UK – CENTRAL AMERICA Getting - PowerPoint Presentation

Slide1

UK – CENTRAL AMERICA

Getting

the

right

legal

advice

Slide2

Regional

Generalities

Geographic

Region

:

571.202 km21Population: 54.16 millions of inhabitants.Nominal GDP :$ 244,053millions

Including

: Belize, Guatemala, El Salvador, Honduras, Nicaragua, Costa Rica,

Panama

and

the

Dominican

Republic

Slide3

Competitive

advantages of the Region

Open MarketsSolid Banking SystemsQuality of Local ProvidersTransfer of technologies and FDIAvailability of Financial Services Quality of airport infrastructureRegulations that favor Foreign Investment

Source

: Global

Competitivity

Report

2013-2014, WEF

Slide4

Basic Indicators of the Region

INDICATORSBelizeGuatemalaEl SalvadorHondurasNicaraguaCosta RicaPanamaa Dominican RepublicTotals and %GDP at current prices (US$ millions)1,49349,895.923,844.217,968.810,517.645,127.336,252.559,945.00244,053GDP growth (constant prices in %)5.3% (app. by 2012)3,2%1.3%3.5%5.20%5.1%10.7%3.90%4.77%GDP per capita (in US$)8,700 (app. by 2012)3,315.343,796.852,268.791,758.809,421.1510,126.45,802.625,648.74Total Population (millions of inhabitants)0.34(app. by July 2013)15.056,287,925,984,793.5810.1654.16Labor Force (millions of persons)0.125.033.234.052.542.411.744.5423.66Foreign Direct Investment (US$ millions)194.2(app. by 2012)1,063.9257.61,058.7858.82,2002,822.93,771.1012,227.2Foreign Debt (US$ millions)1,017.8 (app. by 2012)6,308.98,050.33,646.84,289.45.56910,751.213.8952,503.00

Source: “Indicators”, Strategy & Business Magazine, Edition No. 165, September-October , 2013World Bank : www. worldbank.orgWorld Factbook 2012 : www.cia.govCEPAL :http://www.eclac.cl/ Central Bank of Belize: www.centralbank.org.bz

Slide5

Indicators

(Amounts in US$ millions)BelizeGuatemalaEl SalvadorHondurasNicaraguaCosta RicaPanamaDominicanRepublicTOTAL C.A.Foreign CIF Imports468.611,247.57,573.76,784.94,080.713,055.69,595.317,761.070,567.3Foreign FOB Exports290.485,340.33,354.63,032.71,872.58,515.4660.89,069.132,126.88Trade Balance178.155,907.24,219.13,752.22,208.24,540.28,934.58,691.938,431.45Exports within the Region-2,038.11,618.5741.0394.61547.966.3-6,406.3Imports within the Region-1,641.91,459.61,579.3951.2864.8694.8-7,191.6

Economy of the Region

Source: Central American Foreign Trade. January- September Report, 2013. Statistics Office, Central American Economic Integration System (SIECA)Note: Trade of Goods. Does not include inward processing arrangements or assembly plants. Data updated to January 2014Central Bank of Belize: www.centralbank.org.bz Data from the Visible Trade Table. Data from July to September 2013.Central Bank of the Domincan Republic: www.bancentral.gov.do Payments Balance Table 1993-2012

Slide6

Legal Framework

for

Investment

and

Trade

in Central America

Slide7

Legal Systems

Based on the analysis of judicial resolutions by Courts of equal or higher hierarchy as well as the interpretations of laws that these Courts issue. Jurisprudence is the main source of Law. A solution applicable to the case derives from the already created legal rules.

The main source of Law is created by the Legislative Branch of the Government. Jurisprudence only plays a secondary role. The interpretation of a rule applied in a particular resolution is only obligatory for Courts of lower hierarchy. Legal norms, which are generic, derive from the law and are applied by Courts in a case by case basis.

