 FORMATION OF COMPANIES IN OTHER JURISDICTIONS
PANAMA CORPORATIONS
Introduction
The Republic of Panama has always played an important role in international
commerce because of its geographic position, from the time of the
Spanish conquerors thru the California Gold Rush of 1849 and then
the construction of the Panama Canal.
In addition to our privileged geographic position, there have
been many other factors, which have greatly contributed to the development
of Panama as a corporate and financial center, such as well-trained
bilingual manpower, the U.S. dollar as our currency, an excellent
telecommunications system and political stability.
Panama is a 100% Tax Heaven
• No tax reporting requirements
• No income tax
• No capital gains tax
• No interest income tax
• No sales tax
• No tax on issuance of shares.
• No tax to shareholders
• No stock sales or transfer tax
• No capital stock tax
• No property tax
• No estate tax
• No gift tax
• No stamp tax
All of these factors, together with Law No.32 of 1927 covering
the organization and operation of Panamanian corporations, have
helped make Panama one of the most important corporate centers in
the world and have made Panamanian corporations accepted by bankers,
investors and governments.
Advantages of Panama
The advantages, which Panama offers as a tax heaven may substantially
benefit persons and companies wishing to use Panama based corporations
for holding purposes or for directing business activities in different
parts of the world.
Among the many advantages of Panama, an interested party will find
the following:
1. Panama is a 100% Tax Heaven
2. The country is virtually located at the crossroads of the world,
with the best air and ocean transportation, both for passengers
and freight, as well as excellent telephone, telefax, telex and
cable communications with the rest of the world.
3. There is a unique banking system, which includes 120 banks
with offices in Panama, among them some of the largest and best
known banks operating internationally, supported by strong bank
secrecy laws.
4. There are absolutely no exchange controls and there is complete
freedom to transfer funds. No registration with the authorities
nor any permits are required for any transaction involving the receipt
or transfer of funds.
5. The monetary system of the country uses the international free
U.S. Dollar as its medium exchange.
6. There are no taxes on capital (stocks, bonds and other investments)
held by Panama corporations.
7. The income tax law of Panama specifically exempts from its
provisions the following:
- Directing from an office established in Panama, operations
which are completed, consummated or take effect abroad;
- Invoicing, from an office established in Panama, the sale of
merchandise or products for a sum higher than that at which said
products or merchandise had been invoiced to the office established
in Panama, provided that said merchandise or products are handled
exclusively abroad;
- Income from International Maritime commerce of vessels registered
under the Panama flag.
- Corporate dividends or participations when said dividends or
participations are derived from income not produced within the
territory of the Republic of Panama, including the income derived
from the activities mentioned in points a and b above.
- The interest earned for funds kept in time deposits or savings
accounts.
8. There are no tax treaties with any other country.
9. The Colon Free Zone offers unique opportunities for the duty
free storage, repackaging and reshipment of goods of all sorts.
How to Incorporate
Usually, the client will simply fax or mail to us a request to organize
a Panamanian corporation and will provide the name of the corporation,
the names and addresses of the Directors, the names of the Officers
and the desired capital. Once this information is received, it will
take no more than five (5) working days to protocolize the Articles
of Incorporation and register them in the Public Registry.
Points of Interest
With respect to cost and several other points, which may be of interest
to you, we are pleased to report as follows:
1. Name reservation. After its availability has been verified,
the name of a corporation may be reserved in the Public Registry
for a period not to exceed thirty (30) days, by filing a written
petition before the Public Registry. After this period has expired
the name reservation will lapse without the need for a notation
by the Registry in said respect.
2. Neither the stockholders nor directors have to be nationals
or residents of Panama. As previously mentioned, there must be at
least three Directors. We may provide local directors and officers
if required.
3. There are no legal requirements regarding a minimum of capital.
According to law, there is no need to state that the capital subscribed
has been paid in.
4. As long as the corporation is not doing business in Panama,
it does not incur in any tax liabilities.
