Panama

The Republic of Panama is an independent democratic state in the Central American region, located on the Isthmus between North and South America. The capital is Panama City. The official language is Spanish (in business circles, English is used alongside Spanish).
Panama's legal system belongs to the Romano-Germanic family (Latin American subgroup), but is heavily influenced by Anglo-American law.

Panama's strategic geographic location, sovereign control of the Panama Canal (since 2000), along with a stable political system, friendly corporate and tax legislation and a well-developed legal services sector, have made Panama a renowned centre of international business with thousands of international companies and ships registered.
The national currency is the Panamanian balboa and the US dollar (as legal tender, it is freely available in Panama). There are no currency controls or restrictions on the flow of funds. Transactions can be made in any currency.
Panama is included in the List of Offshore Zones of the Ministry of Finance of Russia No. 108n, but is not on the List of Instructions of the Central Bank of the Russian Federation No. 1317-U.

6 simple steps to purchase a company

  1. choosing a country

  2. choosing a bank

  3. payment (by any method)

  4. sending documents

  5. company registration

  6. bank account opening

Organisational and legal forms of companies

  1. a closed joint stock company (sociedad anonima);
  2. general partnership;
  3. limited partnership;
  4. civil partnership;
  5. commandite company;
  6. sole proprietorship.

Taxation

Panama's tax system is characterised by the territorial principle of taxation, i.e., the income of a Panamanian corporation not operating in Panama is not taxed. Dividends paid by a Panamanian corporation not doing business in Panama are also not subject to withholding tax if the profits from which the dividends are distributed were derived from a foreign source. These rules allow Panama to be equated with classic offshore jurisdictions.

Only income derived from operations within Panama is subject to income tax in Panama. The corporate tax rate in this case is 25%.

Only the annual fixed fee is compulsory for all companies. Failure to pay the annual fee results in the imposition of penalties.

Documentation and reporting of Panamanian corporations

The company's corporate and financial records must be kept in Panama if the company carries out taxable operations in the territory of Panama. Such information must be up-to-date and available for inspection by the local tax authorities. If the company carries out exclusively offshore operations, such documentation can be stored anywhere, including abroad.

Companies not carrying out business in Panama are not required to file annual accounts, tax returns and audits.

How to register a company in Panama in the most profitable way

Experts estimate that Panama has the most favourable environment for the development of foundations and corporations. Consider each of these forms in the context of business attractiveness. Such foundations are non-profit organisations (not to be confused with investment funds).

Panama's funds are characterised by:

  1. High level of confidentiality.
  2. No requirement to disclose the beneficiaries of the fund.
  3. There is no requirement to submit annual and financial reports.
  4. Full tax exemption on income from all business activities and transactions carried out outside of Panama.
  5. The foundation's property is managed by the foundation's board (nominee members of the foundation's council may be granted). The foundation council must consist of at least 3 individuals or at least 1 legal entity.
  6. The founders, board members and protectors of the foundation may be citizens and residents of any country.
  7. The founders of the foundation may be either individuals or legal entities.
  8. The founder of the foundation may also be a beneficiary.
  9. Under no circumstances may the assets of the foundation be used to meet the obligations of the founders or beneficiaries of the foundation.
  10. The accounting records of the foundation can be kept both in and outside Panama.

In order to establish a foundation, the actual placement (contribution) of funds or assets into the foundation by the founder is required.

The foundation acquires the rights of a legal entity from the moment the charter of the foundation is registered in the Public Register. The foundation's charter contains the following information:

  1. The name of the foundation (must contain the word "foundation" in any language);
  2. The legal address of the foundation;
  3. Initial capital or property (expressed in any currency) of at least USD 10,000 or the equivalent in another currency;
  4. The names and addresses of the members of the foundation's board who manage the assets (these can be individuals or legal entities);
  5. The name and address of the foundation's registration agent in Panama (this should be a local lawyer or law firm);
  6. The statutory objectives of the foundation (they must be reasonable, feasible, lawful and not contrary to the norms of morality);
  7. Method of identifying the beneficiaries of the foundation (the designation of beneficiaries is not required in the charter of the fund);
  8. A reservation about who has the right to make changes to the charter of the foundation;
  9. The term for which the foundation is established;
  10. The way the foundation's assets are used and their fate in the event of liquidation of the foundation.

The beneficiaries of the foundation, as well as the method of profit distribution, are not defined in the articles of association, but in the foundation's Regulations, an internal document of the foundation kept by the registration agent in strict confidentiality.

Corporation advantages:

  1. registration within 4 working days;
  2. there is no requirement for the number of shareholders;
  3. there is no direct link between paid-in capital and the value of the corporation's assets;
  4. the shareholders' meeting can be held in any country, there is no link to Panamanian citizenship either;
  5. Weak government control;
  6. it is not necessary to fill in an income declaration;
  7. zero tax rate on earned dividends;
  8. audits are carried out upon the decision of the shareholders' meeting, etc.

It is necessary to obtain the following set of documents:

  1. Memorandum of Association and Articles of Association (contains the addresses of residence, as well as the names of the founders, the amount of share capital, the purpose of the company's formation, the registered office, etc.)
  2. Certificate of Incorporation;
  3. Minutes of the appointment of a director (decision of the first shareholders' meeting);
  4. Share certificate and the resolution to issue it;
  5. Consent of the director to perform their duties;
  6. Registers of shareholders and directors.

The owner's personal presence is not a requirement for registration. In order to do business, you must maintain an office in the country and the agent must be a resident of Panama.

Set of documents:

  1. Articles of incorporation
  2. Apostilled Extract from the Register
  3. Share Certificates
  4. Minutes of the Meeting of the Board of the Directors
  5. Apostilled Minutes of the Meeting of the Board of the Directors
  6. Agreement for the provision of nominee services
  7. Page with Apostille (on request)

Nominee director and shareholder

  1. Apostilled Power of Attorney
  2. Consent Letter (Letter of consent from the Nominee Director on the assumption of office)
  3. Director Resignation Letter
  4. Nominee Director’s Declaration
  5. Assignment of Subscription of a Share
  6. Deed of Trust

Confidentiality and international exchange of tax information

The names of the company directors are contained in the public register of Panama.

Information about shareholders and beneficial owners is not disclosed and is only kept in the files of the Panamanian registration agent.

With regards to bearer shares, Act No. 47 of 6 August 2013 introduces a custodial regime (storage mode). In accordance with this law, bearer shares issued after the entry into force of the law (that is, after August 2015) must be transferred to the depositary together with an affidavit from the owner of the shares containing identification data. The same requirement applies to shares issued before the law came into force (there is a three-year transition period until August 2018). Shareholders retain all rights associated with such ownership. The following local (Panamanian) entities may act as depositories: banks with a general licence; regulated (supervised) trustees, brokerage firms; centralised securities depositories, lawyers meeting statutory requirements, and similar foreign entities registered in a special register of Panama.

Panama has Tax Information Exchange Agreements (TIEA) in place with Canada, Finland, Ireland, Norway, Sweden and the US.

Double tax treaties (DTAs) exist with the following countries: Barbados, Czech Republic, France, Ireland, Luxembourg, Mexico, Netherlands, Portugal, Qatar, Republic of Korea, Singapore and Spain (all of which were concluded in the period 2010-2013).

As of early 2014, Panama is not a party to the OECD Convention on Mutual Administrative Assistance in Tax Matters (as amended in 2010).

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