“Common Law System

”

“Continental System”

Slide8

Getting the Right Legal Advice

Slide9

General

framework for the Investor

INCENTIVES AND CONSTITUTIONAL GUARANTEESBELGUAESHONNICCRPANDRRight to private propertyXXX X X X XXFree distribution of profits and equityXX X XXXXXFree currency conversionXX X XXXXXInverstment is not subject to a financial minimum or capXX  X* XX X XXForeigners may be Shareholders at local entitiesXX X XXXXXConstitutional Guarantee: equal treatment for local or foreign investmentsXX X XX X XXNo expropriation without prior compensationXX X  XX X XXFree Access to bank creditsXXXXXXXXFiscal benefits for Free Zone and other special regimesXXXXXXXXProtection to trademarks and patentsXXXXXXXXFree imports and exportsXXXXXXXX

*

A mínimum of US$12,000.00 of

initial

investment

capital is required but it is only applicable to Branches.

Slide10

CORPORATE STRUCTURESBelizeGuatemalaEl SalvadorHondurasNicaragua Costa RicaPanamaDominican RepublicCorporations Closely held corporations Partnerships Limited Liability partnership Foreign Entities Individual Corporations

Corporate

Structures

in

the

Region

Slide11

Agreements: Public and Private Documents

It is granted before a public officer or a public notaryIt is always formalIt entails authenticity: its autor is deemed to be certain, authorized by law and granted credibility. Public instruments are erga omnes evidence of the act granted and its date.Some transactions must be done thru public document.

PUBLIC DOCUMENT

PRIVATE DOCUMENT

It

does

not

require

special

formalities

It

does

not

give

faith

on

its

own

,

its

author

must

acknowledge

it

or

the

judge

may

consider

it

recognized

Third

parties

are

not

bound

to

acknowledge

their

existance

but

until

an

irrefutable

fact

takes

place

Slide12

Taxation

in the Region

TAXBelizeGuatemalaEl SalvadorHondurasValue Added Tax (VAT)General Sales Tax: 12.5%12% 13% Executive Class 15% and 18% applicable to alcoholic beverages, tobacco and airfareTransfer of assets Rendering of services ImportsImport Taxes (0-15%) plus VAT Use or consumption of merchandise   Income Tax from Work ActivitiesGeneral Rate: 25% (variable taxable amount)Q. 0.01 a 300,000.00 5% and 7% for(US$38,309.28 or more)$ 4,064.01 or more:From 10% to 30% ($22,857.15 or more) L.500,000.00 or more: 25% (US$25,455.78 or more) Income Tax from Economic ActivitiesGeneral Rate: 25%The first $10,000 of annual income: non taxableProfit from Lucrative Activities: 28%Simplified Optional Regime: from 5% to 7%  Less than US$150,000: 25%US$150,000 or more: 30%L 500,000 or more: 25%. (US$25,455.78 or more): 25% + 5% Temporal ContributionIncome Tax on Capital Gains or Losses---Movable assets and real estate:10% Gains and Profits: 5% Capital Gains: 10% Ganancias de Capital: 10%Customs (VAT, Selective Consumption Tax, Import Taxes, Central American Integration System, Rate for Services of Importation of Merchandise amongst others)0%-70%(different % depending on the type of merchandise)  0%-15%0% and 40%.(different % depending on the type of merchandise) 0%- 40%(different % depending on the type of merchandise)5%-20% (different % depending on the type of merchandise)

Official Exchange Rate of the Central Bank of each country for January 20, 2014

Slide13

TAX

Nicaragua Costa RicaPanamaDominican Rep.Value Added Tax (VAT)15%Sales Tax: 13%ITBMS: 7%ITBIS: 18% (2013-2014)Transfer of assets Rendering of Services Imports Use or consumption of merchandise Income Tax from Work ActivitiesProgressive: 15%-30% C$ 500,000.00 or more 30% (US$19,685.35 or more)¢1.128.000 or more: 15% (US$2,215.15 or more)Income Tax from Economic ActivitiesC$ 500,000.00 or more: 30% (US$19,685.35 or more) Entities: ¢100.513.000 or more: 30% (US $197,386.19 or more)Entities: B/.1,500,000.00 or more: 25%Entities: 29% on its taxable net incomeIndividuals: ¢16.667.000 or more: 25% (US $32,730.45 or more)Individuals: Progressive from 0%-25%B/. 50,000.00 or more shall pay B/.5,850.00 for the first B/.50,000.00 and a rate of 25% on the excess of B/.50,000.00Individuals: Progressive from 0%25% (RDS833,171.01 or more: 25%)Income Tax on Capital Gains or LossesMovable and Real Estate: 10%--- Capital Gains: 10%Capital Gains: 25%Customs (VAT, Selective Consumption Tax, Import Taxes, Central American Integration System, Rate for Services of Importation of Merchandise amongst others)0%-40%(different % depending on the type of merchandise) 1%-15% (different % depending on the type of merchandise) 8%-30% (different % depending on the type of merchandise) 0%-40% (different % depending on the type of merchandise)

