Panama Jurisdiction
The Republic of Panama, with an area of approximately 76,900 sq km, is located between Costa Rica and Colombia, forms the narrowest and lowest portion of the isthmus that links North and South America. Panama is famous for its Canal, which joins the Atlantic and Pacific Oceans. With a population of about 3.3 million and due to the importance of the Canal, Panama has excellent telecommunications as well as international airline links. There is a sophisticated banking and financial system together with a major Free Trade Zone. Now firmly established as a democracy, the Country has legal system based on a constitution and is politically stable with a continuously growing economy.
POPULATION
The population of Panama is approximately 3,395,346 million, about 62% of which are in urban areas.
POLITICAL STRUCTURE
The Isthmus of Panama was discovered in 1501 by Rodrigo de Bastidas and Vasco Nuñez de Balboa, who had a leading part in the establishment of Santa Maria La Antigua del Darien in 1510, the first permanent settlement on the mainland of the Americas. In 1513, Balboa led an expedition, in Panama, which discovered the Pacific Ocean. Pedro Arias Davila founded Panama City on 15th August 1519. Panama was a Spanish colony until 1821 when it became part of the Gran Colombia of Simon Bolivar. In 1903, Panama broke its alliance with Colombia and became an independent republic. The executive branch of the Government is at present composed of a President and two vice-presidents, elected for a five-year term by direct election. This year Ricardo Martinelli has being elected as the next President of Panama.
Colon Free Zone
The Colon Free Zone (“CFZ”) is located on the Caribbean side of the Isthmus of Panama near the Atlantic entrance to the Panama Canal. This Free Trade Zone is the largest free zone in the Americas and the second largest in the world after Hong Kong. Created in 1948, the free zone, receives yearly more than 250,000 visitors from all parts of the World. The Colon Free Trade Zone registered transactions for $13,095 million, showing an increase of 12.1% in the first nine months of the year 2008 compared to those of 2007, which totalled 11.685.5 million.
As of November 2008 it has contributed 77.9 million dollars to the economy. While commercial activities generated up to $ 1.938.9 million in transactions from January to September 2008, business operations developed as follows: 6 million 443 thousand U.S. dollars in imports, and 6 million 652 thousand in re-exports. In the year 2007 the CFZ generated $607.6 million in imports and $ 534.7 million in re-exports.
The CFZ offers free movement of goods and complete exemption from tax on imports and re exports. There are no taxes on the export of capital or the payment: of dividends. In addition, there are reduced income tax rates on earnings from re-export sales.
Panama Canal Areas
On December 31, 1999, the U. S. turned over the Panama Canal to Panama’s new Canal Authority. This date marked a new era for Panama. The canal areas, where these bases were located, comprise 233,000 acres of prime real estate and over 7,000 commercial and residential buildings. Although many assets have already been awarded to private companies or groups from all over the world, there still are unique investment opportunities in the tourism, technology, forestry, maritime, real estate, transport and industry sectors.
The transformation of the former Howard air force base, into a special economic area was designed by the Government of Panama with the advisory of the World Bank’s international Finance Corporation (IFC), is an ambitious project to turn this former military base into a Business Centre of the Americas.
The Howard Special Economic Area will have a high impact due to the Free Trade Agreement with the United States, the approval of a program for multimillion expansion of the Canal to increase its traffic capacity, measures to increase the competitiveness of the private sector and the construction of a mega container port in the entrance of the Panama Canal.
On the other hand, Law 41 of 2007 is currently in force creating a special regime for establishment and operation of regional offices of multinational companies. This is located is in the grounds of the prestigious City of Knowledge. This area will be managed by the Multinational Headquarters Licensing Commission. Its main functions are to set the requirements for licensing of such businesses, making the country an attractive centre for multinational coming from around the world, and create mechanisms to facilitate monitoring of their activities.
The Panama Canal
About 70 percent of all trade through the Canal are coming from or heading to the U.S. Traffic is projected to increase two percent per year. Revenues generated by this international waterway for the fiscal year 2008 rounded 2.000 million dollars, while in 2007 the amount was $ 760 million.
In 2006, the Panama Canal Authority announces the construction of a third set of locks. A multi-phase program that includes building additional water reservoirs to increase water availability both for the Canal and the terminal cities; dredging the entrances to the Canal to allow the entrance of larger ships to the ports; similarly deepening Gaillard Cut and Gatun Lake; building the new locks and constructing two bridges over the next ten years. Expansion works have advanced between 7% and 10%.
Ports
The Panamanian maritime industry represents 20% of the Gross Domestic Product and is the fastest growing sector in the national economy. Nearly 14,000 ships transit the Panama Canal each year with more than 192 million tons of cargo and 700,000 passengers and crew on-board. Because of this traffic and modern port facilities, Panama is expected to become the region’s principal multi-modal logistics center in coming years.
During the last 10 years, the evolution of port activities has shown its highest level in growth and development in Panama. In 2008, the Panamanian port system moved 3,935,000 TEUs (container units of 20 feet in length), that is 15.1% compared to same period in 2007.
The Panama Port System is made up of 18 ports of which 11 are managed by the Panama Maritime Authority. The remaining seven ports are managed and operated by private businesses that develop their activities under the supervision of this general directorate.
Panama is on its way of becoming the container trans-shipping center of Latin America and the Caribbean. Law 57 known as the Merchant Marine Shipping Act which came into effect on January 8, 2009, brought several benefits to the administration of the Panamanian Merchant Marine Register. As of October 31, 2008 Panama flag registration topped the list with 8159 vessels.
Panama has 144 routes in world trade. Port operators pay to the National Government nine dollars for movement of each TEU.
