Friday, December 30, 2011

Happy 2012!


Happy New Year! ¡Feliz Año Nuevo! C Hoвым Годом!

From our office in sunny Panama Republic – the thriving little gem of Central America and the gateway to Latin America – visit with us!

Best wishes,
Juliette M. Passer & the NY - Panama Team

Monday, December 19, 2011

Panama improved standing in the WEF financial index

Panama stood out among Latin American countries which have better financial development, climbing two positions located at No. 37 of 60 economies covered in the WEF (the World Economic Forum) index.

Panama shows large differences between its strengths and weaknesses in this report that measures and analyzes seven factors within three broad areas that encourage development of financial systems in the World.

WEF analyzes the policies and institutions, variety, size, depth and efficiency of financial intermediaries, and access of people and businesses to capital and financial services.

Panama ranked high with regard to the degree of financial sector liberalization (19), however, the Economic Forum found flaws in terms of enforcing contracts (58).

The country needs improvements in its policies and institutions, including the quality of education in mathematics and science (58). There are also large gaps in the time it takes to pay taxes (53) and the regulation of securities exchanges (51).

However, the country has a better position in financial stability (39), access to finance (33), access to loans (13), and a high level of foreign direct investment (5).

Thursday, December 1, 2011

Panama’s local economic activity grows 9.13%

The monthly index of economic activity (IMAE) of Panama grew by 9.13% in the first nine months of the year. Most sectors of the economy performed better than last year.

Construction continues to be driven by public investments in infrastructure.
Transportation, storage and communications, trade, hotels and restaurants, mining and quarrying, real estate, financial services, personal and social community services, electricity and water, agriculture and manufacturing are other growing sectors.

Interestingly, report stated that the sector with the worse performance from previous years is still the fishing sector.
The government estimates that Panama economy will close the year with 9% growth.

Saturday, November 19, 2011

Congratulations on celebrating 20th Anniversary of private practice!

To our clients, friends and associates:

Congratulations on celebrating 20th Anniversary of private practice to Juliette from PanaManagement Corporation, International Project Development Group and the Panama NY team!

As Juliette said: “It has been amazing 20 years, which took me from China, Uzbekistan and Russia to East and West Europe and now to Panama. I am looking forward to covering the rest of the World in the next 20 years… Thanks for all your business and support!”

We are looking forward to continuing working with you and seeing you in Panama.

The NY-Panama Team

Tuesday, November 15, 2011

Colon Free Trade Zone re-exports increased by 57%

Colon Free Trade Zone (“CFZ”) is the largest free zone in the Americas and the second largest in the World. Created in 1948, the free zone houses 1,751 merchants, receives yearly more than 250,000 visitors from all parts of the World, mainly from countries such as Haiti, Jamaica, Costa Rica, Venezuela, Colombia, United States, Ecuador, and others. The CFZ generates exportation and re-exportation goods valued at more than US$ 11.4 billion in 2010.

According to a report of Statistics and Census Institute (INEC), Colon Free Trade Zone (CFZ) grew 31% in first half of 2011 over the same period of last year. The expansion occurred as a result of increased orders from almost every Latin America countries. Total re-exports reached US$6.715 million in the first half of this year, which represented an increase of US$ 1.602 billion over the same period of last year; in August re-exports reached a value of US$ 1.429 million, an increase of over 57% over the same month last year of US$910 million.

At the same time imports from the Colon Free Zone, in August reached U.S. $ 1.516 million, which exceeded $ 997 million the same month in 2010, representing an increase of over 52%. Imported products are mainly - according to their amount - of China ($538 million), Singapore ($430 million) United States ($125 million), Hong Kong ($67 million) and Mexico ($41 million).

CFZ employment is 30,000 people. This special economic area makes a contribution to GDP of 7%. CFZ value added increased 7.3% in the first quarter of 2011, as a result of strong economic expansion of Latin America. The forecast is that CFZ re-exports will grow 8.3% from 2011 to 2014 (average growth rate per year).

Friday, November 11, 2011

New photos from Panama City from Juliette Passer

New photos from Panama City from Juliette Passer, including the architecturally innovative Yacht Club Tower – enjoy and visit with us soon!

