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Panama


Panama

 

PANAMA

HISTORY AND POLITICAL STRUCTURE

The Republic of Panama is the southernmost country of Central America. Situated on the isthmus connecting North and South America, it is bordered by Costa Rica to the northwest, Colombia to the southeast, the Caribbean Sea to the north and the Pacific Ocean to the south. The capital of the Republic of Panama is Panama City. Panama, at 75,515 km2, is ranked 118th worldwide on the basis of land size. The highest point in the country is the Volcαn Barϊ (formerly known as the Volcαn de Chiriquν), which rises to 3,475 metres (11,401 ft).

Panama was explored by Columbus in 1502 and by Balboa in 1513, Panama was the principal shipping point to and from South and Central America in colonial days. In the 16th century the Spanish explored and settled in Panama but in 1821 Panama joined a union of Nueva Granada, Ecuador, and Venezuela which was named the Republic of Gran Colombia. When the Republic of Gran Colombia was dissolved in 1830, Panama remained part of Colombia but Panama seceded from Colombia in 1903.

The Panama Canal was built by the US Army Corps of Engineers between 1904 and 1914. In 1977, an agreement was signed for the complete transfer of the Canal from the US to Panama by the end of the century.

Revenue from Canal tolls represents today a significant portion of Panama’s GDP. Panama has the third or fourth largest economy in Central America and it is also the fastest growing economy and the largest per capital consumer in Central America. In 2010 Panama ranked 4th among Latin American countries in terms of the Human Development Index, and 54th in the world in 2010.

Panama’s politics take place in a framework of a presidential representative democratic republic, whereby the President of Panama is both head of state and head of government, and of a multi-party system. Executive power is exercised by the government. Legislative power is vested in both the government and the National Assembly. The judiciary is independent of the executive and the legislature.

National elections are universal and mandatory for all citizens 18 years and older. National elections for the executive and legislative branches take place every five years. The Head of state appoints the members of the judicial branch but the Panama’s National Assembly is elected by proportional representation in fixed electoral districts. Lastly, presidential elections do not require a simple majority since out of the four last presidents only one, the incumbent president, was elected with over 50% of the popular vote.

ECONOMY

Panama depends largely on its privileged geographical position: the economy is based on a well-developed services sector, including the Panama Canal, banking, insurance, government, the trans-Panamanian oil pipeline, and the Colσn Free Zone. The Panama Canal and the monetary regime anchored in the use of the US dollar which helped in the rapid development of the service economy which offset markedly unfavorable terms of trade. The unique monetary system played a significant role in the creation of an International Banking Center and the Colσn Free Zone.

Panama Business has shown a substantial growth over the years. The Colon Free Trade Zone of Panama is the second biggest free trade zone across the globe. Its banking sector comprises of more than 80 foreign banks. The Panama Canal has come of age as a facilitator of global trade.

The Panamanian economy has been among the fastest growing and best managed in Latin America. Latin Business Chronicle has predicted that Panama will be the fastest growing economy in Latin America in the five-year period 2010-14, matching Brazil’s 10% rate.

Like most countries in the region, Panama is feeling the impact of the global financial crisis, which threatens to undermine the social gains made in the past few years.

Balboa is the Panamanian Currency but US dollars are used as paper currency in the country. This Latin American country was the first to use the dollar currency in their economy.

WHY CHOOSE PANAMA WHEN STARTING A BUSINESS?

Panama companies are created under the General Corporation Law, Law 32 of February 26, 1927. Law 32 has been used as a model for many other jurisdictions and ensures the legal framework to conduct legitimate business activities in the international arena. Many choose Panama to start a business since it is considered one of the most stable governments in Latin America. Its stability is due to the fact that the government has three branches that offer a system of checks and balances similar to the U.S Federal Government. In addition the Panama Canal puts Panama in contact with governments and organizations from all over the world.

 

The corporation law of the Republic of Panama provides that any two natural persons acting as the organizers and the subscribers may appear before a Notary Public to organize and constitute a corporation

 

Advantages of the Jurisdiction of Panama

 

The following are the advantages of starting a Business in Panama:

 

•   Setting up offshore company in Panama is affordable and prompt.

•   Income derived using a Panama IBC but outside of Panama is not taxed.

•   Government does not control the offshore company in Panama activities.

•   Confidential information is neither required nor registered.

•   Panama offshore company can be managed from any place in the world.

•   Bearer shares may be issued at owner’s option.

•   The formation of a Panama company takes from 3 to 5 working days.

•   No paid-in capital required for incorporation a Panama IBC.

•   No limitation on Panama offshore company lawful activities.

•   Protection from inflation, since Panama’s currency (the Balboa) is pegged to the US dollar, in Panama there is no
inflation upon the devaluation of the Balboa.  Nevertheless, the Panamanian economy is subject to the fluctuations
of the US Dollar, particularly against the Euro.

•   Freedom from currency exchange control.

•   Reduction in legal liabilities, since the company has limited liability

•   Reduction in operating expenses

•   Easy access to North American and European Capital Markets

•   No International Trade Tariffs

•   No annual tax return requirements

•   No import/export quantity limitations

Placing an order for the formation of a company

When you decide to place an order for the formation of a company an Incorporation Service Form must be completed and a Power of Attorney will be required. Through the registrar the following steps must take place:

 

Incorporation Description:

 

•   Name availability check.

•   Preparation of memorandum and articles of association.

•   Preparation of power of attorney.

•   Preparation of registration forms.

•   Filing with the Registrar of Companies.

•   Payment of the filing fees (government fees).

•   Certificate of incorporation.

•   Share certificates.

•   Registered Agent

•   Procurement of tax identification number (RUC).