Taxation

in

the

Region

Slide14

Labor Aspects in C.A.

COUNTRYYoungest AgeMain Agreements -ILOWorking DayMinimum wageSocial dutiesBelize 14 yearsRatified and in forceNot more than 9hrs daily.Not more than 45hrs weeklyAgricultural: $3.30 p/hrNon Agricultural: $3.30 p/hr Commerce and Household: $3.30 p/hrEmployer: 20.08% Employee: 11,92%(wages of $300 or more weekly)Guatemala14 yearsRatified and in force 8 hrs. (day shift)6 hrs. (night shift)Agricultural: $307Non Agricultural:$307Manufacture: $285Employer: 10.67%Employee4.83%El Salvador14 yearsRatified and in force8 hrs. (day shift)6 hrs. (night shift)Agricultural: $113.70Manufacture: $202.80Industry: $237Commerce and Services: $242.40Employer: 7.50% Employee: 3%Honduras14 yearsRatified and in force8 hrs. (day shift)6 hrs. (night shift)Agricultural $273Textile manufacture: $386Services: $397Employer: 7%Employee: 3.5%

Slide15

COUNTRYYoungest AgeMain Agreements -ILOWorking DayMinimum wageSocial DutiesNicaragua14 yearsRatified and in force8 hrs. (day shift)7 hrs. (night shift)Industry: $109Agricultural: $101Manufacture: $137Services: $143 Employer:17%Employee: 6.25%Costa Rica15 yearsRatified and in force8 hrs. (day shift)6 hrs. (night shift)Qualified E.: $536.67 Un-qualifed E: $465.11 Higher Education technician: $794.02 University Graduate: $972.69 University Degree: $1,167.27 Employer: 26,17%Employee: 9.17%Panama 15 yearsRatified and in force8hrs. (day shift)7hrs. (night shift)Zone 1: $624Zone 2: $490Employer: 12.5%Employee: 9.5%Dominican Rep.14 yearsRatified and in forceNot more than 8hrs dailyNot more than 44hrs weeklyQualified E.: $1,098Semi-qualified E.: $439Un-qualified E.: $145Employer: 15.19%Employee: 5.91%

Labor

Aspects

in C.A.

Slide16

Incentives and

Tax Benefits for particular Economic Activities

ACTIVITYTAX BENEFITSENERGYTax for the importation of machinery and generation equipment.VAT for 10 years Customs Import Taxes for 5 to10 years  Customs Import Taxes and VATX100% Customs Import TaxesIncome Tax X10 years X5 to 10 yearsXX10 yearsOther taxes (Temporal Solidarity Contribution Tax on the net active value; Capital Gains, Municipal taxes)AST, IVAN, IGC for 10 yearsMunicipal Tax for 10 years.Hydroelectric Projects with wáter permits for 10 years75% of the investment cost on equipment as credit against income taxTOURISM Tax on the transfer of real estate or Real Estate Tax---XXX for 10 yearsX 10 years X20 yearsxImport tax (on vehicles and others)XX (20 vehicles a year max)XxIncome Tax or Value Added TaxFrom 80% to 100% for 10 years 15 years15 yearsxSales Tax (except in the case of initial investment)X for 6 years