More on Picasa:

Thursday, November 10, 2011

Critical situation in Colon, Panama - landslides and floods…

The end of the rainy season in Panama proved treacherous again this year - floods, landslides and even closed schools in the isolated communities in the province of Colon, where the Ministry of Education suspended classes this week.

Similarly, the highway was blocked by a landslide. A team from the Ministry of Public Works is working on clearing the road even today, despite of the national holidays.

Friday, October 28, 2011

Panama investment highlights

A report of the Economic Commission for Latin America and the Caribbean (ECLAC) placed Panama as the Central American country with the highest volume of foreign direct investment (FDI) captured in the first half of the year.

During this period, Panama received 1,416 million dollars, again beating Costa Rica, its closest competitor, which recorded 570 million dollars.
According to projections from the Comptroller General, the Panamanian economy could raise over 3 billion dollars in FDI in 2011, exceeding the
2,362 million dollars last year.

Among the factors that have driven FDI in Panama is the establishment of multinationals such as Wrigley and Fastenal (U.S.), Atlas Copco (Sweden), Unilever (Netherlands), Merck and Bauer (Germany).

According to the ECLAC report, foreign investment in the 18 Latin American economies grew 54% in the first six months of the year, confirming good economic performance of the region, despite the uncertainty of the European crisis and the U.S. deficit.

La Prensa
October 26th, 2011
Summary by Juliette Passer

Monday, October 24, 2011

30% progress on Panama Canal expansion

The expansion project of the Panama Canal is 30% complete, including dredging, dry excavation, design and construction of new locks. This work was done by a Belgian company - Jan De Nul Group, which won the contract in August of 2010 for $54.5 million.

Yesterday, the Panama Canal Authority (ACP) commenced the filling of the Pacific access channel to connect the new Post-PANAMAX locks with the Gaillard Cut.

It will take about three days to fill the area using 1.4 million cubic meters of water from Gatun Lake according to Jorge Luis Quijano, Executive Vice President Engineering and Program Management of the ACP.

This entry to the Pacific access channel is measuring 1.6 km long, 218 meters wide and its depth of excavation is to 9.14 meters above sea level. The rest of the Pacific access channel, with a total length of 6.1 kilometers, will be filled during 2013 once it has completed the excavation of 26 million cubic meters and the construction of earth and rock dam of 2.3 km that separates the Miraflores Lake.

October 20, 2011
La Prensa, Summary by Julitte Passer

You can see the process on the video by Jan de Nul - "Dredging the new Panama Canal" at:

Friday, October 21, 2011

November is the month of Holidays in Panama – the list is below – make plans accordingly and enjoy a few days off!

November 2nd: Memorial Day (Día de los Difuntos)
Half Day up to 12PM

November 3rd: Independence Day (Separación Panama de Colombia)
Day Off

November 4th: Flag Day
Day Off

November 5th: Colon Day (conmemoración Patriótica de la Ciudad de Colon)
Day Off

November 10th: Uprising Day Los Santos
Day Off

November 28th: Independence Day (Separacion Panama de España)
Day Off

Happy Holidays to all from Juliette and the NY Panama team!
November is the month of Holidays in Panama – the list is below – make plans accordingly and enjoy a few days off!

November 2nd: Memorial Day (Día de los Difuntos)
Half Day up to 12PM

November 3rd: Independence Day (Separación Panama de Colombia)
Day Off

November 4th: Flag Day
Day Off

November 5th: Colon Day (conmemoración Patriótica de la Ciudad de Colon)
Day Off

November 10th: Uprising Day Los Santos
Day Off

November 28th: Independence Day (Separacion Panama de España)
Day Off

Happy Holidays to all from Juliette and the NY Panama team!

Wednesday, October 19, 2011

Panama Canal would bring the State $985 million this year.

In its 12 years of Panamanian administration, the Panama Canal will be delivering to the National Treasury 6 billion 556.1 million dollars.

In 2011, Panama Canal broke a record in freight volume, reaching 322.1 million tons in one year. This figure improved record by 7.1% from 2010.

Direct contributions from the Panama Canal to Panama budget this year will total $985 million, according to the latest estimates from the Ministry of Economy and Finance.

