ADVANTAGES OF A PANAMANIAN COMPANY:
- Panamanian corporations have enjoyed worldwide acceptance since their creation by Law 32 of 1927 by reason of the flexibility and stability of the law - notwithstanding the occasional political problems - and of the fiscal provisions, which exclude from taxation income earned outside the country. As a result, the use of Panama as a convenient jurisdiction in which to organize and operate corporations has grown steadily over the years, providing significant economic benefits to Panama.
- There are no minimum capital requirements. A corporation may operate without any issued share capital requirements.
- All Panamanian companies must appoint a registered agent, but do not require a local registered office. This function may be carried out by a local attorney or a firm of attorneys.
- Both registered and bearer shares can be issued.
- There must be at least 3 directors. They need not be nationals or residents of Panama.
- There is no legal minimum number of shareholders. Again, there are no nationality requirements.
- Every corporation must have a share register and minute book. These may be kept anywhere. Names and addresses of directors must be on record at the Public Registry.
- Shareholder details are not kept on public record.
- There are absolutely no exchange controls and there is complete freedom to transfer funds.
- The local medium of exchange is the US Dollar. There are no taxes on capital (stocks, bonds and other investments) held by Panamanian corporations.
- The Colon Free Trade Zone offers unique opportunities for the duty free storage, repackaging and reshipment of goods of all sorts.
- Unless otherwise specified in a company's articles/bylaws, there is no legal obligation to hold specific annual meetings. However, if such meetings are held, they do not have to be in Panama.
- The name of the corporation shall include a word, phrase or abbreviation to indicate that it is a corporation as distinguished from a natural person or partnership and can be expressed in any language. The most common endings include S.A, Corp., Incorporated, Inc. The words Limited or Ltd. are not sufficient by themselves.
No accounts or annual summaries have to be filed with the Government, with the exception of the annual franchise tax filed by the registered agent.
TAXATION
As stated, Panama employs a strictly territorial tax system. However, for those actually conducting business in Panama and not covered by the aforementioned caveats there is a sliding scale of taxes for both individuals and corporations. For the former the rates vary from zero to 30%. For the latter there is a flat rate tax of 30% (since 1996),
HOW TO INCORPORATE A PANAMANIAN COMPANY
The formation procedure in Panama is very similar to that of Spain; however, the governing legislation is based on American common law and not Continental civil law. In most cases, a company will be formed on the instructions of a client through the use of a registered agent as the initial incorporator. In Panama, directors will be on file at the Public Records Office. For this reason, and the fact that Panama demands at least three shareholders, virtually all companies will appoint nominees directors.
CORPORATE REQUIREMENTS:
- Name: The name of the corporation shall include a word, phrase or abbreviation to indicate that it is a corporation as distinguished from a natural person or partnership and can be expressed in any language. The most common endings include 'SA', 'Corporation', 'Corp.', Incorporated', Inc.'. The words "Limited1 or Ltd' are not sufficient by themselves. Names can be checked within 48 hours.
- Capital: There are no minimum capital requirements and capital need not be paid up. Shares may be nominative or bearer. The corporation may operate without any issued share capital. Franchise tax payments, nevertheless, are on a sliding scale depending on the authorised share capital.
- Resident Agent: All Panamanian companies must appoint a registered agent, but do not require a local registered office. This function must be carried out by a local attorney or firm of attorneys.
- Board of Directors: There must be at least 3 directors, but unless provided in the articles of incorporation, directors need not be shareholders nor nationals or residents of Panama. In most cases, nominee officers will be employed in a tax efficient jurisdiction.
- Directors/Shareholders: Unless otherwise stated in a company's articles/by-laws, there is no legal minimum number of shareholders. There must, however, be 3 or more directors.
- Officers: There must be at least a President, a Secretary and a Treasurer, who shall be chosen by the Board of Directors. Any person may hold two or more offices, if so provided by the articles of incorporation or in the by-laws.
- Books, records and seal: Every corporation must have a share register and minute book. These may be kept anywhere in the world or as provided in the articles of incorporation. Panama corporations do not require a seal. However, one may be adopted if approved by resolutions or if stated in the articles of incorporation or by-laws, if any. Names and addresses of directors must be on record at the Public Registry, where the Articles of Incorporation are also recorded. Shareholder details are not kept on public record.
- Powers of attorney: A Panamanian company may grant a general or special power of attorney to any person to act on it's behalf to execute contracts, agreements, deeds and other instruments. These powers are not a matter of public record.
- Certificates of good standing: Certificates of good standing can be obtained upon proper application to the Registrar of Companies.
- Bearer shares: Both registered and bearer shares may be issued.
- Transfer of jurisdiction: A Panamanian company may transfer it's domicile to a foreign jurisdiction permitting such a transfer. A company organised under any foreign jurisdiction may continue it's existence as a Panamanian company upon the approval of the necessary resolution by it's corporate body.
- Trusts/Foundations (General): Since 1984, Panamanian law has adopted modern trust rules and regulations. No details are kept on public record, however, 'trustees' and other relevant parties exercising control of such instruments are supervised by the National Banking Commission. Since, 1995, (Law 25/1995) Panama further adopted the concept of 'Foundations' which combine the features of company with those of a trust save that control can be directly executed by it's beneficial owners. Both undertakings benefit from the same tax advantages and principles applicable to Panamanian companies.
ANNUAL FEES & GOVERNMENT TAXES
Companies: All Panamanian companies must pay their annual franchise tax on the anniversary of their original incorporation date. As stated, the franchise tax levied will vary depending upon authorised capital, if any. In most cases, registered agent fees and franchise taxes will be charged simultaneously.
Penalties for non-payment: As with most similar jurisdictions there are penalties for those who do not pay the franchise tax on time. Generally, companies will be struck-off before the second year. Re-instatement fees are high.
Approximate company registration fees: A standard Exempt Company with a local registered office/agent and nominees, including the payment of all initial duties (accepting minimum capitalisation of less than US$10,000 for the minimum duty to apply) will cost approximately US$1,500.00. If nominees are not needed the cost should be no more than US$1,000.00 to US$1,200.00. In both cases it is presumed that bearer shares are being issued. Annual maintenance fees, including annual duties, should be around US$1,000,00 to US$1,500.00 depending on the exact services required.
Foundations: According to Article 8: "Every Private Foundation shall pay a registration fee and a single annual registration fee equivalent to those established for corporations in Articles 318 and 3ISA of the Panamanian Fiscal Code". Nevertheless, the feet that Foundations are always going to require individual drafting by lawyers in respect to both the Foundation Charter and it's Regulations, ill by definition result in substantially higher fees. At present, a relatively basic Foundation should cost around US$4,000.00. Annual fees, providing the Foundation acts as a "holding1 type vehicle should be in the region of US$3,000.00. |
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