Panama Immigration and Legal Info

Special Temporary Residence Permit: Concept and Requirements

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sat, 05 Dec 2009 00:01:00 +0000

Special temporary resident permits (also known as VTE) are issued to foreign executives (Regional Directors, for example) working on International companies with offshore activities (exclusively) from Panama. This residence permit is granted for a one-year period with renewals options (until five years). For this special type of resident permit, the Company’s subsidiary will not have to comply with any restriction in the amount employees nor wages limitations. This type of residents are not obliged to pay social security, nor income tax as the income comes from abroad. Salary: up US$1,000.00 plus US$ 250.00 per each dependant, according the last modification of the Immigration Law. The dependants of the resident are not allowed to work within the Republic of Panama.

Requirements:

Full copy of the passport, front to back Passport, duly authenticated by your Embassy in Panamá
Police Record, duly authenticated by the Panamanian Consulate
Certificate of Good Health
Photos in carnet size with white background
Certificate of Birth (for dependents under 18 years old), duly authenticated by the Panamanian Consulate
Certificate of Marriage (for spouse as dependent) duly authenticated by the Panamanian Consulate
Bank's letter stating that you receive your income from abroad.
A certificate of good standing (also known as a certificate of existence or certificate of authorization) duly authenticated by the Panamanian Consulate stating the following

the existence of the company and that it is in good standing in its country of origin, its principal head-quarters, and the branch or head-quarters which is responsible for oversight of the office in Panama, as well as the details of the address, phone number, email address, etc. of the principal representatives of the company;
confirmation that the applicant is an executive of the company, specifying the nature and attributes of the role, and the title;
confirmation that the salary earned by the executive is from overseas, that this is not Panamanian-source income, and the amounts and form of payment (i.e. wire transfer from the headquarters in XYZ, sent to the applicant's account in Panama);
That the company is responsible for all expenses of the executive in Panama, and that the company undertakes to inform the Immigration Department should they decide to close their office in Panama or terminate the labor relationship with the applicant, and cover any repatriation expenses which the applicant may have; and
How long they estimate that the applicant will be working in Panama as an executive.
Banking reference letter issued by a Panamanian bank, either for the applicant or the Company that he is working for, and should indicate how long the account has been in existence.

I would strongly recommend this residence permit to those persons living in Panama and working with a foreign company. It is easier and faster than other type of resident permit. Please remember that each resident permit might vary according to the situation of each person.

NEGOCIATION OF DOUBLE TAXATION AGREEMENT WITH ITALY

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Thu, 22 Oct 2009 14:40:00 +0000

According to Ministry of Economy of the Republic of Panama’s website, the governments of Panama and Italy have launched a series of negotiations to sign an agreement to avoid double taxation. The main goal of Panamanian negotiating team is to “meet the necessary steps to remove Panama from “OECD gray list”, which reduces competitiveness to attract foreign investment, which has been identified as a weakness of Panama's financial center in a study requested by the Superintendence of Banks - said Vice Minister of Economy, Frank de Lima, in a note published last October 21.

This measure transmits us the idea that national government had committed itself to maintain Panama as a solid international financial center and to avoid the strong pressure from the OECD, which have left consequences (the closing of BNP Paribas in Panama). Now Panama expects to meet the conditions g to cooperate with the International Community by fighting tax evasion.

Similarly, bilateral agreements to avoid double taxation can promote technology transfer and private investment into our country, as well as provide a framework for security and stability to the taxpayers. However, our negotiating team must recognize Panama’s position as a developing country to achieve an equitable agreement that will allow Panama to continue their campaign to get out of OECD gray and black lists with full regard over the legal and economic principles supporting Panamanian tax system. Even thought Panama has no social or economic dimension to justify the adoption of these treaties, we must make commitments to combat tax evasion.