This figure will be $147 million above what was budgeted for 2011. The total contributions consist of $365 million in tolls ($21 million more than budgeted) and $620 million dividend ($126 million more than budgeted).

The improvement in the results of 2011 is due to increased traffic on the waterway, which also was a record. For next year, the Canal expects 332.5 million tons in freight volume.

Summary by Juliette Passer, La PRENSA, October 2011

Tuesday, October 18, 2011

More US investment is expected with the TPA between the U.S. and Panama, summary by Juliette Passer, Esq.

The Panamanian industry sector and government expressed hope that the ratification of the Trade Promotion Agreement (TPA) with the United States will attract new investment to Panama, but others expressed concerns that it poses a challenge for the agricultural sector of Panama.

The Agreement comes at a time when Panama is experiencing a boom with an average economic growth of 8.5% over the past five years and prospects for growth of over 9% for 2011.

"We will facilitate what we have to do to help our producers and farmers so they can compete with quality products with good prices," said Ricardo Quijano, Minister of Commerce and Industry of Panama. "We will give the necessary support ... so that agricultural producers can have access to new technologies, new products and thus be competitive."

Maritime sector and services, including areas such as finance and logistics are the most excited about the TPA, because the Agreement improves the conditions for the investment of American capital, which would hopefully bring new businesses and create more local jobs.

Minister Quijano considered Panama's geographic position and the growth of logistics operations for transportation of goods by sea, land and air as favorable combination of factors coupled with the U.S. trade pact with Panama for consolidating its platform for export.

October 15th, 2011, Telemetro (Channel 13), summary by Juliette Passer

Thursday, October 13, 2011

We have trade agreement with Panama!

We have trade agreement with Panama! summary by Juliette Passer

The U.S. Congress approved yesterday the trade promotion agreement (TPA) with Panama after a marathon session that ended four years of stagnation in the White House.

After two intense debates Panama won approval of the agreement. In the House of Representatives it received 300 votes in favor and 129 against, while the Senate had 77 votes in favor and 22 against.

With this, the Agreement is ready to be signed by President Barack Obama, who called the approval of agreements with Panama, Colombia and South Korea as "a great victory for workers and businesses."

The United States is Panama's main trading partner, and the Agreement opens to Panama access to a market of 300 million potential consumers. The TPC in Panama involves a demanding agricultural sector competitiveness and improving the quality of education. It is expected that more American companies come to the country, that the financial sector will make its way in America, and Panama to provide preferential services in that market.
"This is an achievement of all Panamanians and administrations that have preceded us. The Panamanians have to prepare to take the benefits of this treaty, which shall enter into force soon,” said President of Panama Ricardo Martinelli.

Federico Humbert, President of the Panama Chamber of Commerce, described the ratification as a historic moment for the country. But he warned that the changes have to occur in all sectors.

"Hard work lies ahead, the implementation period should last about 18 months, in which both government and private sector must press ahead to support our producers, to ensure that when the treaty enters into force they are ready to reap the benefits that it can give us ...", said Humbert, who was also Ambassador to Panama in the United States.

On Tuesday October 18, Minister of Commerce, Ricardo Quijano, will be traveling to Washington to begin the process of implementation of the treaty. It is expected that in eight months it will take effect.

Tuesday, October 11, 2011

Panama is a more competitive country, summary by Juliette Passer

Panama advanced this year four positions in the rankings of Global Competitiveness and was among the 50 most competitive economies in the world. The country, according to the World Economic Forum, coming from the 53rd position joined the 49th position, and became again the second most competitive nation in Latin America in 2011, surpassed only by Chile, which held the 31st position.

Summary and photo by Juliette Passer

Tuesday, October 4, 2011

Millions are invested into the western suburbs of Panama City

According to the main Panamanian newspaper, LA PRENSA, investors found fertile land to put their money west of Panama City. Arraijan -specifically, in the past was known as a dormant town - they have now developed commercial and hotel projects whose main attraction is its proximity to the capital city, but without the typical traffic chaos and bustle of the City of Panama.

