Transcript PANAMANIAN TAX LEGISLATION

INVESTING IN PANAMA
Escobar, Della Togna, Icaza & Jurado
Attorneys at Law
September 2nd, 2011 – Panama City, Panama
Background
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Jacqueline Escobar – Graduated from Duke University –
Masters in Law (International Commerce Expert)
Marisel Della Togna – Former Deputy Director of
Panamanian Internal Revenue Service (Tax Consultant)
Marisel Jurado – MBA and Masters in Accounting
(Corporate Law Expert)
Maruquel Icaza – Graduated from American University,
– Former Vice Consul Panamanian Embassy at
Washington, D.C. (Immigration Consultant)
Panama´s Overview
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Reasonable life here on about $1,200 a month.
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Comparative advantages
Panama´s Economy:
Dollarized economy.
Services based economy (banking, commerce, transportation,
ports and tourism).
The country's industry includes, manufacturing of aircraft spare
parts, cements, drinks, adhesives, textiles and more.
HEALTH CARE AND INSURANCE
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Infrastructure (e.g. Punta Pacífica Hospital which is affiliated to the John
Hopkins Hospital in the US)
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Low cost medical services and health insurance premiums
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Recognized local and international insurance companies (Blue Cross Blue
Shield)
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Your health insurance policy can cover you for hospitalization and/or
medical expenses. You can obtain Local or International Coverage.
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By Law, all vehicles have to be insured.
INCORPORATION IN PANAMA
The most common legal instruments for Incorporations in
Panama:
1- Panamanian Corporations (Used to do business in Panama
or to protect assets such as properties, any legal activity)
2- Private Interest Foundation (Asset Protection)
PANAMANIAN CORPORATIONS
Law 32 of 1927
•IDENTITY OF DIRECTORS
Nationals or foreigners may establish a corporation
• SHARE STRUCTURE
Bearer and nominative shares are also permitted.
A single person or a corporation may own all shares.
• CORPORATE DIGNITARIES & RESIDENT AGENT
Panamanian law requires a President, a Secretary and a
Treasurer, and a local resident agent.
• DURATION AND DOMICILE OF CORPORATION
Law 2 of 2011
• KNOW YOUR CLIENT – DUE DILIGENCE
Steps to Set Up a Corporation
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Check name availability in the Public Registry.
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Preparation of legal documentation (i.e. corporate by-laws).
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Upon registry, the Resident Agent prepares share certificates and legal
books for the corporation.
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The annual corporate tax is of US$300
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Length of time for organizing a company: 3-5 days
Doing Business in Panama
1.
Set up a company
2.
Obtention of tax payer I.D. number (R.U.C.)
3.
Obtain a Commercial License to operate in Panamá (Aviso de
Operación – Retail activities restriction by Law)
4.
Register the company in the Municipality Office (Municipal Taxes)
5.
Hire personnel / Labor contracts sealed in the Ministry of Labor
6.
Register personnel in the Social Security of Panama (The rate paid
is of 12% employers – 8% employees)
ASSET PROTECTION
PRIVATE INTEREST FOUNDATIONS
Private Interest Foundation
Law 25 of 1995
•These private interest foundations shall not be profit oriented.
• They may engage in commercial activities in a non-habitual
manner.
• The founders must select a name to identify the foundation.
• The objectives, duration, domicile, and board of the foundation
must also be indicated, along with the beneficiary or
beneficiaries.
Private Interest Foundation
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Foundation charter must be notarized and registered as trust deed
does.
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The private interest foundation is very similar to a trust in its
operation, but unlike the trust, there is no need to transfer the assets
to a third party.
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When the assets are from outside the territory of Panama, no taxes
are levied when these assets (whether movable or immovable, shares,
bonds, and others) are transferred.
Private Interest Foundation
•It
may be established for the benefit of a person or
persons, a family, or a specific social purpose.
•PIFs
are a viable solution for estate planning,
providing privacy, and protection of assets.
Private Interest Foundation
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Your Foundation books are mantained 100% private
and confidential by law.
The Beneficiaries are not registered in the Public
Registry.
Beneficiaries can be appointed through a Private
letter of wishes written and signed by the Protector.
The PIF does not require Paid In Capital
IMMIGRATION
PENSIONADO PROGRAM
Law No. 9 /June 24, 1987
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Pension income of at least US$ 1,000.00 per month and an
additional US$ 250.00 for each dependent.
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Private and public pensions apply (retired by the government,
social security or private pension programs)
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Your application must be processed by a Panamanian
attorney through a Power of attorney.
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Indefinite legal residence status
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Does not grant you a Passport nor a Panamanian I.D. Card
Private Income Retiree Visa
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This visa has an income requirement of US$ 850.00 monthly.
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Approximately US$350K (Time deposit) with current interest
rates.
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The time deposit has to be free of any liens.
