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Establish your business in the best jurisdiction in Latin America: Incorporate a company in Panama

calendar 9/6/2020 8:00:00 AM
author Aldemaro Financial and banking
If you know at least a bit of the financial world, you know that Panama is a top player. This country is among the top three banking jurisdictions on the planet, it has the best free trade zone in Latin America, and it’s a global crossroads, thanks to the Canal.

Whether you wish to establish a holding company, an import and export business, or whatever trading or service business you have in mind, company incorporation in Panama should be at the top of your list.

Generally, creating a company is a complex process. But some countries understand the significance of offering a swift process towards establishing a business as it will benefit them through job creation and tax payments.

And Panama is one of them. Opening a company is a rapid, six-day process, and it comes with fantastic benefits, as it will give you easy access to the Panamanian banking system, the Canal for shipping your products across the world, and the terrific Panamanian tax system.

Panama is also a top destination for online businesses. You can create your company in Panama and manage it remotely, providing your services online. This is an ideal option for companies that offer consulting services or e-Commerce, especially when considering there are no international transaction taxes in Panama.

In fact, in Mundo, we have a merchant account package that includes the establishment of a company in Panama and a bank account where you can receive your payments made on your e-commerce platform.

Want to know more about our banking services in Panama? Read our article right here!  

Moreover, Panama is one of the most stable democracies in Latin America. Since the 90s, almost all Panamanian governments have applied pro-business policies, which has given this small country the reputation it has as an ideal investment and business hub.

But the main benefit of establishing your business in Panama is that it has a territorial tax system. That means that only your Panamanian-sourced income will be taxed in Panama. All foreign-sourced income is entirely tax-free, which is a terrific benefit if you wish to offer your services remotely.

Add to that the Panama Canal, which is responsible for more than 5 % of the world trade, which gives the country a $2 billion revenue per year. That means Panama has a stable, thriving economy, that joined with the largest free trade zone on the planet, allows it to sustain welfare programs without increasing the fiscal pressure.

Furthermore, its special geopolitical status due to the Canal makes Panama a peaceful and stable country. It is generally neutral in global affairs, which makes it somewhat similar to Switzerland. That means it is an ideal hub to establish your headquarters, as it enjoys fantastic relationships with European countries, the US, and China. Panama doesn’t have an army, nor it involves itself in major global issues.

As the years go by, Panama has looked at Singapore as a role model and started modeling its foreign investment legislation in the Singaporean example.

The result? Panama is one of the top financial and business centers of Latin America and even the whole world.

When you start doing business, you also start learning about the significance of choosing the right jurisdiction for your activities and business and the proper guidance. And, in Mundo, we have the best experts to help your business thrive.

It’s not a coincidence that over 500,000 corporate structures have been registered in Panama, making it the second most popular jurisdiction in the world after Hong Kong.

That’s why we love Panama. We think it is one of the best jurisdictions to start and develop a business.

 

Why Panama? Seven reasons to start a business in Panama

A stable democracy and economy

Thanks to the Canal, Panama is a key commercial hub. It allows access for Latin American, European, and American businesses to the Pacific Ocean and Far Eastern businesses to the Atlantic Ocean.

This, the favorable tax system, and the top-notch banking business boast the Panamanian economy. Its unique commercial status also leads the country to have good relations with all major powers and not get involved in geopolitical struggles.

Simple process

Starting a business in Panama is simple. It’s a five-step process that you can do in a week or even less if you have the right assistance, which we can give you in Mundo thanks to our top-level experts.

Enhanced asset protection

Panama uses the US Dollar as currency, which allows it to have a sound and stable monetary policy. This will help you to avoid the loss of value of your capital.

Moreover, the Panamanian banking system is one of the most reliable on the planet, as it is usually cited to be at the level of Switzerland and the US.

Panama allows you to protect your corporate assets using designated directors of your company that will enable you to keep your name away from company records and your money safe from third-party claims.

Fantastic tax system

Panama offers beneficial tax rates for companies, especially international companies. The biggest advantage? A territorial tax system. That means only your local income will be taxed at a 25 % rate. Your foreign-sourced income is entirely tax-free.

In fact, if your company is established in the free zone (more on that ahead), it’ll pay zero taxes on the importation of goods, services, or technologies destined for exportation.

Ideal for e-businesses

Panama is a top destination for online businesses. You can create your Panamanian company and manage it from whichever country you like, which is a top option for businesses that can be managed online, such as e-learning platforms, consulting services, and e-commerce companies.

Business visa

Investing in a business may also be your entryway for a residency by investment. You must invest at least $160k in an already-existing business or in creating a new business. This visa will allow you to live for two years in Panama. The period can be extended three times, and afterwards, you can apply for a permanent resident visa. This will allow you to do business in Panama with more freedom and also take advantage of its fantastic personal income tax rates.

Want to know more about our immigration services in Panama? Read our front-page article righ there!

How to start a business in Panama?

Starting a business in Panama is a simple and straightforward process. But before discussing the steps, which is the ideal corporate structure?