Between 2009 and July 2011 the value of construction in Arraijan added $200 million, of which $97 million was invested in nonresidential projects. Regis Gaston, President of the Panamanian Chamber of Construction (CAPAC), estimated that commercial property investments will continue to increase towards the west.

He noted that there is already a captive population in Arraijan and La Chorrera, and so now employers are focusing on commercial projects. But beyond the dollar investments, the President of Capac argues that it is urgent to expand the road infrastructure to expedite travel between the capital and the area west and vice versa.

The Panama Canal Authority (ACP) included $ 20 million in its budget for 2012 for the design of a fourth bridge over the waterway. The bridge, according to information from the ACP, will be designed to withstand the weight of a light rail. On the grounds of the former Howard Military Base, the firm London Regional is planning to invest $705 million over a period of 40 years. Of this total, the company has already invested 15%, and by 2015 the figure expected to reach $405 million.

At least 70 companies, mostly multinationals, already operating in Howard and by the end of the year the company expects to deliver the first residential units with sales recorded over 50%. This project pushes the development of surrounding areas, as is the case of Farfan, where Empresas Bern is building a hotel of 621 rooms and a residential complex. The combined investment is exceeding $120 million and is scheduled for October 2011 opening of the hotel, which will be managed by the Westin chain.

Thursday, September 29, 2011

Panama’s economic activity keeps pace: 8.68% in 2011

Panama’s economic activity keeps pace: 8.68% in 2011

Panama’s economy is healthy! According to the latest report by the General Comptroller of the Republic of Panama, in the first seven months of 2011 the monthly index of economic activity (IMEA) grew by 8.68% over the same period last year. The best performing sectors were: construction, transportation, storage, communications, trade, hotels and restaurants, mining and quarrying, the social and personal community services, electricity, water and manufacturing.

Thursday, September 22, 2011

President OBAMA promises commercial Agreement with Panama

President OBAMA promises commercial
agreement with Panama at the UN General Assembly

President of Panama, RICARDO MARTINELLI, participated yesterday in the debates of the opening of the sixty sixth United Nations General Assembly, where subjects in reference to the challenges of the Nations of the world and national concerns were discussed.
Martinelli also met with the President of the United States, Barack Obama, who said that the commercial promotion treaty (free trade agreement) will be a reality. “Soon we will see the culmination and realization of the United States FTA”, said Martinelli. Among the leaders that met with them, was Chilean President Sebastian Pinera, who will visit Panama in October, President Mikheil Saakashvili, from Georgia, and some executives from AES Panama and Petroterminal of Panama.

Thursday, August 18, 2011

Happy Birthday, Panama Canal!

August 15th 2011 marked the 97th birthday of the Panama Canal, which was a hugely famous engineering achievement at its inauguration and continues to awe its visitors, including me, every time I visit Mira Flores!

Happy Birthday, Panama Canal!

August 15th 2011 marked the 97th birthday of the Panama Canal, which was a hugely famous engineering achievement at its inauguration and continues to awe its visitors, including me, every time I visit Mira Flores!

Tuesday, June 14, 2011

Trump Ocean Club in Panama City, Panama

Panama briefs by Juliette Passer: The Trump Ocean Club is set to open this summer in Panama City – beware of fraudulent emails offering closing and mortgage services! All closings are handled by representatives in the US with only the Deed processing in Panama.
Panama briefs by Juliette Passer: The Trump Ocean Club is set to open this summer in Panama City – beware of fraudulent emails offering closing and mortgage services! All closings are handled by representatives in the US with only the Deed processing in Panama.

Wednesday, May 18, 2011

Panama Briefs by Juliette Passer May 2011

Panama will be the Permanent Headquarters of the Executive Secretariat of the Central American Council of Superintendents of Banks, Insurance and Other Financial Institutions (CCSBSO).

To choose the permanent headquarters, the Superintendent General of Financial Institutions of Costa Rica, Mr. Francisco Lay Solano, representing the Permanent Executive Secretariat (SEP, by its acronym in Spanish) Commission, comprising of Costa Rica, Panama, and Guatemala, presented to the General Assembly of the Council, the results of the analysis made, in which they evaluated key factors, such as: safety, costs, and qualitative aspects of the candidate countries, Guatemala and Panama.