Slide17

ACTIVITYTAX BENEFITSTELE-COMMUNICATIONSMovile and conventional phone Operators15% of the taxes charged by the MunicipalityConcession request for 30 yearsX No license for foreign entities in the case of TV and broadcastingSpecial Contribution between 1.5% and 3% on gross income obtained in the operation of public networksLocal customs duties and others that levy the importation of equipment 100 % exemptionFORESTRY Exemptions and Tax SubsidiesDepending on Number of Has. 5 years---Minimum Plantation of 15Has. 5 years after the beginning of operationsFor 25 years20 years after the beginning of operationsIncome tax payment / IncentivesTo establish energy plantsDeduction of 100% for reforastationIncome from the sale of plantation productsIncome tax, importation of equipment, dividendsXOther taxes-------Import tax, Sales and aquisition of equipment50% of the Municipal Sales TaxUncultured land---

Incentives and

Tax

Benefits

for

particular

Economic

Activities

Slide18

ACTIVITY

TAX BENEFITSFREE ZONEImport taxesxX100% DA and importation of machineryXX100 % exempted, including vehiclesX100% exempted Income Tax or Value Added TaxX (20 years)XXX (up to a maximum of 12 years)X (100 % the first 10 years and 60% after year 11)Manufacturers that export more than 75% of the production: 100% exemption for entities during the first 8 years and 50% during the following 4 years. 10% of credit against income tax as well as the deferral of payment for up to 10 years provided that the Head Office does not receive dividendsXxReal Estate taxesXXXX (For 10 years)100 % exemption Other taxesPerpetual exemption of taxes on dividendsTax for the rendering of services (13%)Consular dutiesLocal or municipal taxes on purchasesTaxes on profits (conditions)Taxes on dividends and profits100 % MunicipalTax on exportation and re-exportationTax on the transfer of industrialized assets (ITBIS).Exemption of the tax on the formation of the entity and capital increase.

Source: SELA (2012) Influence of Free Zones in the diversity of production and the participation of countries in Latin America and the Caribbean. Table 7: Prepared by Araujo Ibarra y Asociados.

Incentives and

Tax

Benefits

for

particular

Economic

Activities

Slide19

INDICATORS 2011-2012BelizeGuatemalaEl SalvadorHondurasNicaraguaCosta Rica Panama Domin. RepTotals and %No. of Free Zones and Entities (ent.)-24 FZ 270 Ent.16 FZ 200 Ent.-35 FZ 696 Ent.256 Ent.14 FZ 94 Ent.At Zona Colón 2,960 Ent.51 FZ586 Ent.FZ5,06 Ent.Free Zone FDI (US$ millIions)-251-6886747053862,0983,965Free Zone Exports (US$ millions)119.2Sept 2013)3502,238-1,2004,83370114,08012,782Employment at Free Zones17,00070,321120,00099,50658,0122,72930,000121,000518,568MAIN SECTORSMaricultureXManufacture (textiles, shoes, etc.)XXXXXXXX*Tobacco Electronic devicesXXXXPharmaceutical ProductsXXXAgro-industryXXXMedical EquipmentXServices by Third PartiesXXXXXCommercializationXX

Free

Zones

:

Special

Regime

Source

: SELA (2012)

Influence

of Free

Zones

in

the

diversity

of

production

and

the

participation

of

countries

in

Latin

America

and

the

Caribbean

.

Table

7:

Prepared

by

Araujo

Ibarra y Asociados.

Slide20

Migratory

Simplicity for Investors

CountryMigratory CategoryDocumentation Minimum Capital (General or Sectors)Other requirementsBELMembers of the EU do not need a visa. Foreign InvestorPassportBirth CertificateMarriage and/or divorce certificatePhoto ID US$ 50,000,00Register at the Income Tax Department and the Social Security Board. GUATemporal Resident/ Permanent ResidentVisa for persons with independent icome (rentistas) Passport and certificate of validity Birth Certificate Criminal Record – Passport and certificate of validity; In the case of visas for persons with independent income: the type of investment must be justified. Minimum income for persons with independent inome US$1,000.00Bank statements that reflect the deposit of monies from abroadESTemporal Resident/ Permanent Resident Passport Health Certificate (issued by a Salvadorian doctor) Criminal Record (from the country of origin) Police Record (Salvadorian) Tax Identification Document Verify that the Direct Investment is registered at the National Office of Investments (ONI)Higher than 4,000 minimum wages in force at the date of request.Corporate documents duly registered at the Mercantile Registry / Investment doument. Documentation to evidence that the entity is operating. HONInvesting ResidentPassportPolice Record duly apostilled.Photos (3)Migratory movements, Medical Certificate and Criminal Record from Honduras. US$50,000.00Feasibility StudyProposed Schedule including the investment amount. Deposit of a guarantee of US$5,000.00 and Registration Certificate at the Investors Registry at SIC.

