters of resignation from the directors so that our client can replace those directors at any time, without in any way being dependent on our law firm.

Favorable Incorporation Laws

Panama offers the most favorable and most flexible incorporation laws available in the world.

Strict Privacy Laws

Panama continues to maintain what we consider to be the most solid banking and corporate book secrecy laws in the world, which are engraved in its’ constitution.

With Britain’s proposed regulation for removal of bank and corporate book secrecy in the UK offshore territories, plus considerable dilution of privacy laws in jurisdictions, such as Bahamas, Antigua, St. Vincent etc., it is clear that Panama remains the most secure offshore financial center

In Panama, privacy and confidentiality are not only respected, but also vigorously protected by constitutional law. Panama offers the best bank secrecy and corporate book secrecy laws in the world.

No Sharing of Information Treaties

Panama has no mutual legal assistance treaties (MLAT’s) for sharing of banking information with any other nation and does not recognize court rulings from other countries.

Panama Offshore Company

Stable Government

Panama has what is considered by government analysts to be the most stable government in all of Central or South America.

Tax Benefits

– No tax reporting requirements

– No income tax

– No capital gains tax

– No sales tax

– No tax on issuance of corporate shares

– No tax to shareholders

– No stock sale or transfer tax

– No capital stock tax

– No property tax

– No estate tax

– No gift tax

– No stamp tax

– No succession tax

– No inventory tax

Top Uses of a Panama Offshore Company

Panama has a supportive legislative and banking environment making incorporation procedures both easy and flexible for many different business activities. An offshore company can be made for any legal purpose and for any legal activity, including but not limited to:

– Offshore savings and investmentsPanama Offshore Company

– Private Interest Foundations

– Forex and stock trading

– E-commerce

– Professional service company

– Holding Company

– Licensing company

– Internet services

– Asset protection Company

Key Corporate Features [Chart] of a Panama Company

Panama Company Corporate Details
General
Type of Entity Limited by Shares
Type of Law Civil Law System
Governed by General Corporation Law of 1927
Coded Bank Accounts Law 8 of 1959
Commercial Code Law 17
Registered Office in Panama Yes
Shelf company availability Yes
Our time to establish a new company 3 days
Minimum government fees (excluding taxation) US$250
Corporate Taxation No
Access to Double Taxation Treaties Yes
Share capital or equivalent
Standard currency Legal tender is the US dollar.
Panamanian Balboa (official currency)
PAB fixed exchange rate of USD $1.00 = PAB 1.00
Permitted currencies Any
Minimum paid up No minimum
Usual authorized USD $10,000 divided into 100 shares of $100 each
Bearer shares allowed Yes
No par value shares allowed Yes
Directors
Minimum number 3 Directors/Officers (President, Secretary and Treasurer)
Local required No
Publicly accessible records No
Location of meetings Anywhere
Corporate directorship allowed No
Shareholders
Minimum number 1
Publicly accessible records No
Corporate shareholder allowed Yes
Location of meetings Anywhere
Company Secretary
Required Yes
Local or qualified No
Accounts
Requirements to prepare No
Audit requirements No
Requirements to file accounts No
Publicly accessible accounts No
Recurring Government Costs
Minimum Annual Tax / License Fee USD $250
Annual Return Filing Fee USD $350
Other
Requirement to file annual return No
Migration of domicile permitted Yes

 Panama Offshore Company

Articles of Incorporation Requirements

– Name of the corporation

– Name and domicile of the subscribers of the corporation

– Corporate objectifies

– Corporate Capital

– Duration of corporation

– Name and address of Directors and dignitaries

– Name and address of the registered agent

Panama corporations must have two subscribers present at the public registry in order to be incorporated. The subscribers are the individuals from our law firm that appear at the Public Registry with the articles of incorporation to incorporate the corporation.

By law, the subscribers have a right to own one (1) share of the corporation. As soon as the corporation is established, the subscribers sign a document where by they resign their rights to one (1) share of the corporation. This document is provided to our client along with the other corporate documentation.

