Attorneys at Law September 2nd 2011 Panama City Panama Background Jacqueline Escobar Graduated from Duke University Masters in Law International Commerce ID: 672717
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INVESTING IN PANAMA
Escobar, Della Togna, Icaza & JuradoAttorneys at Law
September 2nd, 2011 – Panama City, PanamaSlide2
BackgroundJacqueline Escobar – Graduated from Duke
University – Masters in Law (International Commerce Expert)Marisel Della Togna
– Former Deputy Director of Panamanian Internal Revenue Service (Tax Consultant)
Marisel Jurado – MBA and Masters in
Accounting
(
Corporate Law Expert)Maruquel Icaza – Graduated from American University, – Former Vice Consul Panamanian Embassy at Washington, D.C. (Immigration Consultant)Slide3
Panama´s OverviewSlide4
Reasonable life here on about $1,200 a month.Comparative advantagesPanama´s Economy: - Dollarized economy.
- Services based economy (banking, commerce, transportation, ports and tourism).- The country's industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, textiles and more. Slide5
HEALTH CARE AND INSURANCEInfrastructure (e.g. Punta Pacífica Hospital which is affiliated to the John Hopkins Hospital in the US)Low cost medical services and health insurance premiums
Recognized local and international insurance companies (Blue Cross Blue Shield)Your health insurance policy can cover you for hospitalization and/or medical expenses. You can obtain Local or International Coverage.By Law, all vehicles have to be insured.Slide6
INCORPORATION IN PANAMASlide7
The most common legal instruments
for Incorporations in Panama:1- Panamanian Corporations (Used to
do business in Panama or
to
protect assets such as properties, any legal activity)2- Private Interest Foundation (Asset Protection)Slide8
PANAMANIAN CORPORATIONS
Law 32 of 1927 IDENTITY OF DIRECTORS
Nationals or foreigners may establish a corporation• SHARE STRUCTURE
Bearer and nominative shares are also permitted.
A single person or a corporation may own all shares.
•
CORPORATE DIGNITARIES & RESIDENT AGENTPanamanian law requires a President, a Secretary and a Treasurer, and a local resident agent. DURATION AND DOMICILE OF CORPORATION Law 2 of 2011
KNOW YOUR CLIENT – DUE DILIGENCESlide9
Steps to Set Up a CorporationCheck
name availability in the Public Registry.
Preparation of legal documentation (i.e. corporate by-laws).Upon
registry, the
Resident
Agent prepares share certificates and legal books for the corporation.The annual corporate tax is of US$300Length of time for organizing a company: 3-5 daysSlide10
Doing Business in PanamaSet up a companyObtention of tax
payer I.D. number (R.U.C.)Obtain a Commercial License to
operate in Panamá (Aviso de Operación – Retail activities restriction by Law)Register
the company in the Municipality Office (Municipal
Taxes
)
Hire personnel / Labor contracts sealed in the Ministry of LaborRegister personnel in the Social Security of Panama (The rate paid is of 12% employers – 8% employees) Slide11
ASSET PROTECTION PRIVATE INTEREST FOUNDATIONSSlide12
Private Interest FoundationLaw 25 of 1995
These private interest foundations shall not be profit oriented.• They may engage in commercial activities in a non-habitual manner.
• The founders must select a name to identify the foundation.• The objectives, duration, domicile, and board of the foundation must also be indicated, along with the beneficiary or beneficiaries.Slide13
Private Interest FoundationFoundation charter must be notarized and registered as trust deed does.
The private interest foundation is very similar to a trust in its operation, but unlike the trust, there is no need to transfer the assets to a third party.When the assets are from outside the territory of Panama, no taxes are levied when these assets (whether movable or immovable, shares, bonds, and others) are transferred.Slide14
Private Interest FoundationIt
may be established for
the benefit of a person or persons, a family
, or a
specific
social
purpose.PIFs are a viable solution for estate planning, providing privacy, and protection of assets.Slide15
Private Interest FoundationYour Foundation
books are mantained 100% private and confidential by
law.The Beneficiaries are not registered in the Public
Registry.Beneficiaries can be
appointed
through a Private letter of wishes written and signed by the Protector.The PIF does not require Paid
In CapitalSlide16
IMMIGRATIONSlide17
PENSIONADO PROGRAM Law No. 9 /June 24, 1987Pension income of at least
US$ 1,000.00 per month and an additional US$ 250.00 for each dependent. Private and public pensions apply (retired by the government, social security or private pension programs) Your application must be processed by a Panamanian attorney through a Power of attorney.
Indefinite legal residence statusDoes not grant you a Passport nor a Panamanian I.D. CardSlide18
Private Income Retiree Visa
This visa has an income requirement of US$ 850.00 monthly.Approximately US$350K (Time deposit) with current interest rates.The time deposit has to be free of any liens.This visa has to be renewed every five (5) years.