Slide21

Migratory

Simplicity for Investors

CountryMigratory CategoryDocumentation Minimum Capital (General or Sectors)Other RequirementsNICTemporal Resident/ Permanent Resident Passport Birth, Health and Marriage Certificates Criminal RecordUS$30,000Certificate of Registration as Foreign Investment at MIFIC, Legalized copy of the corporate documents and the authorization to exercise commerce duly registered at the Mercantile Public Registry; copy of the registration before the municipality and the tax authorities. CRTemporal Investing Resident Passport, Birth Certificate Criminal RecordsEvidence of fingerprint registry and consular registrationUS$200.000.00 in the real estate sector, assets subject to registration, shares, securities, porductive projects or projects of national interest.Forestry: US$100,000.00 PANTemporal Investing ResidentPoA and residency request Passport photocopy (certified by Notary Public or corresponding authority); Criminal Record;Certified Check for B/.250.00 in favor of the National Treasury; Certified Check for B/.800.00 in favor of the National Migration Service; Health Certificate;Affidavit of personal criminal background. Forestry: B/.80,000.00Macro-entity: B/.160,000.00Processing Zones for Exportation: B/.250,000.00Agrarian Sector: B/.60,000.00If an entity: evidence their activities and ownership of shares as well as the amount of owner´s equity.Certificate by an Accountant detailing the total amount invested. Original certificate of the registration of the entityRDInvesting ResidentTwo copies of the complete passportNational Identification Document, Birth CertificateHealth Certificate and Criminal Record Evidence of registration as Foreign InvestmentUS$200,000.00Document evidencing the type of businessResidency card if investor resides in another country

Slide22

Country

Free Trade Agreements by RegionBilateral Free Trade AgreementwsPartial Sope AgreementsAssociation AgreementsDR-CAFTA C.A Common MarketChile and C.APanama and C.A.Domin. Rep. and C.AC.AMexico and C.A.ColombiaCanadaTaiwanVenezuela and ColombiaCARICOMCARIFORUM and the EUEU and C.A

Free Trade

http://www.sice.oas.org/agreements_s.asp

Slide23

Central American Common Market

General

Treaty

on

Central American

Economic

Integration

Purposes

:

It

establishes

a Free

Trade

regime

for

all

Products

of

Origin

,

except

for

the

limitations

contained

in

Annex

A of

the

Treaty

.

Benefits

:

Products

of

Origin

are

exempted

from

:

Import

and

Exports

Custom

Taxes

Consular

Duties

and

other

taxes

,

charges

,

contributions

that

derive

from

the

respective

importation

or

exportation

.

Criteria

to determine

Merchandise

of

Origin

:

(C.A

Regulation

on

the

Origin

of

Merchandise

)

Totally

obtained

or

produced

in

the

territory

of 1

or

more

Parties

.

Produced

in

the

territory

of 1

or

more

Parties

with

materials

that

qualify

as

being

of

Origin

.

Produced

in

the

territory

of 1

or

more

Parties

with

materials

that

do

not

qualify

as

being

of

origin

but

that

comply

with

a

change

of

tariff

classification

.

There

are

specific

considerations

when

they

do

not

comply

with

the

change

of

tariff

classification

.

IT IS OBLIGATORY TO OBTAIN A CERTIFICATE OF ORIGIN OF THE MERCHANDISE

Merchandise

of

Origin

with

materials

that

are

not

of

origin

:

It

shall

be

considered

as

being

of

Origin

provided

that

the

materials

that

are

not

of

origin

and

that

do

not

comply

with

a

tariff

reclassification

do

not

exceed

10% of

the

transaction

value

.