Major opportunities for development of new business include: additional ports, shipyards and maritime services such as the storage, distribution and transport of cargo; financial and administrative services, insurance coverage, ship supplies and maintenance, as well as tourism enterprises.
Financial industries
Panama has the most modern and successful international banking center in Latin America. The International Banking Center (IBC) is made up of 90 banks – of these 43, including the two official banks – have a General License, 32 have an International License and seven a Representation License. In addition, there are 14 representative offices. In 2008, growth the banking system total assets was 21.7% while the rate of new loan disbursements grew a 41.5% compared to the other sectors. As of August 2008 banking center’s net income gains amounted 824 million dollars, an increase of 24.5% compared to the 2007 period. By the end of September 2008 credit portfolio increased 19% and deposits 24%, while liquidity rounded approximately 60%. Panama’s new banking law meets the standards of leading financial centers around the world for transparency and regulation. Panama is one of the most secure international offshore centers in the world. In the financial industry, diverse investment opportunities exist in banking, hedge funds, investment capital financing, insurance and reinsurance.
The Panama Stock Exchange is one of the fastest-growing in the region. Since beginning operations in 1990, the local securities market suffered a positive transformation that allowed the widening of the market and increased the number of intermediaries in the first decade of operations. The Market made negotiations of over US$925 millions in titles of the primary market and more than US$200 millions in the secondary market. Panama’s Stock Exchange closed 2008 with 1.932 million dollars trading volume.
LANGUAGE
Spanish is the official and spoken language. English is also spoken widely in urban areas and is used daily in commerce and international trade.
CURRENCY
The Panamanian currency is the Balboa, but the United States Dollar circulates freely at an exchange rate of 1 Balboa = 1 US Dollar.
EXCHANGE CONTROL
None.
TYPE OF LAW
Based on Spanish Civil Law with many Common Law influences, particularly regarding Company Law, which is based on the Delaware Model.
PRINCIPAL CORPORATE LEGISLATION
Corporation Law No. 32 of 1927, Decree No. 130 of 1948, Decree No. 147 of 1996, Law No. 32 of 1978, Decree Law No. 5 of 1997 and Executive Decree 296 of 1997.
TYPE OF COMPANY FOR INTERNATIONAL HOLDING, TRADE AND INVESTMENT
In substance, identical to IBCs. Generally, corporations are incorporated under the Corporation Law 32 of the 1927. Limited Liability Companies and Limited Partnerships are used also.
PROCEDURE TO INCORPORATE
By presentation of the proposed corporation’s signed Articles of Incorporation before a Notary Public who creates a Public Deed for registration at the Public Registry.
RESTRICTIONS ON TRADING
Cannot undertake the business of banking, trusteeship and trust administration, insurance, assurance, reinsurance, fund management, investment funds, collective investment schemes or any other activity that would suggest an association with the banking, finance, fiduciary or insurance businesses.
LANGUAGE OF LEGISLATION AND CORPORATE DOCUMENTS
Spanish and certified English translations.
REGISTERED OFFICE REQUIRED
Yes, must be maintained in Panama at the address of the Registered Agent.
NAME APPROVAL REQUIRED
Name availability should be done in advance or at incorporation.
TIME TO INCORPORATE
Three to five days.
NAME RESTRICTIONS
A name that is similar to or identical to an existing company. Names of well known companies incorporated elsewhere or a name that implies government patronage.
LANGUAGE OF NAME
Names may be expressed in any language using the Latin alphabet. A Spanish or English translation may be requested by the Registrar.
NAMES REQUIRING CONSENT OR A LICENCE
Bank, building society, savings, insurance, assurance, reinsurance, fund management, investment fund, financial companies, trust or their foreign language equivalents.
SUFFIXES TO DENOTE LIMITED LIABILITY
All Panamanian corporations must end with the suffix Corporation, Incorporated, Sociedad Anonima or the abbreviations Corp, Inc or SA. They may not utilize the suffix Limited or Ltd.
DISCLOSURE OF BENEFICIAL OWNERSHIP TO AUTHORITIES
No.
CHANGE OF JURISDICTION
Companies organized under a foreign law may opt to be governed by Panama law and continue their existence as a Panama Corporation, and vice-versa.
SHELF COMPANIES
We have a number of existing companies (both aged and new) for sale. These companies are “clean”; that is to say, they have never traded nor engaged in any transaction whatsoever.
AUTHORIZED AND ISSUED SHARE CAPITAL
The standard authorized share capital is US$ 10,000 divided in to 100 common voting shares of US$ 100 each or 500 common voting shares of no par value. The capital may be expressed in any convertible currency. The minimum issued capital is either one share of no par value or one share of par value.
CLASSES OF SHARES PERMITTED
Non-voting shares, common shares, preferred shares, bearer shares and registered shares, par value and no par value shares.
BEARER SHARES PERMITTED
Yes.
TAXATION
A Panama Corporation does not pay any tax on its worldwide profits.
DOUBLE TAXATION AGREEMENTS
None.
LICENCE FEES
Annual Tax of US$ 250 is payable in the first year. From there on there is an annual fee of US$ 300.00
FINANCIAL STATEMENT REQUIREMENTS
No requirement if income is of non-Panamanian sources.
DIRECTORS
Both corporations and natural persons may act as directors and the minimum number of directors is three. They may be of any nationality and need not be residents of Panama. Panamanian companies are also required to appoint a minimum of three officers (president, secretary and treasurer) who may also be the directors.
COMPANY SECRETARY
A company secretary must be appointed, who may be a natural or corporate person. The company secretary may be of any nationality and need not be a resident of Panama.
SHAREHOLDERS
The minimum number of shareholders is one.