Why Should Your Business Invest In Panama?

Author:Ms Lyndsey Wheeler
Profession:TMF Group

Businesses looking to invest in Central America should set their sights on Panama.

Panama has a robust economy based on the US dollar, a stable government, and is involved in many free trade agreements. Panama has served as the crossroads of trade for the Americas due to the Panama Canal, making it one of the world's most important areas for trade. The country also has a low cost of living and is very safe.

Panama's economy is growing and is expecting 5% growth in 2019. There are investments in public infrastructure and in February 2019 a copper mine will be opening and is expected to generate about $2 billion of annual exports helping to boost the economy of the country. The Panama Canal is essential for global trade and represents 10% of the country's GDP. One of the sectors that has lost importance in the country is agriculture. The main sources of economic activity are logistics, financial services and tourism. Panama can offer tax incentives for companies especially in the industries of logistics, shared services and research and development. Due to new laws, two other sectors that are seeing investment growth are call centres and reforestation.

Benefits for investors

The Multinational Headquarters Act has allowed for companies to establish headquarters in Panama with the help of tax incentives and also gives the option for bringing in foreign workers under a special visa. Companies in Panama normally have a limit of 10% foreign workers but that does not apply to these companies under this Act. This law gives multinational companies an advantage for investing in Panama.

Incorporation of a company in Panama

Depending on the entity you pick for your company, the process to incorporate a business in the country takes about 7-10 days. An off-shore company only needs to be registered in the Mercantile Registry. They do not need an operating licence unlike a company that is physically operating the country. Any company that will be physically doing business in Panama will need to follow a 4-step process:

register with the Mercantile Registry; obtain an operating license; register with the tax authority; get a municipal permit. If your business will have employees, you must register with the social security office within the first six days that the employee begins employment to avoid fines. Employee contracts must also be submitted to the Labour Ministry and they must accept the terms. Panama also requires businesses to have a...

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