Panama

Panama

Synopsis

Explored and settled by the Spanish in the 16th century, Panama broke with Spain in 1821 and joined a union of Colombia, Ecuador, and Venezuela - named the Republic of Gran Colombia. When the latter dissolved in 1830, Panama remained part of Colombia. With US backing, Panama seceded from Colombia in 1903 and promptly signed a treaty with the US allowing for the construction of a canal and US sovereignty over a strip of land on either side of the structure (the Panama Canal Zone). 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. Certain portions of the Zone and increasing responsibility over the Canal were turned over in the subsequent decades. With US help, Dictator Manuel NORIEGA was deposed in 1989 (Source CIA Fact Book)

Star Ratings

Corporate registration efficiency

4

Cost

5

Confidentiality

5

Local Banking facilities

3

Legal system

3

Political stability

4

Reputation

3

panama

Location

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

Advantages of a Panamanian International Business Company (IBC)

Panamanian corporate law is based upon US corporate law. In other words, despite having a civil law system, its corporate law is based upon the US common law system. It should be noted that even during its most unstable periods Panama kept the integrity of its tax free companies. However, it has some anomalies such as requiring a minimum of three officers (a president, a treasurer, and a secretary) and three directors. However, one person may hold two or more offices. Panamanian companies can most usefully constitute the 'Foundation Council' for a Panamanian private interest foundation (PIF) under Law 25/1995 – See separate information sheet on Panamanian PIF's.

Panamanian incorporation provides the following benefits and features:

  • There are no minimum issued share capital requirements;
  • IBC companies are exempt from all local taxes and stamp duty (save for registration and annual license/franchise fees) even though the administration of an IBC may be from within Panama;
  • An IBC is required to have a registered agent and office in Panama. In most cases, nominee directors will also be employed to allow anonymity to be maintained when dealing with third parties
  • Three directors are required. A company may serve as director. There are no nationality requirements for either directors or shareholders
  • Only one shareholder is required
  • The books and records of a company may be maintained anywhere
  • Accounts whilst not required to be on public record must be maintained to international standards
  • Directors have power to protect the assets of the company by transferring them to trustees, another company or other legal entities for the benefit of the IBC, its beneficial owner(s) and/or creditor(s)
  • Registered agents are authorised to verify and authenticate the signatures of all company directors and officers including those of the agents concerned
  • All Panamanian corporations must end with the suffix Corporation, Incorporated, Sociedad Anónima or the abbreviations Corp, Inc or SA. They may not utilise the suffix Limited or Ltd
  • No accounts or annual summaries have to be filed with the Government, with the exception of the annual fee form to be completed and filed by the registered agent in Panama but accountancy records must nevertheless be maintained by the company or agent if nominee directors or shareholders are used

Domestic Corporate Tax

Not applicable

Personal Taxation

Not applicable

Double Taxation Treaty Network

Panama has tax avoidance agreements with Japan and Singapore, including information exchange provisions. Negotiations towards an agreement for the exchange of tax information with France were also launched in May 2010.

Administration & Accountancy Services

Managed & Non-Managed Companies

SCF can provide Panamanian companies either in a non-managed or managed format. However, in general like all 'international business corporation' (IBC) jurisdictions Panamanian companies are generally used for 'holding' or low level consultancy purposes so full management services are not common, especially as Panama has limited tax treaty protection. However, virtually all Panamanian companies avail of our administration services from a convenient tax free location or sub-contracted out provider to ensure that corporate activities are separate from those of the beneficial owner

Fully Managed & Branch Registrations

Where required SCF can provide fully managed services and even branch registration in another jurisdiction where tax treaty protection is required. For further details please consult with a SCF consultant

Set-up & Maintenance Fees

Please see the separate Panama Quotation Leaflet

The Ownership of Panamanian Companies

'Overhead' Discretionary Trusts or Private Interest Foundations

For tax planning reasons, normally pertaining to anti-avoidance provisions in a beneficial owner's 'home' country or place of fiscal residence, and/or because of a need to 'ring fence' IBC assets many clients owning a Panama company select to have it owned not by themselves but by an overhead discretionary trust or private interest foundation (PIF) normally located in a jurisdiction such as Panama (very common) or Liechtenstein (locally known as a Stiftung)

For more information on discretionary trusts and/or private interest foundations please refer to the separate information leaflets.