Grants Special Panamanian Passport but not Panamanian I.D. Card Slide19
IMMIGRANT VISA AND RESIDENCE PERMIT TO FOREIGNERS WITH ECONOMIC SOLVENCY The Self-Economic Solvency Visa offers three (3) different investment options to qualify for residency status in the Republic of Panama:Investment Option A: Requires a minimum of US$300,000 in a three (3) year time deposit (or "certificate of deposit" or "CD") without liens at any licensed bank in Panama.
Investment Option B: Requires a minimum of US$300,000 in a titled property (real estate) in Panama without any liens.Investment Option C: Requires a time deposit and property, for the amount of US$ 300,000 for both investments.
Slide20
General Documentation RequiredRegistration Process is the first step. To register at the Immigration Office, the applicant must go in person with his original passport and 2 pictures.Power of attorney (we provide it)Health certificate issued by a Panamanian Doctor.
Police report.Complete passport copies (all pages including cover), notarized in Panama (we take care of that). Six (6) photographs
Sworn statement about personal background. (We provide the form)All document coming from a foreign country needs to be authenticated by a Panamanian Consulate in the U.S or by Apostille. If it is a private document, it has to be notarized before sending it to the Consulate.All documentations requires to be translated into Spanish by a Panamanian authorized translator. Slide21
OPENING BANK ACCOUNTSSlide22
BANKING REGULATIONS A foreigner can have a Panama Bank Account. The bank account minimum is $1000, for both checking and savings accounts, in USD or Euros.
Article 194 of this law specifically enshrines the client’s right to privacy and confidentiality in its relationship with the bank with respect to third parties, and Article 110 makes explicit the bank’s obligation to maintain this confidentiality. More than 75 banks are stationed in Panama, 36 of them with international (offshore) licenses. The financial sector represents a full 8% of the GDP, and employs 17% of the labour force. Slide23
BANK ACCOUNT REQUIREMENTS- PERSONAL ACCOUNT AND CORPORATE
ACCOUNT- Please note that requirements can vary from Bank to Bank.
Requirements to apply for a personal account (deposit) – Basic requirements.
Personal interview with Branch Manager – Main Branch
Required documents:
- Passport – original- Bank reference letters (preferable two)
- Personal reference letters (from a known friend /customer with residence in Panama )
- Business reference letters (job, accountant, lawyer or broker). (Two in total).
Internal bank papers will need to be signed and completed by applicant.
Application documents will be evaluated by our Compliance Office
Bank reserves the right to request additional information if considered necessary
Brief description of background and current activities.Slide24
Requirements to apply for a deposit account in the name of a corporation (local) with foreign directors and/or signers – Basic requirements
Personal interview
/ bank formsCopy of articles of incorporation and its amendments (if applicable)
Legal
I.D. for
all directors of corporation are requiredReference /Presentation letter from lawyers in Panama.Bank reference letters
Business/commercial letters of reference of corporation and or directors and signers to account
Validation Certificate of Corporation issued by the Registry Public in Panama (recent)
Brief description of background and current activities of the authorizing signatures.Slide25
PANAMANIAN TAX LEGISLATION& BENEFITSSlide26
1. INCOME TAX Individuals Companies
2. ALTERNATIVE METHOD FOR CALCULATION
Companies with taxable income of more than 1.5 millions pay income tax on the greater of applying the traditional method (25%) or 4.67% of total net revenues2.1 ADVANCE INCOME TAX - Companies that earn taxable income
1% of the
monthly
taxable income M A J O R T A X E S
Up
to
11,000
O%
11,000 – 50,000
15%
+ 50,000
USD5,850
for
the
first
50,000 and
25% of
the
surplus
PERIOD
TAX
2011
27.5%
2012
25%Slide27
3. TRANSFER OF MOVABLE GOODS & SERVICES TAX / VAT (7%) Exceptions – (10% & 15%)4. SELECTIVE CONSUMPTION TAX (varies depending on the goods such as cars, cigarettes, liqueurs, etc.)5. COMMERCIAL OR INDUSTRIAL LICENSE TAX
2% of the company’s total capital , with a minimum payment of 100 and a maximum of 60.000 INCOME TAX RELATED TO REAL ESTATE Habitual Business
Brand new - Progressive TableUsed – general income tax tariffs as individuals or companiesNon-habitual Business a. Income tax at a rate of ten percent (10%) on taxable income. The taxpayer is obliged to pay a sum equal to 3% of the total value of the transfer or the cadastral value, whichever is greater
TRANSFER OF REAL ESTATE TAX
a. Property vs. Panamanian Corporation (2%)Slide28
PROPERTY TAXa. Progressive tableb. 1% of land value for condos (if improvements are exempt)9. CAPITAL GAINS TAX (10% - 5%
witholding)10. IMPORT DUTIES (varies depending on the good – in many cases ISC supplanted import tax)11. BANKING & FINANCIAL INSTITUTION TAX / Insurance Tax (FECI)
12. OTHERS: Oil Tax, Municipal Tax, Vessel Flag TaxSlide29
INCOME TAXIndividuals earning income in Panama, who stay more than 183 consecutive or alternate days, must pay income taxSums derived from income generated in Panama that are remitted abroad pay withholding tax of 27.5 % (for companies) or 15% (highest rate for indivIduals) on 50% of the total income
Foreign Income non-taxableInvoicing from a company in Panama To conduct transactions in Panama that have its effects abroad (offshore)To distribute dividends generated from foreign income or from companies that do not require commercial license
TERRITORIALITY PRINCIPLESlide30
T R A N S F E R S A B R O A D
Interest, commissions and others credited or remitted abroad, pay income tax at regular rates over 50% of remitted sum, withheld from the total amount paid to the foreign creditor.The beneficiary of the
service may deduct the payment remitted from its taxable income.Slide31
Foreign source income is not subject to tax.