The Executive Secretariat, which will start permanent operations in Panama in August 2011, is an administrative body of the Council that will respond exclusively to it, without any relationship or subordination to the host country.

Tuesday, April 26, 2011

More recent photos of Panama City - March 2011

Juliette is traveling back to Panama in early May – ready to visit with us?

During February of this year 176,202 tourists arrived at Panama - 13% more than for the same month last year. In the first two months of this year 381,859 tourists arrived.

More photos at:

Panama Laws and Advice: Preview "More recent photos of Panama City - March 2011"

Panama Laws and Advice: Preview "More recent photos of Panama City - March 2011"

Panama City March 2011

Monday, March 7, 2011

President Martinelli of Panama stated recently that the Panama Government will soon open the bidding for the building of a 4th bridge over the Panama Canal. It will be at the Pacific entrance to the Canal between Howard and Amador. With the expansion of the Canal, POST PANAMAX ships would be hindered by the present bridge.

  The President also opened the debate over the future of the Bridge of the Americas. According to President Martinelli, the structure might hinder the passage of bigger ships.

Soaring 384 feet above the ocean at average tide and measuring 5425 feet from end to end, the Bridge of the Americas reaches across Panama Bay at the Pacific Canal entrance, reuniting the land divided during the construction of the Canal and forming another link in the Pan-American Highway.

Thursday, February 3, 2011



The government of Panama has completed the ten–year bond issue for 41,500 million yen (about $500 million) in Japan’s capital market.

Panama has become the third Latin American country together with Colombia and Mexico to enter into the Japanese market. The issue, partly backed by the Japanese Bank for International Cooperation, was structured and place by Daiwa Security Capital Market and Mitsubishi UFJ Morgan Stanley Securities.

With 1.81% interest rates, the bonds were placed among private qualified investment institutions such as central banks, insurance companies, regional banks and other financial institutions. The demand doubled the offer.

Tuesday, January 25, 2011

Recent photos by Juliette Passer, Panama January 2011  - Healthy & strong - at:

Sunday, January 9, 2011

Summary of recent Tax Laws of Panama by Juliette Passer

Part I

Law 8 of March 15, 2010 (as published in the Official Gazette 26489 A as of March 15, 2010) contains comprehensive amendments to Panama’s Fiscal Code, including a reduction in the corporate and income tax rates and an increase in the current ITBMS (Impuesto de Transferencias de Bienes, Muebles y Servicios) rate (“Law 8”).
Law 8 is a second tax reform recently carried out by the Government of Panama seeking to collect revenue to fulfill its educational, health and social projects.
Law 49 of September 17, 2009 (as published in Official Gazette 26370 C of September 17, 2009) became effective in September 2009 and introduced important changes in the tax system such as extending the scope of the dividend tax to dividends paid out of foreign source income and to Colon Free zone corporations (“Law 49”).
We have prepared a two-part summary of this important legislation: Part I covering Law 49 and Part II covering Law 8.


LAW 49 OF SEPTEMBER 17, 2009
A. Annual Franchise Tax

National or foreign juridical persons, except non-profit associations, must pay as part of their registration fees an annual franchise tax in the amount of $250 and of $300 for subsequent years.
National or foreign juridical persons may be stricken-off from the Public Registry (same effect as being dissolved) due to lack of payment of said tax for 10 consecutive years. However, if said juridical person pay a $1,000 fine within the 3-year dissolution period it could be reinstated.

B. Capital Gains

Gains from sale of real estate properties continue to be taxed at a fixed 10% (ten percent) rate, provided the sale is not carried out within the taxpayer’s ordinary course of business. However, taxpayer will be required to pay a 3% rate over the value of the transfer or the Cadastral value of the real estate property, whichever is greater, as an advance of income tax. Said 3% tax may be considered at taxpayer’s choice, as definitive tax.

Taxpayer may request the Treasury for a refund in cash or a tax credit. This tax credit may be assigned to other taxpayer provided the 3% tax rate paid in advance is higher than the 10% tax rate over capital gains from the sale of real estate properties.

Taxpayer was allowed to update the cadastral value of real estate properties if sale of said properties took effect before June 30, 2010.

