Panama stands out as one of the rare countries globally where both nationals and foreigners receive equal treatment under the law. The republic’s commitment to providing exceptional conditions for investors dates back to its inception.
Over 40 laws and decrees offer special incentives to investors, particularly regarding taxes and operations. These incentives apply to various sectors, including tourism, export processing zones, mining, reforestation, insurance and reinsurance, agro-industry, oil-free zones, and infrastructure and construction.
Panama has long served as a magnet for global investors attracted by its legal security and outstanding competitive advantages, including those outlined in the Investment Stability Law, Law No. 54 of July 22, 1998.
James Li, COO of Pensio, a company specializing in property management and guaranteed investment income programs, has firsthand experience of these benefits. He shares insights into what drew their attention to the country.
Conducting extensive research into destinations offering the strongest investment guarantees for their clients, Panama emerged as the top choice in the region.
He observed, “Our exploration and analysis of the best emerging real estate markets and partnership opportunities unequivocally led us to focus on Panama.”
Seeking a geographical analogy, the COO of Pensio drew a comparison between the country and major global cities. “For many, Panama embodies the essence of Manhattan, London, or Hong Kong in Latin America, boasting numerous shopping centers, restaurants, and vibrant nightlife. Panama offers an exceptionally safe living environment and facilitates Permanent Residency for investors.”
In his assessment, “Panama boasts the world’s premier tax system, attracting many emerging companies in technology, investment, construction, restaurants, retail outlets, and businesses.”
The Panamanian Business Ecosystem: Essential Factors for Business Success
For over a century, Panama has served as a pivotal hub for the commercial expansion of the region and beyond. Its significance extends beyond commerce and corporate affairs, encompassing civil aspects. Individuals meeting specific criteria through various reforms can integrate into the national productive framework, leveraging the tools provided to enhance their quality of life and engage in international estate planning.
These are several key considerations when contemplating launching a business in the country.
DOLLARIZED ECONOMY
Adopting the dollar as the official currency has enabled Panama to establish itself as a globally respected banking hub. This currency stability has fostered confidence in deposits and facilitated the development of credit products with more favorable terms, as there is no risk of devaluation.
Moreover, this monetary stability has contributed to maintaining a low inflation rate, creating conducive conditions for robust economic growth and positioning Panama as a highly appealing destination for foreign investment.
The country’s recognition as an investment-grade economy is underscored by the ratings of the three leading global risk rating agencies: S&P, Fitch, and Moody’s. Each agency has awarded Panama investment-grade ratings, such as BBB+, BBB, and Baa, placing Panama on par with other esteemed nations like Chile, Mexico, Peru, and Uruguay and surpassing many within the Central American region.
Therefore, if you are considering Panama as a location for business ventures, it’s crucial to note that the dollar is the official currency.
COMPANIES
Panama has pursued a series of public policies to attract foreign capital for years. These laws are designed to ensure legal security and investor protection and to facilitate the entry of qualified professionals providing services to the country.
Panamanian legislation offers various legal structures for businesses, with the ‘Sociedad Anónima’ (Anonymous Society) being the most commonly used due to its flexibility and ease of management for both local and international operations. One key advantage of these companies is their ability to conduct activities not subject to taxes in the country.
Regulated by Law 32 of 1927, which governs Public Limited Companies in Panama, these entities possess unique and advantageous characteristics. This legal framework benefits nationals and extends its advantages to non-resident foreigners seeking a legal entity to conduct their commercial and business activities abroad.
Its operation is based on the formulation of a Social Pact registered in the civil registry, which requires the participation of at least one shareholder, two Panamanian lawyers, and a minimum management team of three signatories.
Generally, opening such a company in Panama takes no more than six days on average.
LEGAL SECURITY AND PROMOTION OF FOREIGN INVESTMENT
Law 54 of July 22, 1998, stipulates that foreign investors and the companies they invest in enjoy the same rights and obligations as nationals, with limitations only as outlined in the Constitution and the law. However, as the law specifies, specific strategic sectors are reserved exclusively for Panamanian participation.
Panama has taken significant steps to foster a conducive environment for business development. The enactment of Law 57 on October 24, 2018, amending Law 41 of 2007, which established the special regime for establishing and operating Multinational Company Headquarters (SEM) and the Multinational Company Headquarters Commission, introduced new regulations for SEM companies.
Over 150 multinational corporations have chosen to establish their headquarters in Panama, attracted not only by regulatory and economic incentives but also by its strategic location and robust logistical infrastructure. These companies include Procter and Gamble, Adidas, Halliburton, Dell, Bayer, Caterpillar, Bauer, Phillips, and Nestlé.