Well, like any country with a modern legal system, the top corporate structure in Panama is the Sociedad Anónima, which is somewhat equivalent to a limited liability company. In SAs, liability is limited to the extent of the contributions of a shareholder. It allows ideal asset protection, as it is considered a separate legal person from its shareholders and directors. Furthermore, the income of a SA isn’t taxed in Panama if it’s foreign-sourced.

SAs require at least three directors.  To operate within the Panamanian territory, a SA needs to apply for an operating license, which is usually granted quickly. This will allow the company to be considered a Panamanian tax resident, and, as long as it operates through trading business and not just passive investment, the company will only report its tax information to the Panamanian authorities.

Starting a business in Panama is a simple process. Let’s walk you through it:

Hire a representative (Mundo) to prepare the articles of association

Notarize the articles of association. This costs $75, and the articles must include:

  • Name and domicile of all subscribers
  • Domicile of the company and resident agent
  • Name and address of all directors and officers
  • Name of the company

The objectives of the company

  • The name of the president, secretary, and treasurer. The directors can also serve in these positions, and they don’t need to be shareholders
  • Details about the capital and how the shares are divided
  • Duration (can be perpetual)
  • Register at the public registry and pay the annual registration tax ($300). Entry fees for the mercantile registry are $50 for the first $10k in capital stock, and $0.75 for each additional $1k.
  • Obtain a notice of operations. This step is simple and can be completed online. You receive your tax number after paying the $55 fee.
  • Register for the employer’s inscription number and register your employees at the social security

And that’s it. The whole process can take as little as five working days.

Clearly, if you open your company remotely, the process may look a little different. We’ll explain that ahead.

Also, if you want to manage your business from your home country, you need a corporate bank account in Panama.

And guess what? With Mundo, you can create your business and open a corporate bank account without even stepping foot in Panama.

Check out our Panama banking article so you may see all our banking services in Panama


Free trade zones

Panama has 12 free trade zones, of which one is of special interest: We’re talking about the Colon FTZ, which is the largest of Latin America, and one of the largest in the whole planet. It has more than 1,8k registered companies, has created around 17,5k permanent jobs, and receives almost $20b per year in income.

The Colon FTZ is the most important logistic distribution platform in Latin America. Dozens of multinational corporations have established their distribution centers in the trade zone, such as HP and Huawei.

What activities are benefited by the FTZ? Introduction, storage, exhibition, packing, re-packing, unpacking, tagging, wrapping, mixing, bottling, and much more.

Any FTZ company will be considered as a fiscal resident in Panama, which means it only reports its income to the Panamanian authorities, and all goods and services sold outside of Panama are tax-exempt. In some instances, a meager 1 % business volume tax applies.

An FTZ company doesn’t pay taxes on its importation of goods and services destined for exportation. That means you can assemble products with imported parts and export them completely tax-free.

So, to sum it up, an FTZ company has the following advantages:

  • An FTZ company will be considered the main office of the company, which means you’ll only report your income to the Panamanian authorities
  • International income is tax-free
  • Imports and exports are tax-free, including VAT
  • The FTZ has simpler hiring policies
  • Commercial crypto companies are not prohibited nor regulated

And in Mundo, we have top experts that can help you establish your business in one of Panama’s FTZs.

 

Who are we, and what can we do for you?

In Mundo, we are committed to your freedom. It is our core value and our main driver. We want to help you live, do business, work, invest, and protect your legacy freely.

In our 25 years alongside NTL, we’ve built a paramount network of experts and partners across the world for the top financial, immigration, banking, corporate, and asset protection services.

That’s why NTL’s main headquarters is in Panama. We believe this is one of the top jurisdictions for you to establish your business, and for that reason we work with top financial experts and lawyers.

We can help you start your business in Panama remotely. This is a particularly good option for e-businesses that focus their services in consulting, e-learning, or e-commerce. Still, if you intend to start a physical business, Panama is a top option thanks to its sound banking industry and its friendly tax regime.

This is especially true for manufacturing and logistics businesses. They can operate in one of the 12 Panamanian FTZ that offers incredible duties and tax benefits for their companies.

And guess what? We can help you with all that. We are registered agents in Panama.

The first we’ll need from you is a basic set of due diligence documents and requisites, such as:

  • Names of the directors (must be at least three) and signatories
  • Capital standard of at least $10,000 divided into 100, $100 shares
  • Source of funds and accounting records
  • KYC forms of the directors, beneficiaries, and shareholders
  • KYC form of the entity
  • Due diligence checklist
  • Due diligence certifications

Our package includes, for a competitive fee, the following processes:

  • Company incorporation in Panama (five working days)
  • Incorporating nominal directors to protect your identity and your assets (five working days)
  • Corporate bank account (one to two months)
  • Virtual office (one working day)
  • Obtention of the tax number (ten working days)
  • Obtention of the notice of operations (Two working days)
  • If you wish to operate in one of the Panamanian FTZ, we can also help you to obtain the commercial license to operate in the zone.

Panama is the best jurisdiction in Latin America to do business. Starting a company in this gorgeous country is a fantastic opportunity for asset protection, tax planning, and portfolio diversification.

What are you waiting for? Contact us right now  and start your Panamanian company!

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