5. The due date of the annual franchise tax is as follows: June
30th of every year for companies incorporated in the first semester
of the calendar year and December 31st of every year for companies
incorporated the second semester. The surcharge for late payment
of the annual franchise tax is US$50.00. In addition to this surcharge,
a restoration fee of US$250.00 will be required to restore the company
that is late in its payments.
6. There are no particular requirements that have to be contemplated
with respect to the subsequent operations of the Company except
that it must pay an Annual Franchise Tax of US$250.00 in order to
maintain its good standing. Of course, subsequent amendments to
the Articles of Incorporation and elections of officers and directors
must be filed for registration with the Mercantile Registry of Panama.
7. Regarding the appointment of the Registered Agent in Panama,
which is required by law, the usual procedure is to appoint us.
8. The corporation is not deemed to have legal existence, with
respect to third parties, until the date it is registered in Mercantile
Registry. Therefore, business should not be conducted under the
corporate name prior to said date.
9. The corporation may execute in favor of one or more individuals
a broad Power of-Attorney to operate the company.
10. Panamanian law allows 100% foreign ownership of an offshore
Panamanian corporation.
11. Corporate Bodies:
- Stockholders: With the exception of corporations engaged in
the retail business in Panama, stockholders need not be nationals
or residents of Panama. Meetings of stockholders may be held outside
of Panama, if so provided in the Charter. Stockholders may be
represented by proxy.
- Board of Directors: There must be at least three (3) directors,
who may be either natural persons or corporations or a combination
of both, but unless otherwise provided in the Articles of Incorporation,
directors need not to be stockholders, nor nationals or residents
of Panama. Meetings of directors may be held outside of Panama,
and directors may be represented at meetings of the Board by proxy,
who need not be a director. The Board of Directors is elected
by the stockholders, but vacancies, whether resulting from an
increase in the authorized number of directors or otherwise, may
be filled by the vote of a majority of the directors then in office.
- There must be at least a President, a Secretary and a Treasurer
but the corporation may also have additional officers, agents
and representatives, who shall be chosen by the Board of Directors.
The same natural person or corporation may hold two or more offices,
if so provided by the Articles of Incorporation or by the By-Laws.
Continuation
A corporation formed and in good standing under a foreign legislation,
may opt to continue its existence under Panama laws, notwithstanding
the provisions of the legislation of its country of origin, by filing
in the Public Registry, for recordal, the following documents: evidence
of its good standing; certified copy of the corporate resolution
authorizing the continuation; articles of incorporation subscribed
in accordance with the laws of the Republic of Panama, with an indication
that they substitute the incorporation document of the foreign corporation.
- A corporation formed and in good standing under a foreign legislation
may conditionally register in the Public Registry its continuation
in the Republic of Panama, under the condition that said continuation
become valid (effective) upon the registration of a declaration
to that effect by the corporation ‘ s duly authorized representative
or attorney-in-fact.
- A corporation formed in accordance with the laws of Panama
may, as provided for in its articles of incorporation or amendments
thereto, continue under the laws of another country or jurisdiction
as long as the laws of said country or jurisdiction so allow it
and the corporation is up to date in the payment of the annual
franchise tax to the government of Panama.
Trustee Services
In addition to company formation and management we may also provide
trustee services and advise with respect to the establishment of
trusts subject to the Panamanian trust legislation. (Law No.1 of
January 5, 1984).
Please contact us for further information on our Trustee Services.
Panama offers the most favourable and most flexible
incorporation laws available in the world. Private Interest Foundations
are also available, and are one of the most widely used estate planning
structures in the world today.
- Panama is the registered domicile for over 400,000 corporations
& foundations, making it one of the most popular jurisdictions
to incorporate in the world.
- Panama does not impose any reporting requirements for non-resident
Panamanian corporations.
- Panama does not allow "piercing the corporate veil".
- Panama corporations share certificates can be issued in Nominative
or Bearer form (anonymous form of ownership), with or without
par value.