As allowed by the Ministry of Agriculture, real estate properties destined for agricultural purposes must pay a definitive 3% tax rate.

C. Colon Free Zone and other free zone corporations

Foreign operation activities carried out by Colon Free Zone and other free zone corporations are limited to billing services, repacking and similar provided they produce effects abroad.

Commissions, storage and warehouse services, leases, transfer of merchandise and cargo in Colon Free Zone and other free zone corporations are considered as local, interior or domestic operations.

Colon Free Zone and other free zone corporations when distributing dividends or profits to their shareholders must withhold 5% of such amounts which correspond to the income tax on dividends. If dividends or profits are not distributed a so called complementary tax must be withheld over 20% of the net income after taxes as advanced income tax on dividends, or in other words at a 2% rate over the total net income after taxes.

Customs fraud and smuggling shall be punished with imprisonment from 1 to 3 years and from 4 to 6 years in case of recurrence, and fines from 5 to 10 times the value of the illegal goods provided they exceed $50,000.

All loans granted in the Colon Free Zone shall be subject to payment of the Special Compensation Fund interest (known by the Spanish acronym of “FECI”).
D. Real Estate Tax

All land and real estate improvements thereon located in Panama are subject to real estate tax.
The tax base depends on the total value of the land plus all improvements.

To calculate the tax base it shall be considered the highest value of any of the following:

1. Assessment of the property fixed by the Directorate of Cadastre.

2. Sale price of a property

3. Appraisal of a property in inheritance proceedings

An alternative real estate tax up to taxpayer’s choice is established on the following terms:

Taxable base more than $30,000 and up to $100,000 - 0.75%

Taxable base over $100,000 - 1%

The alternative rates apply only if real estate properties are updated in their payment of the tax, provided that the taxpayer has presented a sworn declaration (affidavit) indicating the estimated value of the real estate until June 30, 2010.

General or partial appraisals on properties cannot longer be requested by taxpayers. Now, the Directorate of Cadastre acting ex-officio is empowered to effect said appraisals.

Real estate properties with assessed value no higher than $30,000 are exempt from this tax. Properties under Horizontal Property Regime are not exempted from this tax.

New rates for properties under Horizontal Property Regime are set forth, as follows:

Taxable amount (US$) ______ Rate

Up to $20,000 1.40%

$20,000 up to $50,000 1.75%

$50,000 to $75,000 1.95%

Over $75,000 2.10%

Tax exemptions on real estate improvements for residential purposes:

Assessed value of real estate improvements Exemption period

1. Up to $80,000 20 years.

2. $80,001 and up to $100, 000 15 years

3. $100,01 and up to $250,000 10 years

4. Over $250,000 5 years

Real estate evasion is punished with a fine of no less than 5 times no more than 10 times the amount of tax evaded and imprisonment from 2 to 5 years.

E. Tax on transfer of tangible personal goods and rendering of services

Effective as of July 1, 2010, Law 49 introduced a new 7% rate (instead of former 5% rate) and included the following:

1. Commissions from transfer of negotiable documents or securities in general.

2. Commissions from services rendered by entities legally authorized to perform banking and/or financial services.

3. Commissions or retributions from services rendered by real estate and goods brokers.

4. Professional services performed to persons domiciled abroad who do not generate taxable income in Panama.

5. Lease contracts for residential purposes with short time periods less than 6 months.

6. Fixed-line telephone services for commercial purposes

7. Legal services rendered to international commerce vessels.

Tax exemptions include the following:

1. Freight

2. Fixed-line telephone for residential purposes

3. Loading and unloading cargo operations

4. Transfer in or inside the ports and ancillary services rendered in connection with cargo in ports.

5. Repair, maintenance, cleaning and ancillary services rendered to vessels in transit in Panamanian territorial waters.

F. Tax on Notice of Operations

Annual tax on Notice of Operations is equivalent to 2% on the capital and ranges from a minimum of $100 up to a maximum of $60,000. Former maximum amount of $40,000 was increased to $60,000 by Law 49.

Colon Free Zone and any other free zone corporations must pay a maximum amount of $50,000.

