The One-Stop-Shop of Proinvex

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Panama’s Government offers a concierge service to investors

Panama has great opportunities for investors. With a GDP annual growth rate of 8.74% from 2010 to 2014, it has one of fastest growing economies on the  continent,  greatly  influenced  by  the  Panama  Canal and also its business-friendly law regulations.

One of Panama’s main advantages is its strategic location that together with political stability and the dollarized economy continues to bring investors and companies from  all  over  the  world  which  have  chosen  to  transfer their  headquarters  to  Panama  or  open  branches  in  the country.

The Ministry of Commerce has made this proposition even  more  attractive  by  creating  a  special  entity  called Proinvex  Panama,  dedicated  to  “The  Attraction  of  Investments  and  Promotion  of  Exports.” The  mandate  of Proinvex is also to help and encourage prospective foreign entrepreneurs to open their companies here to create jobs and further develop the country. To do this Proinvex operates a “One-Stop-Shop” that allows investors to find information and identify the instruments the government has available for Direct Foreign Investment (DFI), in effect offering a concierge service.

Direct Foreign Investment per GDP in South America

The  agency  pays  special  attention  to  promoting  the government’s  strategic  sectors  which  are:  logistics  and
transport, agriculture and rural development, tourism and mining.

The agency also offers advisory services to investors who are in the process of investing in Panama. Another important function is to establish formal communication channels between the public and private sectors to identify barriers that could limit direct foreign investment and to coordinate the necessary measures to correct them.

Proinvex  is  also  responsible  for  coordinating  the commercialization and promotion of national product exports, focusing on those four in which Panama maintains a  competitive  advantage  and  proven  access  to  international market demands.

In  this  respect,  the  agency  must  identify  trends  and opportunities with regards to crop selection and production development of value-added produce.

Proinvex is coordinating its action plan with the Ministry of Foreign Affairs through embassies and consulates to facilitate direct foreign investment in Panama.

Proinvex has an Advisory Board comprising 11 personalities with proven experience in the entrepreneurial sector. Its objectives are to promote leadership and strategic direction, in order to facilitate access to key contacts that will enable investors to move forward quickly and smoothly to the realization of their project.

PROINVEX PANAMAA  governmental  agency  dedicated to attracting and promoting foreign investment to the country. It operates a One-Stop-Shop that allows investors to find information  and  identify  the  instruments the government has available for Direct Foreign Investment (DFI).

The  agency  promotes  the  government strategic sectors which are:  logistic  and  transport,  agriculture  and  rural  development, tourism and mining.

The main legal instruments used by Proinvex are the Foreign Direct Investment Incentive Laws: Multinational Headquarters,  Investment  Stability  Law,  Incentives  for the  Film  Industry,  Telecommunications  Law,  Industrial Promotion  Certificate  and  Certificate  of  Promotion  to Agriculture Exports.

Proinvex’s tools of the trade – Foreign Direct Investment Incentive Laws

The Multinational Headquarters Law 41

Exemption of Income Taxes: Since Panama has a territorial  tax  system,  and  since  the  MHQ  will  be  operating offshore (providing services to its operations outside Panama),  there  is  no  taxable  income.  If  the  MHQ  provides service to its local affiliate, the MHQ will have to pay the local income tax. The law also provides exemption from sales tax for services rendered to the Corporate Group abroad. MHQ invoicing to offshore operations are not subject to the sales tax.

The  Ministry  of  Economy  and  Finance,  through the  Revenue  Office  (DGI),  studies  the  possibility  of negotiating a tax agreement with MHQs whose countries have  celebrated  bilateral  tax  agreements  with  Panama.
Middle-to-top  management  personnel  enjoy  exemption from  income  tax,  and  social  security  and  education contributions, when salaries are paid from Headquarters abroad. They will also have exemption from import tax for  household  items,  upon  arriving  for  the  first  time  in the country.

Albacrome facilities in Howard

“Ventanilla Única” – “One-Stop-Window”

Law No. 41, also created a “One-Stop-Window” service through the Ministry of Commerce and Industry to speed up the process in order to obtain the Sede de Empresas  Multinacionales  (SEM)  licence  of  multinational company  headquarters  and  visas  for  foreign  personnel and their dependents.

