Doing business in Panama: Why do business in Panama?
Company founders globally have all heard about Panama. But many do not know why it is such an interesting jurisdiction for many businesses. In this article, you will learn about Panama and why this country might be the ideal place for you and your company.
Panama is a country that has been known for many years as one of the most stable economies in Central America, it has a stable government with a U.S. dollar-pegged economy, reducing greatly exchange rate risks. Panama has made efforts to systematize the procedures for setting up businesses since 2005; therefore, it has managed to optimize fiscal and commercial processes and procedures. The Panamanian government offers tax incentives thanks to its flexible policy that seeks to attract foreign capital and among its main sources of economic activity, you can find a well-developed services sector that accounts for more than three-quarters of GDP. Panama’s services include the Panama Canal, logistics, the Colon Free Trade Zone, insurance, tourism, and banking; especially due to the appeal of offshore banking. These sectors along with trade agreements and infrastructure development projects have boosted economic growth.
Let’s dig deeper and see why Panama is a great place for business.
1. It is Easy to Start a Business in Panama
To put it simply, Panama is one of the easiest countries to get started with a business. The Ease of Doing Business Index, ranked Panama second in the region of Latin America and the Caribbean for the benchmark of ‘Starting a Business. This benchmark gathers the procedures, time, cost, and minimum capital to open a new business. Registering a company in Panama can be completed within a week’s time, this is key when trying to start a company operating within a short time span. This saves founders considerable time, especially compared to other countries within the region, where the company setup can take months.
Another reason why Panama is a very good option for you to invest in and expand in the region is that it is considered a Logistics Hub due to its strategic location, with ports and high technology airports, which generate a logistics interconnection system. Also, Panama has the advantage of using a multimodal transport system that allows using at least two modes of transport, so it provides options for planning the transportation of cargo and therefore reducing travel times, loading and unloading.
Moreover, this well-implemented system allows for improved logistics coordination with lower costs in its operations.
3. Panama Canal
The Panama Canal is considered a base for business as it is fundamental for global trade and represents 10% of Panama’s GDP. In 2020 the Panama canal had a revenue equivalent to 3.4 billion dollars. It is a key point for the transit of merchandise because it connects two oceans and all continents, which facilitates world maritime trade.
Future growth will be strengthened by the Panama Canal expansion project that began in 2007 and was completed in 2016 at a cost of $5.3 billion. The expansion project more than doubled the Canal’s capacity, enabling it to accommodate high-capacity vessels such as tankers and neo-Panamax vessels that are too large to traverse the existing canal. The US and China are the top users of the Canal.
4. Panama has Incentives for Foreign Investment
Panama constantly seeks to generate greater incentives to attract foreign investment, for that reason the law grants foreigners the same rights and freedom enjoyed by nationals. It should be noted that such foreign investors are also granted the right to manage their investment earnings as they prefer and to repatriate their interests, profits, and dividends.
Incentives for Multinational Companies:
Exemption from the payment of Income Tax for companies established in Panama but generating foreign source income, outside national territory.
Total exemption of the payment of the Tax of Transfer of Movable Goods and Services applies to the operations that are carried out outside the national territory.
Exemption from import duties.
Migratory benefits such as obtaining an SEM Permanent Personnel Visa or SEM Temporary Personnel Visa for those foreign workers who work in the branches or subsidiaries in Panama. (*)
Labor Benefits: These benefits are granted in compliance with the rule of 10% for foreign workers and 90% for national workers.
(*) SEM: Sede de Empresas Multinacionales (Headquarters of Multinational Companies)
Colon Free Zone
This is a free port that has more than 2,500 companies. There are national and foreign companies in the zone and most of them enjoy tax exemption, but they must meet certain requirements such as having at least five local Panamanian workers, submitting reports, and exporting at least 60% of their merchandise.
Special, Integral, and Simplified Regime for Free Trade Zones
Thanks to this law, duty-free zones are allowed to be established anywhere in Panama, as long as they don’t interfere with the local ecosystem. Approximately fourteen free zones have been calculated so far, while nine of them are already in operation.
5. Real Estate Investment in Panama
If you are interested in investing in Panama, one sector that stands out is real estate, the interest here is based on selling or renting the property in which you have invested. This industry works with long-term investment and is focused on the value that the property acquires over time.
It is a dynamic sector, which not only depends on the construction itself but also on the projects that are carried out in the surrounding area, as this increases its value. It can be considered a buyer’s market where you can get great deals and at the same time get a significant return on your investment.
6. Panama’s Friendly Nations Visa
The Friendly Nations visa has been considered a fast-track way to obtain residency in Panama, applicable for 53 countries (2021 update) considered friendly to Panama. As of 2021, there have been new changes to how this process works, it is important to take into consideration the following:
First, the provisional residence is granted for a period of two years. After which the individual can apply for a permanent residence permit
The process for applying for a permanent residence permit has to be for employment reasons or for real state investment reasons.
Employment: The Employer has to submit documentation in relation to the nature of the employment. Afterward, the applicant and the employer will have to process the work permit before the Ministry of Labor and Labor Development.
Real estate: The applicant has to demonstrate the ownership of real estate of a minimum value of US$200,000.00. It is important to consider that a local bank may assist with the acquisition of said real estate investment.
Get Assistance from Easyco Experts
If you are looking to start a business in Panama, our company experts can help you register your company in Panama and assist with the formalities and compliance along the process.
Easyco also provides additional services to guarantee your company’s compliance, which includes:
Nominee directors in Panama
Registered office address in Panama
Handling tax and accounting
Hassle-free Payroll Services
Manage your Company bank account opening in Panama
Panama’s Friendly Nations Visa coordination and assistance
Manage your Trademark Registration
Corporate Legal Services
At Easyco, we make company formation in Panama easy; our team of corporate experts has vast experience helping companies and individuals register their business in Panama, with a proven track record of success across all of our services. Easy aims to tackle the complex company formation processes across LATAM and makes business registration easy by providing a hassle-free online company registration experience. Start your company in Panama today!
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