PANAMA

Panama is a small country of 4 million people with 1.5 million located in Panama City which is a modern international city, similar to Miami in look and feel. The country has always been “special”, due to the Panama Canal which is not only one of the wonders of the modern world but is also responsible for over 5% of the world trade. Due to this, there is perhaps, an unwritten consensus showing that most of the world’s countries try not to interfere with Panama and Panama tries to be friendly and indeed politically neutral towards all. This makes Panama an ideal hub to establish a centre of operations as it is neutral to many countries that have differing political views such as the United States, China, and Russia. Besides, Panama does not have an army and does not involve itself in world politics or interfere in the internal affairs of other countries, which makes it similar to Switzerland.

Due to its exceptional and strategic location, Panama has been known for being an important maritime trade centre. The early Spanish conquerors used to transport minerals from Peru to Spain via the Panama isthmus. For these reasons many port cities were formed along the Panamanian coasts, home to both native Panamanians and Spaniards. In the 19th century during the Gold Rush there was a significant increase in traffic through Panama, this was the first economy boost for this region. Nevertheless, this increase of traffic did not help the industrial development, as they were receiving commodities and services straight from the United States. When the first transcontinental railroad was built in the United States, Panama´s popularity as a travel destination and trade route started to decline. This would have been the end of the economic and financial development for Panama if it wasn´t for the fact that the world major economic powers considered convenient to build a canal through the Panama isthmus. The construction of this canal was started by the French but soon the United States took over after Panama separated from Colombia in 1906. The construction of the Panama Canal was finished in 1914, and soon after this it became a major spot for international trade and commerce. The rest is history. Panama enjoyed a period of stability in the 20th century until the government of Noriega in the 80´s. After the deposing of Noriega in 1989, during the 90´s and the turn of the 21st century and up until today, Panama´s economy experienced a constant growth and it finally became one of the major financial hubs of the region and also of the world.

Many times Panama has been given nicknames such as the “Singapore of the Americas” or “the “Switzerland of the Americas”.The reason for these comparisons is that Panama presents some conditions which make it a unique country, where individuals can enjoy a variety of different advantages.

We present five reasons why Panama is considered to be one of the freest counties in the world.

  1. At the crossroads of the Americas

Due to its unique location, Panama attracts many foreigners.

If you want to invest in Panama, you can easily manage your business here and still be not so far away from your home country.

For this reason and for other advantages as well, many wealthy people from other Latin American countries move to Panama escaping from the economic problems and inflation issues of their home countries. This is the case or Argentina and Venezuela, for example.

Panama also uses the US dollar as currency, and the government is not planning to issue its own currency any time soon.

  1. Open to foreign investment

Being a small country in and of itself, Panama has practically no other choice but to attract foreign investors in order to boost the economy.

For many years, the country has been a safe place for investments and business.

Given the fact that Panama has limited resources, it is safe to say that it is surviving thanks to foreign capital and investment. This will continue being this way most certainly for a long period of time.

  1. No central bank

Many people consider Panama to have a stronger property rights regime than the United States themselves.

Panama has proven than a country can survive and even flourish while having a decentralized economy.

The country doesn’t have a central bank, and it hasn´t had one since its independence over a hundred years ago. Panama has no currency of its own besides from a few coins who intend to imitate the American ones. The currency that is widely used is the US dollar.

In general, the economy of Panama is really good, and some surveys indicate that the inflation here is even lower than in the United States.

  1. No Military

Panama is one of the few counties in the world which don´t have an army. It has the Panamanian Public Forces instead, which acts as police force.

Panama is a good example of a country which has learned the lessons from the past and now maintains good relationships with other countries in the region and in the whole world.

  1. No history of civil war

Ever since the civil war which lead to independence, Panama has no history of civil wars at all.

In this country foreigners can enjoy great freedom like free press, free speech and freedom of religion and cult, and also live in a country whose government supports immigration. A clear example of this is the wide variety of residency visas that Panama offers, being one of them actually one of easiest-to-get residencies in the whole world.