Visas for permanent personnel of MHQ: visas are issued to foreign personnel at a management or executive level, and to their dependents. The visas will be issued for five years, renewable, for the same timeframe. Holders of these types of visas will not be required to obtain a labor permit.

Dependents, who wish to work in Panama, can change their immigration status through the One-Stop-Window Service in the Ministry of Commerce & Industry.

Special visas for temporary personnel of MHQ: these visas are issued to any personnel of a MHQ who has to come to Panama for activities related to the MHQ. It has a maximum duration of three months. This type of visa also eliminates the requirement of obtaining a work permit or any other permit from any governmental authority.

Special  visas  permit  for  special  events. These  visas are to be issued to personnel of the MHQ who come to Panama to attend a specific event or for short visits, such as meetings, planning, technical training, etc.

The expansion of the Panama Canal and the consequent increase in traffic, especially with the Post-Panamax ships, too large to fit the original locks, is creating new business opportunities, not just in the maritime field, but throughout the entire economy.

Investment Stability Law

Its objective is to protect the investor. It was created by means of Law 54 of July 22, 1998 and establishes that foreign  investors  and  their  companies,  where  they  participate, have the same rights and obligations that the national investors and companies have.

The benefits that Law 54 offers are: juridical stability unless matters are related to public utilities or social interest; national and municipal stability in the customs regimes that are derived from the Special Laws.

In order to take advantage of this legislation investors submit an investment plan that includes the obligation to invest the minimum sum of $2 million within an established timeframe.

It is important to note that the benefits will be granted for a period of 10 years.

Permited Activities

  • Tourism
  • Commercial    and    Oil Free    Zones
  • Electric    Energy Generation
  • Export    Processing Zones
  • Agricultural Exports
  • Construction
  • Forestry
  • Ports    and    Railroads Development
  • Mining
  • Industrial
  • Telecommunications
  • Irrigation and efficient use of the hydraulic resources projects

All the activities that are approved  by the Cabinet Council  with previous recommendation  by the Ministry of Commerce and Industries.

Movie Law

For  many  years  Panama  has  striven  to  develop  a movie  industry.  To  achieve  that  objective,  the  Government  passed  Law  N° 36  of  2007  which  promotes  the Movie-making and Audiovisual Industry. Then in 2009 Executive Decree N° 34 was drafted to create the Panama Film  Commission  and  its Technical  Secretariat  and  the National Movie Register for foreigners.

Fiscal,  customs,  labor  and  migratory  incentives  are granted  for  foreign  productions  and  special  areas  are assigned for the development of the movie-making and audiovisual industry. It eliminates bureaucratization and guarantees prompt processes for the productions.

The Technical Secretariat of the Panama Film Commission offers the following benefits to foreign productions:

  • A “One-Stop-Shop” for the paperwork.
  • Processing of Migratory Permits for foreign personnel.
  • Labor Permits for foreign personnel.
  • Customs: Temporary custody of equipment without guarantee bond.
  • Fiscal incentives for the special area assigned for the development of the movie-making and audiovisual industry.
  • Permits for public locations throughout the entire national territory.
  • Paperwork required by the public services.
  • Link with producers, technicians, casting agencies and national personnel.

Call Centers and the benefits of Law 25 of 1992 of the Export Processing Zones

Since 1996 the government has striven to attract call centers  to  the  country.  Call  centers  are  under  the Telecommunications Law No 31 of 1996. Today there are call centers in Chiriqui, Veraguas, Colón and Panamá and it is likely that more will open in other provinces.

Law 54 of October 25, 2001, grants incentives to international call centers. Among them are: tax free operations (on sales, income or any other national tax); special vacation schedules; market fluctuations as a justified cause for termination of employees; special employee stability regime (three years); no import tariffs and residence visas for  expats.  Productivity  premiums,  bonuses  and  incentives are not considered as part of the salary.

Composition of Int'l banking Centre 2013

The Free Zones Law 32, article 70, stipulates that the company or person, who has a concession from the Autoridad de los Servicios Publicos (ASEP) to provide call center services for business use, will have the benefits offered by that legislation.