Furthermore, our government must be prepared to face any possible inconvenience that may occur during the enforcement of the agreement, for various reasons such as: the differences in tax systems, public expenses, socioeconomic development, methods of taxation and equity in the taxes retained.

Among the countries that Panama is considering negotiating next agreements are Spain, Holland and Mexico.

REAL ESTATE INVESTMENT IN PANAMA

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sun, 06 Sep 2009 15:11:00 +0000

Real Estate in Panama has become an increasingly interesting area of commerce in the economy, even though there is a worldwide financial crisis. The construction sector, as well as the commercialization of properties for personal or commercial use, has been in a positive trend since many years back now. Under this scenario, buyers are often confronted with different situations at the moment of purchasing a property, situations that commonly go beyond the commercial aspect of the transaction. For this reason, the lawyers has to counsel their clients along all the different phases of the transaction, including the establishment of the proper structure for the acquisition of the asset allowing for an adequate asset protection and tax planning. Below you will find many of the phase and steps that should be followed and in which we intervene to successfully formalize the transaction:

• Title search of the real property/immoveable (due diligence process): Before signing any agreement or contract it is always recommended to conduct a title search of the property and a search of the corporation, if the process will be formalized through the acquisition of the shares of a corporation owning the land.

• Analysis of the proper acquisition structure: Natural versus Juridical person

• Negotiation and signing of Promise to Sale and Purchase Agreement
- Purchase price and payment conditions
- Delivery date
- Causes for termination
- Penal clause
- Otros (extracosts, contract assignment, guaranties)

• Tax impact: Aplicable taxes
- Real Property Transfer Tax (2%)
- Capital Gains tax on the transfer of securities, moveables and immoveables (10%)
- Real Property Tax (exoneration)

• Title Insurance – if requested by client -

• Execution of Public Deed containing Sale Purchase Contract and filing at Public Registry

• Exoneration from Real Property Tax (if applicable) at Finance and Economy Department

• Escrow Account services (custody of funds for payment to seller)

Other general considerations that shall be taken into account:

a. All Purchase agreements as well as Assignment agreements, private agreements and Stock Purchase Agreements, shall include or incorporate specific information on the property being acquired, such as apartment/house number, the area, number of parking spaces and its location, delivery date, purchase price and possible variation due to increase in the area or construction costs, penalty clauses in the event of default (for seller and buyer) and guarantees.

b. Publicity made available by seller through brochures of the project, direct communications, newspaper or magazine ads, among others, which includes different aspects, benefits or characteristics of the project become by law and obligation of the seller and are deem to be part of the purchase agreement.

c. If the purchase of the property includes certain equipment (stove, refrigerator, air conditioners, etc), said circumstance shall be specifically included in the Purchase Agreement, and buyer shall request that seller delivers invoices and manufacturer guarantees of said equipment.

d. Contracts in English language are not recordable at the Public Registry if they are not accompanied by a Spanish translation.

What you should know about starting a business in Panama

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Mon, 22 Jun 2009 03:31:00 +0000

It is very common to hear how easy is to open a company in Panama, but the process of turning an idea into an operating company can take from days to months, depending on the activity being carried out. Each process is different from one to another, so I strongly recommend discussing the initial idea with a lawyer, who might offer the legal perspective of all the administrative procedures that you have to complete before running the business.

First, the lawyer has to create the corporation (S.A.) or a limited liability company (S.de R.L), depending on the corporate structure that the client required within four to six working days. After this, the company has to be registered in the Tax Office (Dirección General de Ingresos in Spanish) to obtain the tax identification number (RUC in Spanish), which is granted to each taxpayer for the purpose of establishing a better tax justice and a more effective monitoring of compliance taxation of natural persons and legal entities (2-3 working days). Next, the legal representative of the company must notify the beginning of commercial operations to the Ministry of Commerce and Industry through the “Aviso de Operación”; by which you report all data of the new company and its commercial activity, because there are some restrictions as special authorization or activities exclusively reserved for Panamanians (1-2 days). Also, the registration of the company in the Municipality has to be done to obtain the good standing certificate to operate within the city and the legal representative of the company must enrol employees at the social security office (1-2 days)

Completed these five initial operations, the company is ready to open corporate bank accounts, subscribe new contracts with clients and suppliers, register the business name and business logos under its ownership and to assume duties as a corporate entity now.