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This visa has to be renewed every five (5) years.
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Grants Special Panamanian Passport but not Panamanian I.D.
Card
IMMIGRANT VISA AND RESIDENCE PERMIT TO
FOREIGNERS WITH ECONOMIC SOLVENCY
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The Self-Economic Solvency Visa offers three (3) different
investment options to qualify for residency status in the Republic of
Panama:
Investment Option A: Requires a minimum of US$300,000 in a
three (3) year time deposit (or "certificate of deposit" or "CD")
without liens at any licensed bank in Panama.
Investment Option B: Requires a minimum of US$300,000 in a
titled property (real estate) in Panama without any liens.
Investment Option C: Requires a time deposit and property, for
the amount of US$ 300,000 for both investments.
General Documentation Required
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Registration Process is the first step. To register at the Immigration Office,
the applicant must go in person with his original passport and 2 pictures.
Power of attorney (we provide it)
Health certificate issued by a Panamanian Doctor.
Police report.
Complete passport copies (all pages including cover), notarized in
Panama (we take care of that).
Six (6) photographs
Sworn statement about personal background. (We provide the form)
All document coming from a foreign country needs to be authenticated
by a Panamanian Consulate in the U.S or by Apostille. If it is a private
document, it has to be notarized before sending it to the Consulate.
All documentations requires to be translated into Spanish by a
Panamanian authorized translator.
OPENING BANK ACCOUNTS
BANKING REGULATIONS
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A foreigner can have a Panama Bank Account.
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The bank account minimum is $1000, for both checking and savings
accounts, in USD or Euros.
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Article 194 of this law specifically enshrines the client’s right to privacy and
confidentiality in its relationship with the bank with respect to third parties,
and Article 110 makes explicit the bank’s obligation to maintain this
confidentiality.
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More than 75 banks are stationed in Panama, 36 of them with international
(offshore) licenses. The financial sector represents a full 8% of the GDP, and
employs 17% of the labour force.
BANK ACCOUNT REQUIREMENTS- PERSONAL ACCOUNT AND
ACCOUNT- Please note that requirements can vary from Bank to Bank.
CORPORATE
Requirements to apply for a personal account (deposit) – Basic requirements.
• Personal interview with Branch Manager – Main Branch
• Required documents:
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- Passport – original
- Bank reference letters (preferable two)
- Personal reference letters (from a known friend /customer with residence in
Panama )
- Business reference letters (job, accountant, lawyer or broker). (Two in total).
Internal bank papers will need to be signed and completed by applicant.
Application documents will be evaluated by our Compliance Office
Bank reserves the right to request additional information if considered necessary
Brief description of background and current activities.
Requirements to apply for a deposit account in the name of a corporation
(local) with foreign directors and/or signers – Basic requirements
• Personal interview / bank forms
• Copy of articles of incorporation and its amendments (if applicable)
• Legal I.D. for all directors of corporation are required
• Reference /Presentation letter from lawyers in Panama.
• Bank reference letters
• Business/commercial letters of reference of corporation and or directors
and signers to account
• Validation Certificate of Corporation issued by the Registry Public in Panama
(recent)
• Brief description of background and current activities of the authorizing
signatures.
PANAMANIAN TAX LEGISLATION
&
BENEFITS
MAJOR TAXES
1. INCOME TAX
Individuals
Companies
Up to 11,000
O%
11,000 – 50,000
15%
+ 50,000
USD5,850 for the
first 50,000 and
25%
of
the
surplus
PERIOD
TAX
2011
27.5%
2012
25%
2. ALTERNATIVE METHOD FOR CALCULATION
Companies with taxable income of more than 1.5 millions pay income tax on the
greater of applying the traditional method (25%) or 4.67% of total net revenues
2.1 ADVANCE INCOME TAX - Companies that earn taxable income
1% of the monthly taxable income
3. TRANSFER OF MOVABLE GOODS & SERVICES TAX / VAT (7%) Exceptions – (10% & 15%)
4. SELECTIVE CONSUMPTION TAX (varies depending on the goods such as cars, cigarettes,
liqueurs, etc.)
5. COMMERCIAL OR INDUSTRIAL LICENSE TAX
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2% of the company’s total capital , with a minimum payment of 100 and a
maximum of 60.000
6.
INCOME TAX RELATED TO REAL ESTATE
a.
Habitual Business
a.
Brand new - Progressive Table
b.
Used – general income tax tariffs as individuals or companies
b.
Non-habitual Business
a. Income tax at a rate of ten percent (10%) on taxable income. The taxpayer is
obliged to pay a sum equal to 3% of the total value of the transfer or the cadastral
value, whichever is greater
7.