Some

exceptions

that

do

not

grant

the

qualification

of

origin

to a

merchandise

:

Manipulation

during

transportation

and

storage

aiming

conservation

Separation

of

the

merchandise

in

parts

Packing

,

packaging

, re-

packaging

and

conditioning

for

transportation

purposes

Testing

or

calibration

Assembly

of

parts

Animal

sacrification

Removal

of

rust

,

grease

,

paint

and

other

covering

substances

Others

Merchandise

of

Origin

imported

within

the

Parties

:

When

a

merchandise

that

qualifies

as

being

of

Origin

of

one

Party

has

been

imported

into

the

territory

of

another

Party

and

then

exported

somewhere

else

,

it

shall

not

affect

its

condition

as of

being

of

Origin

.

Slide24

Association Agreement by and between the EU and C.A

Relevant

Aspects of the Association Agreement Association CouncilShall prepare its Internal Regulation and create the Association Committee which shall be responsible for the general application of the Agreement. May create Sub-committees. Political DialogueScopeInstitutional State; good governance; democracy; human rights; promotion and protection of the rights and fundamental liberties of indigenous population.Equality of opportunities and gender: structure and orientation of international cooperation; migration, reduction of poverty and social pressure. Fundamental labor norms; protection to the environment and sustainable procurement of natural resources; Safety and regional stability: fight for citizen safety; fight against corruption; drugs; transnational organized crime; weapon trafficking. Fight against terrorism; prevention and pacific solution of controversies. AgreementsTo create a common financial and economic mechanism that includes the participation of the European Ivestment Bank (EIB) and the Investment Mechanism for Latin America (LAIF)CooperationScopeTo strenghten peace and safetyContribute by reinforcing democratic institutions, good governance, eauality of gender, all forms of non discrimination, transparency and citizen participation. AgreementsApplication of international instrumentsCreation and promotion of nacional policies and development plans, statistical cooperationTo promote the protection of personal data, measures of citizen safety and transparencyFight against organized crimePrograms that promote employment and social security; improving the quality of educationDEVELOPMENT of the Knowledge Space LAC EU (Latin America and the Caribbean – European Union) and initiatives such as the Common Space of Higher Education LAC EU

Association

Agreement

ratified

in 2013.

The

Trade

core

pillar

is

in

force

since

August

,

October

and

December

2013.

The

other

two

core

pillars

await

legislative

ratification

in

the

28

countries

of

the

European

Union

.

Based

in 3

independent

core

pillars

:

Political

Dialogue 2.

Cooperation

3.

Trade

Slide25

Association

Agreement EU-CA

Main

AspectsTrade ScopeSimplification and modernization of Customs proceduresCompliance with intellectual property rights by Customs authoritiesFree circulation of mercandise and regional integrationCreate mechanisms that reinforce FDI in high technology sectorsStructuring and modernization of transportation and infrastructure located at border cheeckpointsParticipation of micro and medium enterprises (MIPYMEs) in international markets. Products Preferred treatment: BananasMain Challenges of the RegionSimplicity in the commercialization of merchandise that is subject to sanitary and pesticide controls (One import certificate, One sanitary inspection and One Tariff for products from the EU)Unification of import and export declarations; reimbursement of the fee paid (Customs procedure) Definition of the Central American Competition RegulationPanama shall adjust its regulations, personnel and infrastructure to allow a larger management of cargo It establishes a term of 10 years to complete the Central American Customs Union Perfection of a common external fee using the variable geometric principle Achieve an efficient mechanism for the collection, administration and distribution o income derived from importations as well as systems to give back taxes paid in excessPanama shall recognize 224 Geographic Indications in Intellectual PropertyLegal AdviseChallengesNeed of regional firms to provide counselingMulticultural attorneys at lawType of adviceExportation of Central American goods to the EUImportation of goods from the EUProtection to Intellectual PropertyAdvice in customs issuesInquiries of European Investors about regional laws

Source

:

Association

Agreement

between

the

EU and CA.

Reynols

Luisa. “

Challenges

and

opportunities

of

the

Association

Agreement

”

Strategy

and Business Magazine.

January

2014

Slide26

¡

Thank

you

!