Taxation of a Panama Company

A Panama Offshore Company enjoys a variety of tax exemptions that offer individuals and corporations a number of savings, including:

– No tax reporting requirements

– No income tax

– No capital gains tax

– No sales tax

– No tax on issuance of corporate shares

– No tax to shareholders

– No stock sale or transfer tax

– No capital stock tax

– No property tax

– No estate tax

– No gift tax

– No stamp tax

– No succession tax

– No inventory tax

Corporate Details of a Panama Company

Required Capital

No minimums

Financial Statements Required

A Panama Company is not required to file audited financial statements annually with the Financial Services Commission.

Company Secretary

The appointment of a company secretary is mandatory

Directors

A panama offshore Company must have a minimum of (3) three Directors (President, Secretary and Treasurer)

Powers of the Company

Companies incorporated in Panama have equal power as that of a natural person.

Registered Office Required

Every Panamanian corporation must have a registered office

Local Presence

There are no mandatory local presence requirements

Language of Name

The name of the company may be in any language

License Fee

There is an annual fee of US$350 with a one time registration payment of US$250.

Name Restrictions

The name of a Panama Company must include one of the following legal endings: Incorporated, Corporation, Sociedad Anonima, Inc., Corp., S.A.

Shareholders

There must be one (1) shareholder, either and individual or a corporate body, issued one share valued at US$100

Corporate Meetings

Meetings can take place anywhere in the world

Double Taxation Agreements

Panama has signed twelve (12) Double Taxation Agreements with Barbados, South Korea, Spain, France, Italy, Luxembourg, Mexico, The Netherlands, Portugal, Qatar, Singapore and the United States of America.

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Panama Financial Services CompanyPanama Offshore Company

A Panama Financial Services Company is a special type of Panama Corporation (IBC) that has been approved for a special license by the Panamanian Ministry of Commerce.

Known as an “Aviso” (Operational Status), it grants these companies with the ability to transact certain financial operations that do not require a more stringent regulated license.

More importantly, it provides some sort of documentary evidence of the ability, under Panama law, to conduct the services defined in the document.

Benefits of a Panama Financial Company

– These Licensed Panama Corporations have proven particularly popular for those looking to set up offshore financial services companies that handle third-party funds for providing electronic payments services and other related payment processing activities.

– More and more, banks are requiring companies to show some form of license to be able to routinely handle third party funds. The risk in engaging in a payment services type of business without such a license is substantial, as one risks having the account closed or worse, having funds frozen.

– These financial services companies can work very effectively with other foreign structures – perhaps as a way to outsource services offshore for tax purposes and/or to provide additional services to clients of a company in another jurisdiction (which might have an issue with a local company offering such services).

Things to consider

Virtual Office

 In Panama, it is required to have a place of business other than the company’s legally registered office address. This means, at a minimum, having a virtual office with a shared receptionist, a telephone in your company name with fax and mail/fax/phone forwarding service.

Panama Offshore Company

Taxes

Having a legitimate place of business also means that the local “Municipio” (city council) will expect to collect its monthly tax as it does from all local businesses. Currently, the monthly tax fee is $20, subject to their assessment. Other than this the Panama Financial Services Company will still be considered “non-resident” for tax purposes.

This is the only annual compliance requirement to maintain this type of company in good standing, along with the normal annual company renewal payment of government franchise tax and resident agent fees of $550 (Nominee director fees are $350, if selected).

Panama Offshore Company

License Restrictions

Bear in mind, these special licenses DO NOT allow the Panama Corporation to engage activities such as:

– Securities broker-dealer activities including investment funds, managed trading etc.

– Savings and Loan (financiera)

– Fiduciary (trust company) services

– Any banking services including debit cards which in Panama only a bank can provide

– Cash money transmittal services or cambios (e.g. bureau de change)

These services are regulated differently by the Panamanian government and all require a more stringent type of license, with minimum paid-in capitalization and public audit requirements. Also required in Panama are local directors and a local office with staff, although some of these licences (with the exception of banking) are available in other jurisdictions without a physical presence.

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