Property Tax Exonerations

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Mon, 08 Jun 2009 03:51:00 +0000

If you are interested in buying Real Estate in Panama, you should like to know if they are tax exempted.

For years, the Panamanian Tax Code allowed exemption from property taxes for a period of twenty years without any differentiation in primary or secondary home like in other countries, which was a real attraction for real estate activity. However, Law No. 6 of 2005 sets new calculations for the implementation of property tax, which exempts only:

1. Properties registered at a value of 30,000 USD or less including improvements to the land, i.e. construction

2. Land used exclusively for farming and registered with the Ministry of Agriculture and Development at less than 150,000 USD.

However, the government tried to diminish the effects of this new law with another modification, the Law No. 21 of 2008 which establishes an extension to the real Estate Tax exemptions regulated by Law No. 6 of 2005. Builders have up to July 1, 2009 to obtain a building permit, and until December 31, 2011 to acquire an occupancy permit to qualify for the tax exemption. The period of mentioned exemption is for twenty years, start counting from the time the constructions is registered or the corresponding authorities issue the occupation permit or whatever happens first.

After this, the residential properties will be exonerated as follows:

15 years - properties up to USD 100,000.00
10 years - properties of USD 100,000.00 to USD 250,000.00
5 years - properties up to USD 250,000.00

Panama as an International Financial Centre

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Wed, 03 Jun 2009 03:13:00 +0000

One question that consistently foreigners ask is what are the factors that have made Panama one of the fastest growing countries in the Central America. Undoubtedly, Panama has a number of logistical, economical and legal advantages that place it as one of the best investment destination in Central America. The competition among countries has been challenging however there is economic and political stability in Panama. The ability to own titled property, Panama's long history of financial transactions as well as our estimated geographical position has contribute to the present state of economic growth.

Among the most important legal mechanisms for generating business in Panama, is the policy of open registry ships, created by law 63 of 1917, which allows the owner of any vessel, whether natural or legal person, and regardless of their nationality or domicile, can register their vessels under the Panamanian flag. In addition, the “ship mortgage” has large acceptances that are processed rather quickly within international banking institutions, because of its rapid and effective execution as a means of guarantee.

On the other hand, Panama also has a law of corporations which provides an incredible facilitation of international transactions, optimal protection to assets and investments and allows the operation of any lawful business in or outside the country. Other figures that make up the Panamanian Corporate Law are limited liability companies, trusts, and private interest foundations.

Furthermore, the tax system is a strong pillar of the national economy, characterized by the principle of territoriality that allows the exclusively imposition of taxes on national commercial activities. Consequently, gains from foreign sources are exempt from taxes, regardless of the nationality of the taxpayer or the radius of their business operations. Similarly, Panama operates on the US dollar without a central bank to issue currency and keep a control on capital movements.

Panama offers a conservative and reliable banking system enabled the country to resist one of the most severe economic crisis and therefore some might described as the best in Central America, comprising more than 80 banks. Moreover, the Colon Free Zone is an area of constants and new business opportunities for domestic and foreign, besides representing an 8% contribution to GDP of the national economy. Panama is moving along to the events of the time, making important steps to use modern technology and recognize the importance of international law as a legal platform for our international expansion. Accordingly, Panama has signed several treaties, agreements and international commitments including social, economic, legal, humanitarian issues, and has made important steps to facilitate tax information exchange.

Panama has become a metropolis of real estate projects, roads, ports, airports, shopping centers and places of entertainment, a vibrant place to live and invest. While there are still issues to resolve, Panama has the tools to ensure the growth of investment in an atmosphere of political calm and certainty.