This legislation benefits companies and extends advantages to the senior executives employed by these entities.
TAX BENEFITS
From a legal standpoint, Panama offers a comprehensive array of 21 tax benefits covering many areas. This categorization reflects a nuanced system designed to address the diverse social, political, and public needs that have emerged throughout the country’s recent history. Central to this framework is the ongoing goal of attracting international and foreign investments to the national territory.
Moreover, Special Economic Zones have been established, enhancing its strategic positioning and serving as the ideal platform for business growth. These zones offer special tax, labor, and immigration benefits. Some examples include:
- City of Knowledge
- Panama Pacifico
- Export Processing Zones
- Colon Free Zone
Visas
The country has consistently worked to attract the attention of hundreds of entrepreneurs, retirees, and companies, all of whom have taken advantage of the benefits offered by the state to establish themselves here. Below are the most notable categories:
Permanent Residence for Economic Reasons for Qualified Investors
The program stipulates that to qualify for this visa, a foreign investor must invest USD 300,000 from an external source, free of liens, in real estate. A local bank can finance the surplus through a mortgage loan if the investment amount exceeds this threshold. Investments can be made in completed projects or by incorporating a trust to secure real estate purchases.
Permanent Resident Permit for Economic Solvency
This visa offers an opportunity to establish a legal business for foreigners interested in investing a minimum capital in the country, except for those reserved for Panamanian nationals, such as legal and medical professions or certain retail businesses. The conditions for applying for this visa can be found here.
Visa Friendly Countries
It is a reciprocity visa, which extends to countries like the United States, Canada, and certain European nations. This visa can be obtained by fulfilling basic requirements and guaranteeing access for the resident.
Retiree Visa
The Retiree Visa, also known as the Pensionado Visa, is highly sought after internationally, mainly due to the opportunities it offers non-active individuals to engage with Panama’s productive, tourist, and labor sectors. Several factors contribute to its ongoing relevance.
Initially introduced in the 1980s, the program has endured, fueled by the surge in residential tourism throughout the 1990s and 2000s
THE RETIREE VISA: IMPORTANT DOCUMENT REQUIREMENTS FOR APPLICATION AND OBTAINMENT
After obtaining the retiree visa, the holder must provide proof of monthly income, which must be guaranteed for life and meet a minimum threshold of one thousand dollars per month.
This income must be derived from a retirement pension from either a retirement agency or a private company. Additional requirements may vary based on the individual’s work history and association with the pension provider.
Typically, the required documents include the owner’s passport and the corresponding withdrawal document confirming the certified income. A federal criminal record check, a Health Certificate, and an Affidavit Form are typically needed.
Finally, proof of residence in Panama is essential, and depending on the circumstances, this can be demonstrated through documents such as a utility bill or a rental contract.
ITS MAIN BENEFITS ARE:
One-time exemption from paying taxes on purchasing household items up to USD 10,000.
50% discount on entertainment venues nationwide, including movie theaters, concert halls, and sports events.
30% discount on bus, boat, and train fares.
25% discount on airfare rates.
50% discount on hotel stays from Monday to Thursday.
30% discount on hotel stays from Friday to Sunday.
25% discount at restaurants.
15% discount at fast food establishments.
15% discount on hospital bills (excluding cases where insurance applies).
10% discount on prescription medications.
20% discount on medical consultations.
15% discount on dental and eye exams.
20% discount on professional and technical services.
50% discount on home loan closings.
25% discount on utility bills.
15% discount on loans taken in your name.
1% reduction on mortgages for housing used as a personal residence.
All these factors contribute to the growth of investment and business attraction in Panama. Li emphasizes, “Panama is like a stunning ecological wonderland, unique in the world for seamlessly blending urban living with beaches and ecotourism.” He adds, “It boasts the highest biodiversity globally, with beaches, mountains, forests, rivers, and reefs spanning both the Pacific and the Caribbean, all just a few hours away.”
Additionally:
- Panama has a new international airport, with flights to all major destinations worldwide.
- Private education is offered in Chinese, Greek, English, French, Italian, and Spanish.
- There are many university options, and children of Permanent Residents who want to study in America can quickly obtain a student visa as Permanent Residents of Panama.
- The private healthcare system is accessible and one of the best private systems in the world today, one of the reasons why it was rated as one of the best places to live.
- The residential and vacation resort real estate market has grown on average 8% annually for the last six years.
- According to a report by International Living published in Forbes, Panama is one of the best places to retire in the world.
Panama is the ideal location to invest and establish businesses in Latin America.
