Panama Companies and Panama Foundations

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Panama

Panama has been a choice jurisdiction for investors and multinational corporations globally, thanks to strategic location, modern legislation, competitive benefits and modern infrastructure. A major benefit of Panama is its dollarized economy which removes potential currency exchange risks, while highly skilled workforce helps reassure productivity.

Panama does not levy tax on international income and consequently, Panama companies functioning offshore are not taxable on any income, dividends or interest derived offshore. Only income and profits generated within Panama’s borders are subject to local taxation, making the Panama offshore corporation an offshore companies in the true sense of the word. An annual company fee is however payable to the Public Registry for re registration, as registration is not perpetual; usually valid for one year from the date of company incorporation.

Lots of opportunities are made available to Panama companies established in free zones within Panama. In the Colon Free Trade Zone, for instance, Panama corporations are able to engage in re-exporting goods, direct sales to overseas customers via third countries, sales transfers between companies based in the free trade zone and manufacturing. With respect to taxation, fiscal incentives through relief from federal and municipal taxation, tax credits, special income tax rates depending on the number of persons employed by a company, exemption from tax on profits generated outside Panama and exemption from withholding tax on dividends earned from direct sales enable the competitive advantage of corporations based in the zone. A host of exemptions on tariff and duties apply to goods imported into and exported from zones and warehoused using zone facilities.

Panama Offshore Business Entities

  • Panama Foundations
  • Panama Corporations
  • Limited Liability Companies
  • Offshore Trusts
  • General Partnership
  • Panama Civil Partnership
  • Panama Commdandite Company

Panama Foundation

Law

Panama Foundation Law No 25

Features:

  • May be created by one or more corporate bodies
  • The Charter sets the regulations which govern the foundation, including the duration of the foundation
  • May be established to become effective on the day of constitution or on the occurrence or on the founder’s death
  • The founder’s personal assets and the patrimony of the foundation are separate
  • May not be established with an initial patrimony that is less than US $10,000
  • The patrimony can be stated in any currency but must not be inferior to the set amount
  • Is irrevocable, except if the charter has not been duly registered at the Public Registry
  • The objective and purpose of a foundation are carried out by the charter.

Panama Foundation Taxation and fees

Formalities such as the termination of a foundation, its formation or an amendment, including the transfer or encumbrance of assets and the funds origination from these transfers are not taxable. Funds deposited by both juridical and natural persons whose income is generated from overseas sources are exempt from taxes

Panama Corporation

Law

  • Commercial code and law 1984 as stated in decree of 1997
  • Minimum of two persons needed for incorporation
  • Share the same powers as an international business company
  • May only offer its services to non-residents
  • The public deed must be filed at the registry before incorporation can take place
  • Articles and Memorandum must be protocolized before being registered at the registry
  • The Articles are required to be authenticated by a Notary Public if they are not in the form of a public deed
  • A corporation is unable to vote shares of its own stock
  • Shareholders are required to keep their meetings in Panama except if provided for otherwise in the articles
  • Bearer shares may be issued on the condition that they are paid in full and non-assessable
  • Bearer shares are transferable once the certificate representing the title is submitted
  • A proposed name can be reserved at the registry for 30 days
  • A corporation constituted under the laws of another jurisdiction may continue or redomicile in Panama once the correct filing procedures are met

Panama Limited Liability Companies

Features:

  • Minimum number of two (2) members upon formation
  • Maximum number of twenty (20) members upon formation
  • In the event that two (2) partners are spouses, the minimum number of members required upon formation is three (3)
  • The total made in contributions by partners represents the paid-in capital of the company
  • Minimum paid-in capital is US $2000
  • Maximum paid-in capital is US $500,000
  • At least half of the cash contributions is required to be paid-in within five years
  • The paid-in capital must be represented in social participation, accruable and divisible non-negotiable quotas
  • Names must end with either of the following: Sociedad de Responsabilidad Limitada or S. de R.L.; Sdad, Ltda; Ltd
  • The name must be the same as that of another LLC constituted in Panama

Panama Offshore Trust

  • Trusts can be established either for specific assets of any nature or form or for all or a portion of any patrimony
  • Except in a case where stipulated in the Deed, trusts constituted in Panama are irrevocable
  • Trusts can be inter vivos and established by a private document or a public deed
  • Panamanian trusts earning income that is taxable are liable to taxes; these taxes are to be paid by the trust and not the trustee
  • Trusts involving real estate property within Panama are established with the use of a public deed
  • Panamanian trusts are not subject to any registration or requirements for a minimum capital or fees
  • The trust documents can be presented either in English or Spanish
  • Panamanian trusts are given special provisions which protect them against foreign inheritance laws, creditors or judgments
  • Panamanian trust law provides for the establishment of purpose

Panama General Partnership

  • The Commercial Code allows for the formation of Panama general partnerships.
  • The partners of a Panama general Partnership have unlimited liability

Panama Civil Partnership

  • A Civil Partnership (Sociedad Civil) can be established under the Commercial Code and Law No. 24 of 1966
  • Civil Partnerships are commonly used by people such as accountants and lawyers
  • Civil Partnerships have legal personality
  • Partners have unlimited liability

Panama Commandite Companya

  • A Panama Commandite Company (Sociedad Comandita) is formed under the Commercial Code and Law No. 24 of 1966
  • The Commandite Company is a hybrid form of a partnership and corporation combined
  • One partner of the company is required to assume unlimited responsibility
  • The liability of limited partners is limited the amount of capital that has been subscribed
  • Shares of a Commandite Company can be transferred
  • Commandite Companies are not as commonly used as before
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