Legal Marketing: What it is?

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Thu, 21 May 2009 04:25:00 +0000

Thanks to a very important person in my life, I have begun exploring the possibility of exercising the legal profession with a more innovative perspective and to start looking for other disciplines that could enrich my professional performance. Among so many readings, a very interesting blog about Legal Marketing attracted my attention. However, lawyers and students consider that the term contravenes the professional ethics of lawyers, whether never -ending classes of professional ethics or the myth that lawyers become rich just for his dedication to the law studies and not for the marketing. Nowadays, every law firm has sought to enter a digital age where websites are clearly necessary for survival, where the office phone is no longer enough to find a lawyer and where the effective and efficient response to customer demands are extremely required. What is Legal Marketing? It has become a compulsory subject to capture and retains more customers? Is it contrary to the sacred concept of professional ethics? The law firm strategy must be more concern about the image and marketing than the academic titles of its partners? How to attract more clients and promotes loyalty to the law firm? This time I have more questions than answers, but I do accept the challenges to find out all the answer.

Panama Presidential Election 2009

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sat, 02 May 2009 04:13:00 +0000

In Panama, we´ll have the presidential election but what is the importance of this election? Undoubtedly, the importance is crucial. Panama is growing and many international specialists consider Panama as one of the countries with the highest expectations of development. And now we must choose the person who led our nation's future.

My point of view is that we need a change of the existing social structures to gets rid of paternalism, vindictiveness, “juega vivo”, among others erratic behaviours, and starting to look very strongly to build our own future. But it is important to respect and exalt the achievements of past administrations and continue with the implementation, if they have an impact on welfare.

Panama deserves more, and the Panamanians must start promoting education, peace and equity, respect each other, demanding our rights and fulfill our obligations, as it is to participate in the next presidential election, always thinking on the best interests of Panama. At the end of the day, we´ll get a more equitable, fair and peaceful society.

The Application of the Panama-Italy Convention has been restored

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Fri, 10 Apr 2009 17:19:00 +0000

Very good news for all those with Italian citizenship, because it has been announce the re-application of the International Convention between Italy and Panama, which grants residence and work permits to those Italians who want to live in Panama.

The Law 15 of February 1, 1966 covered by the Treaty Friendship, Commerce and Navigation between the Republic of Panama and the Republic of Italy, allows that citizens of each of the contracting parties enjoy in the territory of the other national treatment with regard to admission to business or professional of any kind and the pursuit of such activities with the exception of the exercise of the retail trade.

Since then, the Treaty had been kept in force until the entry of the Decree Law No. 3 of February 22, 2008 which suspends the granting of this type of residence permit for various reasons. However, this year, through the efforts of the Embassy of Italy and several law firms made the National Migration restored the effects of the Treaty of Friendship signed between Panama and Italy, which shows the commitment of the Government to meet its International affairs.

Panama Hotels and Restaurants to be rated in a 5 star system

noreply@blogger.com (Ola Rynge) — Wed, 25 Mar 2009 05:57:00 +0000

Finally, Panama (and Costa Rica), will introduce a rating system for all hotels and restaurants based on actual level of services and facilities.

Up to date it has not been easy to understand the quality of a hotel and the prices for low quality accommodation has increased rapidly during the last few years. With the new rating system, hopefully the mid to high quality hotel will be able to get an increased competitive advantage and the lower end hotels and restaurants may increase their level to obtain a higher ranking.

Read more in this article from La Estrella (translated by Google Translate).

Lawyers complain about delays within Immigration Department

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Wed, 25 Mar 2009 04:33:00 +0000

Finally the lawyers have had the opportunity to show to their clients that the delays to grant visas and residence permit to foreigners is caused by the internal procedure of the Immigration Department to send all the applications to the Director for the final signature. Thus, hundreds of visas and residence permits are stuck in the Director's office.