Example: company has administration and accounting in Panama; operations are abroad.Co. established in CFZ or special regimes (export & re-export) sales – distribution of such earnings.
G E N E R A L P R I N C I P L E S O N D I V I D E N D T A X E S
NON-TAXABLE
Distribution of such earnings derived from
its internal sales in Panama
. Dividends: Nominative 10% Bearer 20%TAXABLESlide32
R E A L E S T A T E R E L A T E D T A X E S
Real Estate Tax
Progressive
Table / 1%
condos
Transfer Real Estate Property Tax
2%
Capital Gains
Tax
3%Slide33
TAX ABATEMENT – REAL ESTATE
RESIDENTIALS:
COSTS
FROM
UP TO
YEARS
UP TO
100,000
15
MORE THAN
100,000
250,000
10
MORE THAN
250,000
5
INDUSTRIAL,
COMMERCIAL
AGRO – INDUSTRIAL:
10Slide34
PANAMA AS TAX HAVEN
Panama has triumphed in the process of not being considered a tax haven. Finally, after a successful negotiation and subscription of 12 double taxation agreements and the implementation of deep changes within the internal revenue and tax administration, the OCDE introduced our country into the so called “white lists”. Slide35
PENSIONADO PROGRAM BENEFITS
Selective Consumption Tax (ISC) of 5% plus 7% Service Tax on cars (*)Import tax exemption for households up to US$10,000
Import tax exemption for household goods 25% discounts on utility bills 25% discount on airline tickets and 30% on other transportation 15% discount on loans made in your name 1% reduction on home mortgages for homes used for personal residence (The house has to be purchased at your name not a company or SA) 20% discount on doctor's bills 15% on hospital services if no insurance applies 15% off dental and eye exams
10% discount on medicines 20% discount on bills for professional and technical services
50% discount on entrance to movie theaters, cultural and sporting events
50% discount at hotels during Monday to Thursday, 30% on weekends, among others.
(*) Law 33 of 2010Slide36
COLON FREE ZONE (ANNUAL GROWTH 15%)
EXPORT PROCESSING ZONESPANAMA-PACIFIC SPECIAL ECONOMIC AREA ($400M)PETROLEUM OIL FREE ZONES
CALL CENTERS (14,000 JOBS)CITY OF KNOWLEDGE AND THE INTERNATIONAL TECHNOLOGICAL PARKTOURISMPENSIONADO PROGRAM
SPECIAL
TAX
REGIMES
Slide37
TIEA PANAMA - USIn effect since
April 20111. Includes the following taxes imposed by the United States:(a) Federal income
taxes;(b) Federal taxes related to employment;(c) Federal estate and gift taxes; and(d) Federal excise taxes.2. Includes the
following taxes imposed by the Republic of Panama:(a) Income
Tax
(b) Real Estate Tax(c) Vessels Tax(d) Stamp Tax(e) Notice of Operations Tax(f) Tax on Banks, Financial and Currency Exchange Companies.(g) Insurance Tax(h) Tax on the Consumption of Fuel and Oil Derivates
(
i
) Tax on the Transfer of Movable Goods and
the
Provision
of
Services
(j) Tax on the Consumption of certain Goods and
Services
(k) Tax on the Transfer of Immovable Goods
3.
Under section 274(h) of the U.S. Internal Revenue Code, an individual may deduct from income expensesSlide38
Escobar, Della Togna, Icaza & Jurado47th Street and Aquilino de la Guardia Ave., The Ocean Business Plaza, Suite 1003
Panama City, Panamawww.edtij.com mjurado@edtij.comTel.(507)340.63.24Fax. (507)340.63.25