- Panama corporations do not require Paid-In Capital, nor is there
a time limit in which authorized capital must be fully paid.
- Panama corporations directors, officers and shareholders may
be of any nationality and resident of any country.
- Neither the directors nor the officers of Panama corporations
need to be shareholders.
- Meetings of directors, officers, and shareholders may be held
in any country and accounting books may be kept in any country.
- It is not necessary for the interested parties to be present
in Panama for the purpose of establishing a corporation.
- Corporations conducting business outside of Panama do not require
a commercial license for offshore business activities.
Private Interest Foundations
In an effort to provide additional opportunities to the Offshore
Community Law 25 of 1995 was created. Said Law contains the procedures
and requirements for the creation of Private Interest Foundations.
Private Interest Foundations may be used as tax and estate planning
device with the following advantages:
1. They provide a fiduciary structure for the orderly transfer
and disposition of assets to beneficiaries upon the death of the
Founder, keeping control of the assets during lifetime;
2. They may be established to have effects from the date of their
constitution or after the death of the Founder;
3. According to Law 25 of 1995, inheritance laws that apply in
the domicile of the Founder or the Beneficiaries, shall not be effective
against the Foundations assets nor may these laws affect the validity
or performance of the Foundations objectives;
4. Foundations are established to carry the specifics goals set
out in the Foundation Charter and may additionally undertake sporadic
commercial activities, exercise rights pertaining to their holdings,
own property, contract obligations and take part in administrative
or judicial proceedings.
5. A Private Interest Foundation should be established with a patrimony
destined to fulfil its objectives, which shall be no less than US$10,000.00.
Said patrimony may be increased by additional contributions of the
Founder or third parties;
6. The assets of the Foundation become legally independent and
do not form a part of the private estate of the Founder. Such assets
are not sizeable and may not be subject to any precautory action
or measure, unless such action or measure pertains to obligations
incurred or damages arising from the fulfilment of the Foundations
objectives;
Notwithstanding the creditors of the Founder or of a third party
shall have the right to contest the contribution or transfer of
assets to a foundation when such transfer constitutes an act in
fraud of the creditors. The rights and actions of such creditors
shall lapse at the expiration of three (3) years, counted from the
date of the contribution or transfer of the assets to the foundation.
7. According to article 27 of Law 25 of 1995, Private Interest
Foundations are except from payment of any taxes, contributions,
duties, liens or assessments of any kind arising from the acts of
constitution, amendment or extinction of the same, as well as acts
of transfer or encumbrance of the Foundations assets and the income
arising thereof, when related to:
- Assets localized abroad;
- Money deposited by natural or juridical persons whose income
does not derive from a Panamanian source is not taxable in Panama
for any reason;
- Shares or securities of any kind issued by corporations which
income is not derived from a Panama source, or which are not taxable
for any reason, even when such shares or securities are deposited
in the Republic of Panama;
The transfer of unmovable property, titles, certificates of deposits,
assets, funds, securities or shares carried out by reason of the
fulfilment of the objectives of the foundation or the termination
of the same, in favor of relatives within the first degree of consanguinity
or the spouse of the Founder shall also be exempted from all taxes.
The Foundation Charter shall be executed by the Founder by means
of a private document, in which case it should be authenticated
by a Notary Public, or by means of a public document directly before
a Notary Public.
In order for us to provide services in the constitution
and management of Private Interest Foundations, the following information
will be necessary:
- Name desired for the Foundation to check on its availability.
The word Foundation must be included in the name, for example:
The Clear Water Foundation, John Doe Foundation for the Children,
etc;
- Initial patrimony if other by the standard of U.S.$10,000.00;
- Names and addresses of the members of the Foundation Council,
which will be no
less than three (3) members (natural persons), unless a juridical
person is appointed, in which case a minimum of one member is
required. We may provide nominees for these positions;
- Domicile of the Foundation, if other than Panama;
- Duration, if other than limited;
- Name of the protector if required.
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