Last week, a group of specialists in Immigration Law presented a formal letter to Clovis Sinisterra, Immigration Department Director, expressing their concern about the unjustified delay in the signing of visas and residence permits pending. Furthermore, they also claimed for the online publication about the approval and denial of applications for residence permits on the website of the institution.

In this regard, a high source of Immigration acknowledged that after an audit carried out last January, it was determined that Legal Counsel had at least 600 cases dealing with the applicants because they had incomplete files.

I totally agree with the position of the National Bar Association (Immigration Counsel), because we are really tired of trying to explain this to clients for whom the procedure will never be clear enough, because it is not the way in which the immigration department works in their countries of origin. I hope this initiative will help to have a more efficient and fast internal procedure.

New changes in Immigration Law

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sat, 14 Mar 2009 16:43:00 +0000

After five months of having entered into force the new migration law, The National Immigration Service amended several articles of Executive Order No. 320 of August 8, 2008 which is the regulation of Decree Law No. 3 of February 2, 2008. Among the most important changes are: it eased the requirements for visas for marines, extended the term of visas for temporary workers; the inclusion of tourism visa and marine visa among the specials visas that can be applied before immigration authorities abroad and reduced the cost of immigration services for domestic workers, among others.

The Executive Decree No. 26 of March 2, 2009 has shown once again that the immigration law is a complex and especially evolutionary law, that despite the latest attempt by the immigration authorities, it requires a deep multidisciplinary study to achieve levels of efficiency and quality to become an effective national security institution, with international vision and respectful of human rights.

What it takes to obtain a panamanian residency?

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sun, 01 Mar 2009 14:40:00 +0000

Certainly, it depends on what you want to do and how long you want to stay in Panama. For example, Investor Visa with a minimum investment of US$150,000.00 in a business with at least 3 Panamanian employees. If you are able to live in Panama by your own means, I strongly recommend you the Personal Income Visa with a term deposit of US$300,000.00 in a local bank for 2 years (minimum) or the ownership of properties, which all together sum US$300,000 or a mix of both options to sum the same amount of money.

Also, the most attractive visas are: Pensioned tourist and Private Income Retiree Visa, with several benefits and tax exonerations.

If you wish to work in Panama, the sponsor company has to prove that you earn monthly more than US$800.00 or US$1,000.00 if you are an executive. For the works visa, you have to obtain your work permit from Ministry of Labor.

Too complicate!!... Get a Panamanian girlfriend! Married with Panamanian Visa grants the work permit and the residency really fast. However, you will have two personal interviews at the Immigration office and one domicile visit.

Tax-Free Activities in Panama

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Sun, 15 Feb 2009 20:04:00 +0000

The Tax law of Panama is based upon the principle of territoriality, which has remained unaltered from the foundation of the Republic. Therefore, taxes are only burdened the net income arising from transactions carried out within the territory of the Republic of Panama. This basic principle has remained virtually unchanged since the founding of the Republic.

The Panama Law defines the activities that are not subject to the payment of income tax in Panama:
- Bill, from an office in Panama, the sale of goods or products that are really handled abroad.
- Directing, from a office established in Panama, transactions that are consummated and complete to have effects abroad.
- The distribution of dividends or shares of legal persons, when such dividends are derived from revenues generated outside the territory of the Republic of Panama.
- Boarding and / or landing in Panamanian ports of passengers on ships in transit through international waters or the Panama Canal. Moreover, air transport to and from Panama to those passengers.

Royalties, interest, dividends, commissions, securities gains and other income received from foreign sources not subject to income tax in Panama. Panamanian corporations could distribute those earnings as dividends (or otherwise) to its shareholders free of income tax or dividends. Interest earned from fixed deposits or savings accounts in banks operating in Panama are not taxable, regardless that the funds are generated in Panama or abroad.