Naturally, Panama also has some flaws. Being a Latin American country, it sometimes falls into some unpleasant stereotypes like slow customer service.

If you like things done fast and efficiently, Panama may not be the right place for you to live, but you can always invest here and conduct business, while living or spending most of your time someplace else.

All in all, in the last few years Panama has been– and it continues to be – a hub for investors and businessmen from Latin America and other parts of the world.

One of the reasons why expats from around the world chose Panama is because this country offers a developed infrastructure and first world amenities, similar to those in the US but at a much lower cost. In Panama a little money can buy you a fair deal of luxury. In some regions a person can easily live on 1,000 USD a month, and at the same time enjoy the company of friendly locals and other expats, pretty landscapes and great beaches.

Moreover, and thanks to the fact that Panama is a small country, you can enjoy a quiet life style while being not too far away from the capital city. In places like Los Santos or Herrera, for example, you can easily find property near the beach for only $60,000.

In other words, Panama offers the California-type life style many can only dream about at a much lower cost.

Thanks to its developed infrastructure, strategic location, mild climate and low cost of living, Panama is considered one of the best places in the world to retire.Many people are encouraged to retire in Panama thanks to the amazing discounts this country offers. The government has put together a very interesting program of discounts for retirees from which can benefit not only locals but also foreigners.

Under the pensionado visa, foreign retirees can have access to all these benefits.

Some of these discounts include: 50% off tickets for movies, theatres, concerts and sporting events; 30% off bus, boat and train tickets; 25% off airplane tickets; 30% off hotel rooms; 25% off restaurants.

These benefits also apply to the health system: 15% off hospital bills, 10% off prescription medicines, 20% off medical consultations, 15% off dental and eye exams, and 20% off professional and technical services.

All these discounts are available for foreigners under the pensionado visa. This visa is one of the most popular because the application process is straight forward and the requirements are easy to meet.

If you are applying with a spouse, for example, the requirement is that you prove to have a lifetime fixed retirement income of only $1,200 for both.

Let´s not forget that Panama also offers other visa options such as the friendly nation’s visa, which is the easiest and simpler residency program in the world. After three month from the day of application, a person can get his permanent residency card and Panamanian ID called “cedula”.

Other reason why people choose to retire here is the fact that Panama is an excellent place to conduct business. In Panama retirees can explore their options of investment and business activities. Many expats come to Panama to enjoy the benefits of its low costs, strategic location and expanding economy.

Speaking of which, Panama´s economy is currently experiencing a boom, being one of the fastest growing economies, expanding approximately 8.4% between 2004 and 2013.

It is also the most important business centre and the strongest economy of the region.

Living in Panama can also help you improve your health. Many expats have reported a significant improvement in their health in general since they moved to Panama. Low costs of medicine, healthy food and a relaxed way of life are definitely great advantages for retirees.

Who wouldn’t love to enjoy a fine cocktail while lying on a swinging hammock, a delicious fried fish meal with a cold beer, or a seafood dish with a delectable mango juice?

Panama is not only known from being a business hub but also from its exquisite and diverse cuisine.

Panama means literally “abundance of fish”, which is probably the reason why there is such a wide variety of fish and sea food in the country.

Corvina is the most popular fish in Panama and you will find it practically in every restaurant where it is often served with garlic and butter.

The corvina is also used for the preparation of the popular ceviche, a meal whose popularity is well spread throughout the Pacific coast. In Panama you will find ceviche made of octopus, shrimp, fish and a combination of these.

On the Caribbean coast of Panama, bacalao is extremely popular, usually served with vinegar and hot peppers.

For obvious reasons fish and sea food are the main protein here, but it is also very common to find chicken and meat based dishes. Some popular meals include pounded beef with onions and “tamal”, which are bundles made of steamed corn and meat wrapped in banana leaves.

Tubers like the yuca and the potato are widely consumed in Panama, being used in soups like the “sancocho”.

One of the most popular meals in panama is the “arroz con pollo”, literally meaning rice with chicken, and the coconut rice which is a typical meal of the Caribbean region.

