Financial Licenses

E-Money Licenses in Panama

7/15/2021 8:00:00 AM
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Panama is maybe the unique country in Latin America that has ideal conditions to create an E-money business. In a nutshell, we will tell you some facts that make this country so especial:

-An unique location. Panama has an unique position in the planet thanks to the Panama Channel, where it passes about 5% of the global trade.

-Often called the Switzerland of Latam, Panama is the main financial center in Latin America, with dozens of both foreign and national banks offering its financial services.

-An increasingly friendly business climate fostered by one of the biggest free zones in Latam and a democratic government that allows foreign investment to thrive, something uncommon in Latam, a region plagued with socialist leaders.

-Panama has a territorial tax regime. This means that only your Panamanian-sourced income will be subject to taxes. Also, this small country has a corporate tax rate of 25%, really low for Latam standards. 

We could continue all day listing facts that make Panama so ideal for doing business, but this is better covered in the Doing Business section. In this article we will tell you in detail all you need to know about e-money licenses and how to set up your e-money business in Panama.

What is an Electronic Money Institution?

Coins, cash, debit cards, bitcoins… money has dozens of presentations in today’s world. So on, what is e-money? Basically, it is a monetary value stored electronically. This is done by holding the value in a central accounting system or an electronic carrier. Some examples of e-money are bank deposits or even an Amazon gift card.

Having explained what e-money is, we will continue telling you what an Electronic Money Institution (EMI).

We will begin by saying what it is not: it's not a bank. At first sight you may think that because it resembles one, as it allows you to save money or even have a prepaid card, but it is not, because it can’t take credit risk or offer investment products.

E-Money institutions (EMI) allow you to hold electronic money. To do so you need to have an E-money license; the legal form will vary depending on the jurisdiction. Below, we will talk to you about EMIs in Panama.

EMIs in Panama

E-money institutions can be organized in Panama as Financial Services Companies. These are special types of Panama Corporation (IBC), that were granted an “Aviso'' by the Ministry of Commerce. This is a special license that allows these companies to do certain financial transactions.

Some of the activities that a Financial Services Company can perform are:

-Payment processing for any third-party

-Act as an intermediary for payment processing

Is possible for Financial Service companies to pave a way to provide additional services to clients in other jurisdictions or to outsource services offshore for tax purposes. Regarding Forex transactions and e-wallets, you would need other licenses. Cryptocurrencies in Panama are in a gray area, so you would have to ask authorities which type of license the business would need.

However, it is important to note that a Financial Service Company is not a financial institution and it should be strictly used for payment processing. You should never advertise services such as lending or deposit taking. If you do so, your entity could face trouble with Panamanian authorities.

How to Open an E-money Company in Panama?

In order to get a Financial Services Company, you must obtain permission to offer financial services from the Ministry of Economy and Finance. The application must be submitted by a lawyer which has the right to practice law in the country. Application must have the following information:

-Name, family status, composition of the family and the address of the applicant.

-Certificate of criminal record.

-A name for the financial company and its contact information (address and telephone based in Panama, etc)

-A proof of the availability of the initial capital.

-The tax number.

-Description of the objectives, economic and financial projections of the company.

-Date of your registration in the public registry, with the registration data.

-Name of its directors, dignitaries and legal representatives with their respective id's.

-Indication of the capital with which the business will operate. Duly established in the social capital of the Corporation.

Also, you have to pay a fee of 1750 balboa (150 USD) for issuing the permit in the Ministry. After that, the information has to be entered in the State Register of Financial Entreprises. You will have to pay an administrative fee that ranges between 750 and 1000 balboa (same quantity in USD) depending on the financial activity. Minimum initial capital is 500,000 balboas for Casas de Remesas (entities like Western Union). Is also required to contribute with a security deposit of 50,000 USD in case of harm to third parties.

A financial services company also needs a legally registered office address, a telephone in the company’s name with fax and email/fax/phone forwarding service, a board of directors (minimum three individuals) and at least two (2) shareholders. Creating a Financial Services Company in Panama can take up to three weeks to complete.

Another fees:

-Operation “Aviso”: $100

-Accounting Certificate: $320

-Economic Study: $1000

-Certified copy of signature: $50

-Public Registry Certificate: $50

-Ministry of Commerce Authorization: $5000

-Notarized documents: $80

About Taxes

As we told you above, this type of company is ideal to optimize taxes in other jurisdictions. As this entity needs a legally registered place of business, the city council (“Municipio” in Spanish) will collect a monthly tax of $20, just as it collects from every local business. This will be the only requirement to maintain this entity in tax compliance. For any other, the Panama Financial Services Company will be considered “non-resident”.

What Can We Do for You?

Panama is one of the last frontiers of financial freedom. Being the principal financial center in Latin America, this small country presents a unique position in order to do business and optimize your taxes.

Our mission is to help you in your permanent pursuit of financial freedom. We have developed a wide network of experts that are always searching for the best business opportunities and tax optimization in the world. Regarding Panama Financial Services Companies, we can help you to create it and advise you in every step of the process.

A Financial Services Company is the best way to optimize your taxes in Panama, create it now with Mundo Expert!

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