Panama has emerged as one of the leading countries to do business in Central America with many opportunities, especially for the United States. Its location makes Panama one of the most connected countries in the world.
Panama, once an important maritime trading hub, is now a top international banking and professional services jurisdiction.
Starting a business
Companies that are looking to start a business in Panama must first choose what type of entity they would like to have, a corporation, LLC or a branch. All of these entities have the same obligations locally, like taxes. This decision is made based on the parent company's preference or tax planning. At this point, a company must also decide if it will be an onshore or offshore company. To register an entity, no proxy is needed making it fairly easy. The process can take 3-5 business days. Opening a branch may take longer as information is needed from the parent company. Whichever type of entity is chosen, the process of registering must be done in person at a local registry.
Once an onshore company is created, it must be set up with the tax authority and requires an operating license. That takes only one day. An offshore company needs to register with the tax authority but in a different way.
For companies that will be operating in Panama, they will then have to go in person to request a municipality registration which can take 1-2 days and then an ID number will be issued.
The next step is to complete the social security registration and take it to the local authority which can take around 2-3 days. There are no nationality restrictions for a person to register a company.
Hiring a workforce
All employees must complete a contract in Spanish and it must be submitted and accepted by the Ministry of Labour. All employees must be paid at least twice a month with some variation based on the industry. The form must also specify where the employee will physically be working. Foreign workers must have a work visa as well as a work permit from the Ministry of Labour. There is a limit of how many people can be foreigners on a payroll of 90% Panamanians and 10% foreigners.
Benefits and Bonuses
Employees in Panama are paid a bonus salary, also called a 13th salary which is one month's salary divided in three and paid out in April, August, and December.
The employer contribution to social security is 13.75% and there is a contribution of professional risk for construction company workers at...