 

Once the Attorney has received the Power of Attorney and the Incorporation Service Form, the new company will be incorporated in a period of time within 3 and 4 working days.

A Certificate of Good Standing may be obtained from the Public Registry at the time that the incorporation of a company is registered. A Certificate of Incorporation is not available in Panama.

After the corporation has been established, you will need to consider the costs of maintaining the corporation in good standing.   This means that you will need to pay the Annual Renewal Fees of the corporation for the Government Franchise Tax (US$300.00) and the Registered Agent fees.

Annual renewal fees for companies are payable in two periods annually.   Companies incorporated between January
and June must pay before the end of June.   Companies incorporated between July and December must pay in De-
cember.

 

Requirements for the Registration of an IBC

 

•   Director: A minimum (with no maximum) of three directors is required. These may be of any nationality, residence
or occupation. The names and addresses of the directors is part of the public record and therefore nominee direc-
tors are usually appointed at incorporation.

•   Secretary: A secretary is required.

•   Shareholder: Following incorporation minimum of one shareholder is required who may be an individual or a cor-
porate body. The details of company beneficial owners and shareholders are not part of the public records.

•   Shares: may be issued in Bearer form or in Nominative form. Preferred, Class A, Class B, voting, non-voting, and
other share structures are also permitted. Keep in mind that the “Articles of Incorporation” are on public record.

•   Capital: is expressed as Authorized Capital, and there is no minimum capital that must be paid in.

•   Name of Company: A preferred name, with two or three alternatives in the event that the desired name may con-
flict with a name already in use, expressed in any language, The name must also include a corporate ending such
as (Anonymous Society), Corporation, or Corp, Incorporated, or Inc., Limited, or Ltd. to clearly denote that it is an

incorporated company.

 

Required Documents to register the company:

 

•   A notarized Spanish translation of the Articles of Association;

•   A Board minute authorizing the Panamian registration;

•   Copies of the most recent financial statements;

•   A certificate from a Panamian Consul confirming that the company is organized according to the laws of its place
of incorporation;

•   Notification of the allocation of capital to the Panamian operation.

 

Corporate documents of an IBC

 

•   Original Certificate of Good standing (Spanish)

•   Copy of the Translation of the Certificate of Good standing (English)

•   Original Minutes of the Extraordinary Meeting of the Board of Directors of the Corporation

•   Original Share Certificate

•   Original Articles of Incorporation (Spanish)

•   Copy of the Translation of the Articles of Incorporation (English)

•   Original Subscription Transfer

 

•   Apostille Bound Set of:

 

- True Copy of the Articles of Incorporation (Spanish)

- True Copy of the Translated   Articles of Incorporation (English)

- True Copy of the Certificate of Good standing (Spanish)

- True Copy of the translated   Certificate of Good standing (English)

- Copy of Minutes of the Extraordinary Meeting of the Board of Directors of the Corporation - Copy of the Share Certificate

 

Extra documents:

 

•   Guarantee of Non-trading

•   Declaration of Trust

•   Nominee Directors Declaration

•   Memorandum of Sole Director

•   Affidavit

•   Company Seal

 

* Power of Attorney will be given when we act as Nominee

 

Panama has a number of unique attributes that make this a great asset protection jurisdiction for corporations, foundations, banking and stock brokerage accounts. Today the Panama Public Registry has new facilities at its Headquarters, and ten regional offices nationwide, and a solid organizational structure that provide better service in a timely and efficient way, always fulfilling our motto of transparency and registration reliability.

GENERAL OVERVIEW

Location

Central America, bordering both the Caribbean Sea and the North Pacific Ocean, between Colom­bia and Costa Rica.

Time zone

GMT - 5 hours.

Population

3,453,898.

Capital

Panama City.

Airport(s)

Tocumen (main).

Language

Spanish.

Currency

US Dollars.

Political system

Constitutional democracy.

International dialling code

+507.

Legal system

Civil law.

Centre’s expertise

Banking, trade and professional sendees.

TAX

Personal income tax

Maximum 30%.

Corporate income tax

Maximum 30%.

Exchange restrictions

None.

Tax treaties

None.

SHARE CAPITAL

Permitted currencies

Any.

Minimum authorised capital

Usually US $10,000.

Minimum share issue

One.

TYPE OF ENTITY

Shelf companies

Yes.

Timescale for new entities

Two to four working days.

Incorporation fees

US $60 for up to US $10,000 capital, plus US $300 Annual Franchise Tax (government).

Annual fees

US $300 (government).

DIRECTORS

Minimum number

Three.

Residency requirements

None.

Corporate directors

Yes.

Meetings/frequency

No statutory requirements. As specified in articles of incorporation.

SHAREHOLDERS

Disclosure

No.

Bearer shares

Yes.

Minimum number

One.

Public share registry

No.

Meetings / frequency

No statutory requirements. As specified in articles of incorporation.

ACCOUNTS

Annual return

None for offshore companies.

Audit requirements

None for offshore companies.

OTHER

Registered office

Registered office and registered Agent is required.

Domicile issues

Law permits change of domicile from or to Panama.

Company naming restrictions

Cannot end with 'Limited' and use of 'Trust', 'Bank', 'Insurance', 'Fiduciary', 'Reinsurance' or deti­rivatives are controlled.

Panama Companies

First period (companies registered between January 1 and June 30):

a grace period until July 15 to pay the renewal without incurring in a penalty;

if the annual fee is paid after July 15 there is a penalty of $50.00.

Second period (companies registered between July 1 and December 31st):

a grace period until January 15 of the immediate following year to pay the renewal without incurring in a penalty;

if the annual fee is paid after January 15 there is a penalty of $50.00.