Panama Info
Joined: 16 Nov 2006
Posts: 17
Home Country: panama
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 Posted: Tue Nov 21, 2006 5:11 am Post subject: DOING BUSINESS IN PANAMA |
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DOING BUSINESS IN PANAMA
STARTING A BUSINESS
STANDARDIZED COMPANY
Legal Form:
Minimum Capital Requirement: 0
City: Panama City
Registration Requirements:
Procedure 1. Hire a registered agent
Time to complete: 1 day
Cost to complete: USD 150
Procedure 2. Notarize Articles of Incorporation
Time to complete: 1 day
Cost to complete: USD 75
Comment: The Articles of Incorporation must include the name and domicile of each subscriber of the Articles of Incorporation; domicile of the company, and of the resident agent, who must be a lawyer or law firm in Panama; names and addresses of directors and officers; name of the corporation, set out in such a way as to distinguish it from other registered that may not be identical or similar to the name of another company already registered with the Public Register; general objectives of the company; name of at least a President, a Secretary and Treasurer who may or may not be the same as the directors and need not to be shareholders and who may hold more than one office or title, details of the capital and the type and number of shares into which it is divided; duration of the company (it may have perpetual duration), any other provisions the subscribers may wish to include.
Procedure 3. Register at the Mercantile Division of the Public Registry
Time to complete: 7 days
Cost to complete: see comments
Comment: Registration fees: $50 on the first $10,000; $0.90 for each $1,000 up to $100,000; $0.60 for each $1,000 up to $1,000,000; $0.12 for each $1,000 above 1,000,000.
Procedure 4. Secure a patente commercial (commercial license) at Ministry of Commerce and Industry.
Time to complete: 7 days
Cost to complete: between USD 250 and USD 750
Procedure 5. Register for taxes
Time to complete: 1 day
Cost to complete: USD 250, Corporation's Annual License tax.
Comment: Off-shore operating Panamanian companies only pay an annual license tax of $250 but companies operating within the territory of the Republic of Panama are subject to income tax on profits derived form Panamanian sources. Some exceptions may apply.
The Panamanian Government has just approved Law 6 of 2005, which among other issues, modifies Article 318-A of the Fiscal Code, regarding payment of the Annual Tax of Corporations (Sociedades Anónimas) and Private Interest Foundations. The Law was published in the Official Gazette and became effective as of February 3, 2005.
Under the new system:
1. Upon the registration of the corporation or foundation, the first Annual Tax of US$ 250.00 will be paid together with the respective registration fees.
2. The second and subsequent Annual Taxes will be US$ 300.00. This represents an increase of $50.00 to the former Annual Tax, of US$ 250.00.
The increase to US$ 300.00 of the second and subsequent Annual Taxes will start and be applicable as of January 1st, 2006
Procedure 6. Register with municipality, get a "paz y salvo municipal"
Time to complete: 1 day
Cost to complete: USD 5
Procedure 7. Request an employers' inscription number from the Social Security Administration
Time to complete: 1 day
Cost to complete: no charge
Comment: The Social security Administration manages pensions, health, accident, and unemployment
OVERVIEW
Business and financing
Business forms: Corporations
Foreign banks have long had a significant presence in Panama and represent one-third of all financial institutions, which are regulated by the Banking Superintendency. All major banks are based in Panama City.
Labour environment
Unemployment rate: 11.8% (2004)* Minimum wage: Varies
*Economist Intelligence Unit estimate.
The government sets minimum wage levels, which are determined by industry and geography (and, in some cases, by company size). Hourly minimum rates are highest in Panama City and Colon, where they are set at US$0.76 in agriculture, US$1.08 in the commercial, industrial and banking sectors, and US$1.33 in construction.
Union membership is 10–12% of the workforce.
Employers contribute 10.75% of each employee’s base pay to the Social Security Institute (CSS), and employees must pay 7.25% (withheld by the employer). The CSS also collects an education tax, paid by employers (1.5%) and employees (1.25%), and worker insurance with rates between 0.98% and 5.67% of gross salaries.
No more than 10% of the workforce of a local company may be made up of foreign senior executives. Such foreign nationals may receive a maximum of 10% of a company’s total wage bill.
Taxation
Corporate tax
Main rate: The highest of 30% of net income or 1.4% of gross receipts
Resident and non-resident companies are taxed at the highest of 30% on net income sourced in Panama or 1.4% of gross receipts (sourced in Panama). A 34% rate applies to certain legal entities registered with the Industrial Registry on income over PAB 500,000. Dividends paid to companies (and individuals) are subject to a 10% withholding tax. However, if part of the distributed profits relates to dividends received from other companies under deduction of tax, these are not included in the taxable base for calculating the 10% withholding tax. Panama allows bearer shares to be issued, and when dividends are distributed to such shareholders the withholding tax is 20%. Undistributed profits may be subject to an additional tax at an effective rate of 4%. However, this is creditable against the withholding tax payable when a distribution is made.
Individual tax
Progressive rates to 27%
Income tax is charged on aggregate income at progressive rates up to 27%. Dividends received are subject to a 10% final withholding tax (20% on bearer shares). Interest and royalties received are generally treated as part of general income. Individuals with taxable income exceeding US$60,000 must pay tax based on 6% of gross income where this is higher than the tax otherwise payable.
Certain individuals residing in Panama for 70% or more of the time are taxed on their full income regardless of where this income is sourced. Such full taxation occurs where the taxpayer’s income is derived from services performed partly inside and partly outside of Panama. The time spent outside of Panama is not taken into account if the taxpayer was not engaged in income-generating activities during that time.
Capital gains
Generally taxed as income
Capital gains of companies and individuals are generally taxed as income at the usual rates applicable to either corporations or individuals. However, gains on the disposal of immovable property and movable goods have special rules depending on the time that they have been held.
Indirect tax
VAT standard rate: 5%
Higher rates: 10%, 15%
Value-added tax (VAT) applies to most transactions at the standard rate of 5%. Registration is compulsory for businesses with monthly turnover above US$3,000 (annual turnover US$36,000). A higher rate of 10% applies to alcoholic beverages and a 15% rate applies to tobacco-related products. Exports are zero-rated. Exemptions include food, medicine, agricultural raw materials, fuel and books. Panama also levies excise taxes on several products and services at a rate of 5%. Items covered by the excise tax include cars, motorcycles, cable television, pre-paid cellular phones, insurance premiums and airfares.
Tax administration and compliance
Tax year: Corporations: accounting year; Individuals: calendar year
Companies must file a tax return within three months after the end of the accounting year, but this limit may be extended by two months on request. Three advance payments are due, based on an estimate of the income for the current year. A final payment of tax is due at the time of filing the tax return. Employment income is taxed by withholding. Individuals who are required to file a return must do so by March 15th following the end of the tax year.
Additional tax information
Withholding taxes: Dividends 10% (20% for bearer shares), Interest 15%, Royalties 15%.
Tax treaties: Panama has not concluded any double-tax treaties.
Dividends: Dividends are subject to a final withholding tax of 10%, with a 4% advance payment on non-distributed profits.
Revenue protection: There is no specific transfer-pricing or anti-haven legislation.
Groups : There are no provisions for group taxation.
Incentives: Farming and forestry; export; mining; industrial promotion; tourism; call centres.
Other taxes: Annual tax on insurance companies, Annual tax on banks, Business and industrial licensing tax, Customs duties, Immovable property tax, Payroll tax, Unimproved land tax, Property transfer tax, Stamp duty, Annual fee on corporations. |
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