Foreigners are required to carry ID, passport or a copy of either one

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Fri, 30 Jan 2009 18:52:00 +0000

Since the 26th of August, 2008, the police have the right to fine foreigners in Panama with a US$ 10.00 fine for not carrying valid identification papers. Valid identification papers are passport, official identification from the country of origin or a copy of either one. The fine should be paid at the immigration office, but for convenience, the fine can also be paid directly to the police.

This is according to “El Decreto de Ley 3 del 22 de febrero de 2008, artículo 91”.

Summary of new Panama immigration law, enforced the 26th of August 2008

zdm@mauad.com.pa (Zuleyma D. Montenegro A.) — Fri, 30 Jan 2009 17:04:00 +0000

By means of Law Decree No. 3 of February 22nd, 2008 and the executive decree No. 320 of August 8th, 2008, the Panamanian government approved the new immigration law and its regulation that entered into force as of August 26th, 2008.

The new legislation mainly focuses on:

Changes to fees and funds required
Changes to visa regulations
Simplifying the frame work
Stricter penalties for illegal permanence within the country

The new rules divide the visas in categories of non residents, temporally residents and permanent residents.

Non Residents Visa

Tourist visa

Citizens of the European Union automatically gets 90 days and do not need a Visa nor a Tourist Card.
All others visitors up to 90 days depending on immigration officers and country of origin. All needs a Tourist Card (US$ 5.00, can be bought at border or at arrival at the airport).
Tourist visas can be extended with 90 days, which is done at the immigration office before the first term ends.

Short Stay Visa
Up to 9 months for visitors involved in the following activities:

Refugees from natural disasters
Visiting for medical treatments
Visiting relatives in Panama
Conducting scientific research
Potential Investments in certain industries (banking, call centers, film industry etc.)
Establishing subsidiaries or branches in Panama

Temporally Residence Visa

Employment Visa
Up to 6 years (renewal every year) to foreigners hired or to be hired as:

Colon Free Zone Executive with a minimum salary of US$ 2,000.00
Employees (max 10% of total workforce) with a minimum salary of US$ 850.00
Expert or technical staff (mas 15% of total workforce): with a minimum salary of US$ 850.00
Workforce hired in accordance to Marrakech Accord with a minimum salary of US$ 1,000.00

Investment visas
Up to 6 years (renewal every 2 years) to foreigners:

Investing in agriculture sector with investment exceeding US$ 60,000.00
Investing in film making industry by labor contract
Executive for International Companies (the business activities has to be performed outside of Panamanian territory) with a minimum salary of US$ 1,000.00
Multinational Regional Headquarter employees with salary paid from abroad

Permanent Residence

Visas of Economic reasons
Allowing foreigners to obtain permanent residence after fulfilling the following requirements:

Filing a residence permit for 2 years
Filing a permanent residence petition
Filing a petition for the procurement of citizenship

Programs for visas of Economic reasons

Investment in Reforestation exceeding US$ 80,000.00
Large Investor, investment exceeding US$ 160,000.00
Self Sufficient funds (Person of means). At least US$ 300,000.00 in cash deposit (bank account), invested in real estate or a mix of cash deposit and real estate.

Visas of Special Policies
Allowing foreigners to obtain permanent residence after fulfilling the following requirements:

Filing a residence permit for 2 years
Filing a permanent residence petition
Filing a petition for the procurement of citizenship

Programs for Special Policies

Retired Annuitant Visa (2nd Passport):
Cash deposit (bank account) that accumulated a monthly interest of at least US$ 2,000.00
Tourist Pensioned with a monthly pension of at least US$ 1,000.00

Other Permanent Residence Programs

Employees hired as permanent staff of Panama Canal Authority with a Labor contract
Panama Pacific Investor investing at least US$ 250,000.00
Employees hired as permanent staff of an operator in the special economic area (Panama-Pacific) with a Labor contract
Export processing zone investor investing at least US$ 250,000.00
Film making industry investor investing at least US$ 150,000.00