TRANSFER OF REAL ESTATE TAX
a. Property vs. Panamanian Corporation (2%)
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PROPERTY TAX
a. Progressive table
b. 1% of land value for condos (if improvements are exempt)
CAPITAL GAINS TAX (10% - 5% witholding)
10. IMPORT DUTIES (varies depending on the good – in many cases
ISC supplanted import tax)
11. BANKING & FINANCIAL INSTITUTION TAX / Insurance Tax (FECI)
12. OTHERS: Oil Tax, Municipal Tax, Vessel Flag Tax
I N C O M E TA X
Individuals earning income in Panama, who stay more than 183 consecutive or
alternate days, must pay income tax
Sums derived from income generated in Panama that are remitted abroad pay
withholding tax of 27.5 % (for companies) or 15% (highest rate for indivIduals)
on 50% of the total income
Foreign Income non-taxable
•Invoicing from a company in Panama
•To conduct transactions
(offshore)
in Panama that have its effects abroad
•To distribute dividends generated from foreign income or from
companies that do not require commercial license
TERRITORIALITY PRINCIPLE
TRANSFERS
ABROAD
• Interest, commissions and others credited or remitted
abroad, pay income tax at regular rates over 50% of
remitted sum,withheld from the total amount paid to the
foreign creditor.
• The beneficiary of the service may deduct the payment
remitted from its taxable income.
GENERAL
PRINCIPLES ON
DIVIDEND TAXES
TAXABLE
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Distribution of such earnings derived from
its internal sales in Panama.
Dividends: Nominative 10%
Bearer 20%
NON-TAXABLE
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Foreign source income is not subject to tax.
Example: company has administration and accounting in Panama;
operations are abroad.
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Co. established in CFZ or special regimes (export & re-export) sales –
distribution of such earnings.
REAL ESTATE
RELATED TAXES
Real Estate Tax
Progressive Table / 1%
condos
Transfer Real Estate
Property Tax
2%
Capital Gains
Tax
3%
TAX ABATEMENT – REAL ESTATE
RESIDENTIALS:
COSTS
FROM
UP TO
MORE THAN
MORE THAN
100,000
UP TO
YEARS
100,000
15
250,000
10
250,000
5
INDUSTRIAL,
COMMERCIAL
AGRO – INDUSTRIAL:
10
PANAMA AS TAX HAVEN
Panama has triumphed in the process of not being considered a
tax haven. Finally, after a successful negotiation and subscription
of 12 double taxation agreements and the implementation of
deep changes within the internal revenue and tax administration,
the OCDE introduced our country into the so called “white lists”.
P E N S I O N A D O P RO G R A M B E N E F I T S
Selective Consumption Tax (ISC) of 5% plus 7% Service Tax on cars (*)
Import tax exemption for households up to US$10,000
Import tax exemption for household goods
25% discounts on utility bills
25% discount on airline tickets and 30% on other transportation
15% discount on loans made in your name
1% reduction on home mortgages for homes used for personal residence (The house
has to be purchased at your name not a company or SA)
20% discount on doctor's bills 15% on hospital services if no insurance applies
15% off dental and eye exams
10% discount on medicines
20% discount on bills for professional and technical services
50% discount on entrance to movie theaters, cultural and sporting events
50% discount at hotels during Monday to Thursday, 30% on weekends, among others.
(*) Law 33 of 2010
SPECIAL
TAX
REGIMES
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COLON FREE ZONE (ANNUAL GROWTH 15%)
EXPORT PROCESSING ZONES
PANAMA-PACIFIC SPECIAL ECONOMIC AREA ($400M)
PETROLEUM OIL FREE ZONES
CALL CENTERS (14,000 JOBS)
CITY OF KNOWLEDGE AND THE INTERNATIONAL TECHNOLOGICAL
PARK
TOURISM
PENSIONADO PROGRAM
TIEA PANAMA - US
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In effect since April 2011
1. Includes the following taxes imposed by the United States:
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(a) Federal income taxes;
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(b) Federal taxes related to employment;
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(c) Federal estate and gift taxes; and
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(d) Federal excise taxes.
2. Includes the following taxes imposed by the Republic of Panama:
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(a) Income Tax
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(b) Real Estate Tax
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(c) Vessels Tax
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(d) Stamp Tax
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(e) Notice of Operations Tax
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(f) Tax on Banks, Financial and Currency Exchange Companies.
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(g) Insurance Tax
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(h) Tax on the Consumption of Fuel and Oil Derivates
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(i) Tax on the Transfer of Movable Goods and the Provision of Services
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(j) Tax on the Consumption of certain Goods and Services
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(k) Tax on the Transfer of Immovable Goods
3. Under section 274(h) of the U.S. Internal Revenue Code, an individual may deduct from income expenses
Escobar, Della Togna, Icaza & Jurado
47th Street and Aquilino de la Guardia Ave.,
The Ocean Business Plaza, Suite 1003
Panama City, Panama
www.edtij.com [email protected]
Tel.(507)340.63.24
Fax. (507)340.63.25