Any juridical persons which require a Notice of Operation are obligated to withhold a dividend tax regardless the source of the income.

Multinational enterprises and other corporations under special regimes are exempted from the obtainment of notice of operations.

Financial institutions regulated by Law 42 of 2001 shall pay an annual 2.5% tax on their paid-in capital as of December 31 of each year. Said tax may not exceed $50,000.

G. Modifications to Law Decree 2 of 1998 which regulates gaming activities

A goodwill payment of $1,000,000 must be paid by new managers and operators of casinos and of $50,000 for the operation of slot machines halls type A.

Slot machines halls type A shall pay as of January 1, 2014 a 22% tax rate on their gross income. Currently the rate is 10%.

As of January 1, 2012 full casinos shall pay 15% tax rate on their gross income, currently the rate is 10%.

Gaming Control Board is the State entity in charge of the supervision on the transfer of shares and designation of board members and officers of corporations that have contracted with the State.

H. Dividend withholding tax

Corporations when distributing dividends or profits to their shareholders must withhold 10% of such amounts which correspond to the income tax on dividends.

Corporations when distributing dividends or profits from export operations must withhold 5% of such amounts.

I. Capitalization of retained earnings

Undistributed profits in any given fiscal year that are capitalized in any subsequent fiscal period shall now be subject to income tax on dividends.

J. Loans

Loans secured by fixed-term deposits in banks located in Panama shall be subject to payment of 1% tax rate of FECI.

Loans agreed as automatic loans in life insurance policies, secured by the mathematical reserve or cash surrender value that will be used to pay premiums for the same insurance policy are excluded from payment of FECI.

K. Selective consumption tax(known by the Spanish acronym of ISC)

ISC on cigarette consumption was increased from 32.5% to 50% rate.

Services subject to the ISC include mobile telephone communications services and cable or satellite television, as well as the amount of winning paid by slot machines.

By Juliette Passer, Esq., Ramon Valdes & Lynette Landau ©2010

We provide peace of mind!™

Thursday, January 6, 2011

Focus on Investors - Doing business in Panama with your eyes open! by Julette Passer

Trust experience and knowledge™.

Focus on Investors - Doing business in Panama with your eyes open!
By Juliette Passer

Panama is a great place to live and work. In recent years Panama has been growing in popularity among investors, expatriates and retirees alike. Recently popular online publication “International Living” rated it as the No. 1 place to retire in the world, and for good reasons. Panama’s prospects for economic growth are strong amidst global economic meltdown, showing positive growth of 2.3% in 2009 and this economic expansion is expected to continue in 2010 and beyond. This is mainly due to substantial growth in the financial and construction sectors, tourism and the commercial expectations placed on the ongoing expansion of the Canal, which connects the Pacific and Atlantic Oceans creating a natural hub for business between North and South America as well as between Asia and Europe with direct maritime access to over 80 countries and 3.5 billion people.

Panama's dollar-based economy offers low inflation and zero foreign exchange risk. Its legal and regulatory regimes are business friendly. Its government is stable, democratic, and reform minded and actively seeks foreign investment in all sectors, especially services, tourism and retirement properties. Panama’s current and planned public investment in productive infrastructure is one of the highest in the region and is on par with East Asian economies, including the planned construction of a subway in Panama City. These factors are expected to contribute to lowering unemployment rates to 4.8% and 4.6% in 2011 and 2012 respectively.

Its banking sector currently comprises of more than 80 foreign banks, providing full banking services through ATM cards, Visa credit cards, check books, Internet banking and Visa debit cards. The first two banks opened its doors in 1904, one was called the International Bank Corporation is today’s Citibank, part of Citigroup, the biggest financial conglomerate in the world and the second one was the Banco Nacional de Panama. The banks of Panama are strictly supervised and licensed by the Superintendency of Banks (Superintendencia de Bancos de Panamá), Panama’s regulatory authority. At present, Panama is reported to have the most upgraded banking system in the world.

Panama offers a higher quality of living at a lower cost and with less crime than typical Central American destinations, although Panama City is rapidly getting to world pricing. Panama has a wealth of variety to offer whether it is beaches, lakes, mountains or the countryside and prices for real estate purchases with a range of choices for practically any budget.