These  call  centers  can  be  registered  in  the  Official Registry of the Processing Zone as a Call Center Services Company for Commercial Use and thus benefit from the incentives of Law 25 of November 30, 1992, of the Ministry of Commerce and Industry.

Fiscal Incentives

Exoneration    of    taxes    and    import    rights    on    raw    material,    semi-elaborated    products,    purchase   and    sale    of equipment     and     construction     material,     machinery, spare    parts,    tools,    accessories,   reinvestments,    packing material    and    all    the    goods    or    services    required    for    its operations.

Exoneration    of    capital    assets    or    property    taxes.

Exoneration     of     the     Income    Tax     on     the     storage     and warehouse    services    that    provide    their   effects    abroad, since    the    latter    are    considered    as    exterior    operations and    of    export,    for    the   purposes    of    Income    Tax.

Migratory Incentives

Permanent Resident Permit in the capacity of investor.

Temporary resident Permit in the capacity of trustworthy personnel, executive, expert and or technician for the term of  the contract.

Short-stay Visa in the capacity of business person and investor.

The permits will be renewable, under equal conditions, to the spouse and dependent minor and adult children, of the principal requestor.

Labor Incentives

Special labor provisions that make the labor incentives more flexible than those of the companies that operate in the rest of the Panamanian territory.

Industrial Promotion Certificate (CFI)

Panama is very interested in attracting high technology to the country. The Industrial Promotion Certificate (CFI)  aims  to  stimulate  valued  added  technologies,  attract foreign direct investment, and encourage local investment to produce more efficiently.

This certificate also seeks to contribute to innovation and  Research  and  Development  (R&D),  and  guarantee the stability in all the productive sectors.

Activities Allowed

  • Research    and    Development
  • Management    and    Quality    Assurance    Systems
  • Environmental    Management.
  • Investments    and    Reinvestments    of    Utilities.
  • Training    and    Coaching    in    Human    Resources.
  • Increment    in    the    Employment    Associated    to    the    Production

Benefits of the Certificate:

Agricultural-industrial  companies  will  benefit  with the  reimbursement  of  35%  of  the  payments  made. The other industrial activities will benefit with 25%. The option to import, at a preferential tariff of 3%, includes the raw material, semi-elaborated or intermediate products, machinery  equipment  and  spare  parts  thereof,  canning, packing and other inputs that are a part of the composition or used in the process of elaboration of their products.

Use of the Certificate:

The company with the certificate may use it for the payment of national taxes, fees and their own contributions.
The certificate cannot be used for paying taxes, fees or contributions caused in fiscal periods previous to their emission, (excepting those caused during the fiscal period that generated the right to the certificate of industrial promotion), payment of the minimum complementary taxes or dividends; payment of consumption taxes of fuel and petroleum byproducts; payment of taxes subject to the retention system.

Certificate of Promotion to Agriculture Exports (CFA)

The program for the Promotion of Competitiveness of Agriculture and Livestock Export was created by Law N° 82 of December, 2009 and aims to support export of nontraditional products. All the agricultural or agricultural-industrial exporting industries can apply for it. However, companies located in special zones, duty free zones and free zones, as well as natural or corporate persons who accept other fiscal incentive programs, are not entitled to the certificate.

Chile’s Ambassador to Panama, S.E. Jose Antonio Sosa talks to Licda. Marisela González, Deputy Director of Proinvex, Panamá.

Chile’s Ambassador to Panama, S.E. Jose Antonio Sosa talks to Licda. Marisela González, Deputy Director of Proinvex, Panamá.

Characteristics of the CFA:

  • It is nominative and transferable by way of endorsement. It expires after one year counted from the date of its endorsement by the General Comptroller of the Republic.
  • The certificate generates obligations on the part of the State from the date of its endorsement by the General Comptroller of the Republic and does not earn interest.
  • It exempts all type of national taxes, fees, rights, and encumbrances.

It will be useful only for the payment of any national tax, with the exception of municipal taxes. The assignment, transfer or disposal of the CFA will cause the payment of income tax at a definite rate of 5% on its value.