18+ Pros and Cons of Doing Business in Panama (Explained)

In the native countries, businesses around the world are experiencing a financial recession. Whether it’s triggered by bank failures, playing poorly real estate markets, factories moving overseas to other countries, or businesses exporting overseas jobs, some feel it’s time to start relocating to another country.

If you’re worried about what’s happening economically or politically in your country, or just want to maintain your prosperity by living in an area that has half the cost of living to yours, Panama has a lot to give.

Let’s discuss the Pros and Cons of Doing Business in Panama in detail

Benefits of Doing Business in PanamaThe Drawbacks of Doing Business in Panama
Territorial Tax SystemFraudulent
International TradeCriminal Offenses
No Entry BarriersBureaucracy
No Income TaxJudicial System is Slow

Advantages of Doing Business in Panama

  • No Burden of Income Tax Returns

Maybe you learned of the word “Tax Haven”. Which means a country with no domestic and global income taxes. Revenue or deduction of income tax on income from non-EU countries. A country that is focused on you and/or your business. A tax haven gives you the chance to raise your wealth. Hold more of the earnings untaxed.

  • Cost-Effective Corporation

Establishing a new company should be simple and cost-effective, or Company thus making you anonymous creation of such entities Allowing you full privacy in financial matters.

  • Progressive Governments

In recent years the Panama government has been aggressively promoting free trade agreements and a program of economic liberalization. It has established a set of laws for the national establishment of Special Economic Zones (SEZ). The SEZ is segregated zones, located at various key positions, where companies formed within them benefit from a range of incentives for tax, migration, and labor.

The SEZ’s goals are to increase international investment, provide local citizens with better job opportunities, and promote creativity as the world shifts toward a digital economy. The practices the scheme promotes include knowledge and telecommunications, biosciences, business and entrepreneurship management, professional growth, and environmental protection.

The SEZ was a big success story, driving the growth of Panama-active multinationals and helping them to lower operating costs and improve their production.

  • Robust Economy

Panama is an extremely attractive global financial center, due to its openness to international financial institutions, dollarization, and low inflation. Panama has been known for more than 40 years for its sound banking system. Modern financial facilities in the country led to the establishment of nearly 90 national and foreign banks in Panama. Panama’s International Banking Center is regarded as the region’s most powerful, operating in a straightforward manner within international legislation and the Basel principles.

The International Banking The Center reported US$ 1.8bn in income in 2017 and provides a wide range of cutting-edge technology products and services to companies. Panama is famous for adjusting its economic services to the needs of businesses.

The system was founded in 1970 through the first banking legislation in Cabinet Decree 238. As a regulator, this law created the National Banking Commission which helped shape the rapid growth of the banking sector.

  • Territorial System of Taxation

Panama provides countless tax advantages to domestically operating international businesses. The country has a regional taxation system, whereby companies are subject only to corporate income tax on their local revenue. This means your income is not taxable by doing business from Panama so long as the income is from foreign sources.

This gives companies with international operations myriad opportunities to minimize their tax burden and minimize their corporate tax leakage. The country’s General Revenue Office (DGI) is also looking to negotiate tax agreements with countries that have signed bilateral tax treaties with Panama.

Disadvantages of Doing Business in Panama

  • Panama has an Intellectual Property

Panama has entered into an agreement with the World Intellectual Property Organisation, as well as the Geneva Phonogram Conventions, the Brussels Satellite Convention, the Universal Copyright Convention, the Bern Convention for the Preservation of original works of authorship, and the Paris Convention for the Preservation of Industrial Property.

  • Copyright Issues

Panama’s intellectual property law allows for 20 years of patent protection from the date the patent was issued. Protection in respect of pharmaceutical patents is only given for 10 years.

However, if the owner of the patent allows a national firm to use the patent, this defense can be extended for another 10 years. The national corporation must have fixed ownership of Panama of 30 percent.

  • Trademark Rights

The Industrial Property act also requires for trademark rights for 10 years. After the initial 10 years, this defense will be extended.

  • Legal Rights

In addition to being a member of the World Trade Organization (WTO), Panama also agrees with the Berne Convention for the Protection of Literary and Artistic Freedom, the International Convention for the Protection of Performers and Radio Broadcasters (Rome Convention), and the Convention for the Protection of Phonogram Manufacturers from Unauthorized Duplication of Phonograms.

Works produced by UK citizens, residents, or works first published in the UK, in Panama are entitled to the same protection as works of Panamanian citizens. This is because the United Kingdom and Panama are also in negotiations with the Berne Convention.

Regulation of copyright works in Panama is deficient as there is a lack of total security for pre-established works, performances, and sound recordings, and copyright laws that are not strictly implemented. Sound recordings are also not rental protected rights, and stealing sound recordings and movies, known as copyright piracy, is a serious issue in Panama.

  • Corruption Issues

Under the UK Bribery Act (2010), it is an offense to bribe anywhere in the world for British nationals or someone who is normally resident in the UK, an individual established in the UK, or a Scottish partnership. Furthermore, a commercial organization, which conducts business in the UK, may be liable for the actions of an individual who is not a UK national or resident in the UK or a company incorporated or established in the United Kingdom.

In this case, it does not matter if the actions or omissions that are part of the crime occur in the UK or anywhere else. The UK has successfully prosecuted businesses engaging in illegal overseas activities and puts the duty on firms to ensure that they have taken sufficient anti-corruption action.

Panama is a signatory to the U.N. Convention against Corruption 2006. Article 343 of the Panamanian Criminal Code shall extend the penalty of imprisonment of between three and six years to any person who offers promises or donates to a public servant, or who promises money, benefits, or advantages in performing, delaying, or omitting any act of their office or employment or in violation of their obligations.

  • Transparency in Financial Sectors

By introducing new regulations Panama is seeking to push the financial services industry to international standards. A law was implemented in 2015 which tackled money laundering and incapacitated bearer shares. In February 2016, they culminated in the withdrawal of Panama from the grey list of the FATF.

The Government of Panama has formed an Independent Financial Services Committee following the 2016 ‘Panama Papers’ scandal. This underlined the desperate need for restructuring of the financial sector in order to maintain its competitiveness.

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