The Colon Free Zone, the second largest in the world after Hong Kong, is a vital trading and transshipment center serving the region and the world. Panama has no restrictions on the outflow of capital or outward direct investment. Its accession to the World Trade Organization in mid-1997 opened up trade and lowered tariffs.

According to Panama's constitution, nationals and foreigners are treated equally under the law. Both Panamanian and foreign companies must fulfill the same basic requirements to organize and operate most types of business activities in Panama. There are restrictions on foreigners participating in retail trade and practicing certain professions. In practice, however, there are legal ways to overcome these restrictions. Panama has one of the most modern and flexible corporate law frameworks in Latin America. Panama is an interesting and potentially profitable jurisdiction for licensing agreements and joint ventures as well as routine commercial operations for international companies.

Having listed all the good reasons to invest in Panama, the caveat is - you must be careful, so to paraphrase the famous line from the Wizard of Oz: “This ain’t exactly Delaware, Dorothy!”

Foreign investors, especially from the US and Canada, Juliette Passer warns routinely drop their guard in a deceptively familiar legal environment of Panama, which is based on the Delaware Corporations Law and similar to the Wyoming Limited Liability Company Law, but allows bearer shares and untitled real estate sales.

Panama has a court and judicial system built around a civil code, rather than the Anglo-American system of reliance upon case law and judicial precedent. Fundamental procedural rights in civil cases are broadly similar to those available in U.S. civil courts; however, the system can be inefficient and prone to abuse. Though the system is improving, many in the business community, both Panamanian and foreign, lack confidence in the Panamanian judicial system as an objective, independent arbiter in legal or commercial disputes, especially when the case involves powerful local figures with political influence. In a few cases the appearance of corruption has been so widely accepted as to constitute conventional wisdom. Arbitration is always a better choice at the Center for Mediation and Arbitration established by the Panamanian Chamber of Commerce or at various European or American arbitration centers and courts.

Since Spanish is the official language in Panama, always make sure the request your transactional documents in English, Juliette Passer advises, as translations of the Spanish documents and never sign any agreements in Spanish if you do not speak and read the language! Legal documents are not interesting reading, but it is a must for a successful investment.

The Public Register of Panama provides much transparency to the company registrations, recordings of mortgages and liens and for transfer of title to properties, however, it also prone to misuse by unscrupulous parties.

Lastly, but just as importantly, Panama has many experienced attorneys and established laws firms; however, the conflicts of interest rules and ethical standards followed by the Panama Bar are not as stringent as those in the US. Hence again, caution must be exercised. At the very least, ask the partner of the firm to warrant to you that other members of the firm are not involved in representing parties adverse to your interests and transactions and do not use affiliated entities as trustees, if the firm is representing the seller in your purchase transaction. A good local bank can be easily hired as a trustee.

Use your common sense to build a team of advisors you can trust and you will do very well in beautiful Republica de Panamá!

Copyright 2008-2010, Juliette M. Passer, Esq.

About the Author

Juliette M. Passer is a U.S. attorney, with over 19 years of broad international transactional experience, specializing in corporate and project finance, as well as new media transactions and e-commerce. Juliette Passer holds a JD (cum laude) from Cardozo School of Law and studied Soviet Law at the Columbia University School of Law. She practiced law with the international law firms of Debevoise & Plimpton and Patterson, Belknap, Webb & Tyler in New York, specializing in corporate and project finance. Juliette Passer is a member of the Council on Foreign Relations and serves on boards of several companies. She is listed in Who’s Who in American Law and Who’s Who in American Women. As a pro bono undertaking, she represents Russian and Ukrainian artists, dancers and musicians. Juliette Passer is a frequent guest lecturer and an adjunct graduate faculty at the Russian Juridical Academy, Kaplan University, Moravian College and others.

We provide peace of mind!™

Saturday, January 1, 2011

                                                              Panama City by Juliette

Happy New Year! ¡Feliz Año Nuevo! C Hoвым Годом!

From our office in sunny Panama Republic – the thriving little gem of Central America and the gateway to Latin America – visit with us!

Best wishes,

Juliette M. Passer & the Team