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.
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.
A 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.
“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.
- Commercial and Oil Free Zones
- Electric Energy Generation
- Export Processing Zones
- Agricultural Exports
- Ports and Railroads Development
- 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.
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.
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.
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.
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.
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.
- 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.
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.