KNOWLEDGE BASE

KEY CORPORATE FEATURES

GENERAL INFORMATION

The Republic of Panama has a land mass of approximately 75,420 sq km, is located between Costa Rica and Colombia, forms the narrowest and lowest portion of the isthmus that links North and South America. It is best known for the Panama Canal which joins the Caribbean Sea to the North Pacific Ocean and connects Central America to South America.

Population

The population of Panama is approximately 3.4 million, about 52% of which reside in Panama City, consisting of mainly the Mestizos (70%) and a mix of West Indians, Caucasians and Indians. The dominant religion is Roman Catholicism.

Political Structure

Panama was a Spanish colony until 1821. In 1903, Panama broke an alliance with Colombia and became an independent republic.

There are three Branches of Government:

  • The Executive Branch of the Government is at present composed of a President and two vice-presidents, elected by majority vote, for a five-year term. The Ministers of State are appointed by the President subject to approval by the Legislative Assembly.
  • The Legislative Assembly is composed of legislators elected from the electoral districts for a five-year term.
  • The Judicial Branch of Government consists of Supreme Court of Justice, five Superios Courts and three Courts of Appeal. The Supreme Court of Justice is presided over by nine judges appointed for a ten-year term.

An autonomous Electoral Tribunal supervises voter registration and all citizens over the age of 18 are required to vote.

Infrastructure and Economy

The Colon Free Zone is located on the Caribbean side of the Isthmus of Panama near the Atlantic entrance to the Panama Canal. This Free Trade Zone is the second largest in the world after Hong Kong. Operations and transactions taking place in the Free Trade Zone are subject to a special tax treatment whereby imports from other parts of the world and re-exports to other countries are exempted from any import or export taxes imposed by Panama. Income earned from re-exports is taxed at specially reduced rates. Panama has the world’s largest shipping registry and a well- established Banking centre. Economic growth will be bolstered by the Panama Canal expansion which began in 2007 and is expected to complete in 2014-15 at a cost of US$5.3 billion. The project will more than double the Canal’s present capacity enabling it to accommodate the modern super tankers that are becoming too large to transverse the existing transoceanic crossway. Without the expansion, it was anticipated that the Panama Canal would be forced to turn away approximately 37 per cent of the world's container ships by 2011. Other areas of economic activity are in agriculture, manufacturing, construction, transport, tourism and financial services.

Language

Spanish is the official and spoken language. English is also spoken widely in urban areas and is used daily in commerce and international trade.

Currency

United States Dollar.

Exchange Control

None.

Type of Law

Based on Spanish Civil Law with many Common Law influences, particularly regarding Company Law.

Principal Corporate Legislation

Corporation Law No. 32 of the 1927 Commercial Code, Decree Law 5 of 1997 and Executive Decree 296 of 1997.

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PANAMA COMPANY INFORMATION

Type of company for international Trade and Investment

Generally, corporations are incorporated under the Corporation Statute Law 32 of the 1927 Commercial Code. Limited Liability Companies and Limited Partnerships are used also.

Procedure to Incorporate

By presentation of the proposed corporation's signed Articles of Incorporation before a Notary Public who creates a Public Deed for registration at the Public Registry.

Restrictions on Trading

Cannot undertake the business of banking, trusteeship and trust administration, insurance, assurance, reinsurance, fund management, investment funds, collective investment schemes or any other activity that would suggest an association with the banking, finance, fiduciary or insurance businesses.

Language of Legislation and Corporate Documents

Spanish and certified English translations.

Registered Office Required

Yes, must be maintained in Panama at the address of the Registered Agent.

Name Approval Required

Yes.

Shelf Companies Available

Yes.

Time to Incorporate

Two days, subject to name approval.

Name Restrictions

A name that is similar to or identical to an existing company. Names of well known companies incorporated elsewhere or a name that implies government patronage.

Language of Name

Names may be expressed in any language using the Latin alphabet. The Registrar may request a Spanish or English translation.

Names Requiring Consent or a Licence

Bank, building society, savings, insurance, assurance, reinsurance, fund management, investment fund, trust or their foreign language equivalents.

Suffixes to Denote Limited Liability

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.

Disclosure of Beneficial Ownership to Authorities

No requirement.

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PANAMA COMPLIANCE

Authorised and Issued Share Capital

The standard authorised share capital is US$10,000 divided in to 100 common voting shares of US$100 each or 500 common voting shares of no par value; the capital may be expressed in any convertible currency. The minimum issued capital is either one share of no par value or one share of par value.

Classes of Shares Permitted

Non-voting shares, preferred shares and registered shares. Bearer shares can be issued but no-par-value and bearer shares must be fully paid when issued. The registered agent must keep the bearer shares certificate in safe custody and must notify the Registrar that the shares have been issued.

Taxation

No corporation tax is levied on non-Panamanian sourced income.

Double Taxation Agreements

None.

Licence Fee

Annual Franchise Tax of US$400 is payable.

Financial Statements Required

Whilst there is no requirement to file audited accounts with the authorities, a company is required to keep financial records, which reflect the financial position of a company.

Directors

Both corporations and natural persons may act as directors and the minimum number of directors is three. They may be of any nationality and need not be residents of Panama. Panamanian companies are also required to appoint a minimum of three officers (president, secretary and treasurer) who may also be the directors.

Company Secretary

A company secretary must be appointed, who may be a natural or corporate person. The company secretary may be of any nationality and need not be a resident of Panama.

Shareholders

The minimum number of shareholders is one.

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HOW TO PROCEED

A bespoke 'offshore' solution can be complex and requires careful planning and execution. We therefore encourage our clients to contact us directly, without obligation, for a Free Initial Consultation.

Our experienced consultants will gladly assist with advice on how to approach your particular challenge.

To make contact with a consultant at one of our offices who speaks your language, click here for a full list of our office contact details.


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