In Panama there are also many choices for vegans and vegetarians. A typical Panamanian meal includes not only meat but also a variety of beans and vegetables.

One of the most popular side dishes is “patacones”. Patacones are plantains which have been sliced, smashed and fried and are usually served as a side dish to fish and meat based meals.

Let´s not forget about fruits, which exist in a wide range of shapes and colours in beautiful Panama. The pixbae, for example, is a typical local fruit which holds many nutrients and vitamins. It is usually served as a snack or added to salads, soups and croquettes.

In Panama you can get inside any market and you will find a wide range of delicious, juicy and nutritious fruits such as mangos, pineapple, bananas, plantain and papayas.

Fruits are very easy to find here in Panama and at very convenient prices. In this country sometimes fruits are even more accessible and easier to find than fast food.

It is time to talk about beverages now. Panama´s most popular drink is the Ron Abuelo, which has won gold international medals for its excellent quality. Another typical spirituous beverage is the seco herrerano, which is a very strong hard liquor distilled from sugar cane. It is usually mixed with cranberry juice. It is safe to say that the seco herrerano is the “Panamanian vodka”.

Panama is also known for its national beers. Panamanian beers tend to be light and are very inexpensive. Some of the most popular brands are Atlas, Panama and Balboa. There are also excellent choices for craft beer such as Rana Dorada and Casa Bruja.

For those who don´t love alcoholic drinks there is the Chicheme, a popular beverage from the provinces made from sweet corn and usually served cold. You may also like the “chicha de tamarindo”, a tamarind drink which can be as refreshing as lemonade on a warm summer day at the beach.

To sum up, the gastronomic variety in Panama is truly amazing, offering a wide range of options for all tastes and preferences. The colourful and delicious Panamanian cuisine, along with its fresh natural products, give both locals and expats a chance to enjoy tasty and at the same time healthy meals.

Panama offers a wide variety of entertainment and opportunities. Many come here purely in search of adventure, while others see Panama as an advantageous business destination and financial hub.

The bottom line is that no matter what your preferences and interests are, in Panama you will find what you are looking for.

Here are is a summary of Panama´s most interesting places and cities.

Panama City

Panama City offers a cosmopolitan, first-world-city life style very similar to the one you may find in cities like San Francisco or Miami, but at a much lower cost.

This interesting city hosts nearly 80 of the world´s largest banks as well as giant international companies and it´s a major commerce, financial and banking centre. Many expats find in Panama City first class health care, high speed internet and reliable power and water supplies.

Moreover, the capital city is one of the the main culinary destinations of the region, offering a wide variety of sea products and also an exquisite international cuisine.

Cost of living in Panama City

Although Panama City is the most expensive city in Panama, it is still cheaper than the United States and Europe, especially if you consider that Panama is a world capital and the most important financial centre of the region.

If you decide to live in Panama City you may consider not buying a car. The subway here costs only $0.35 and most bus rides only $0.25. There are also inexpensive transportation apps such as Uber, and a ride on a regular taxi usually doesn’t cost more than 4 or 5 dollars.

We present a simple budget where you will find details of estimative monthly expenses in Panama City:

Expenses U.S. $
Rent (two-bedroom apartment in a central area) $1,000 to $1,500
Transportation (taxi or fuel/maintenance on a compact car) $75 to $200
Electricity (depending on air conditioning use) $60 to $150
Water (bundled with trash pickup) $0 to $25
Gas for cooking, water heaters, dryer, etc. $0 to $10
Supermarket (food/household, mix of local and imported items) $400 to $500
Entertainment for two (movies twice a month, including snacks/drinks, and dinner four times a month) $150 to $400
Phone (land line, mostly local use) $13 to $20
High speed internet $20 to $45
Cable or satellite television $35 to $50
Monthly total for a First-World lifestyle in the big city: Approx. $1,753 to $2,900

Panama City is on the Pacific Ocean coast. The weather here is mild but sometimes the temperature can rise up to 29°-30° C. Many expats use air conditioning in these hot days, which can definitely increase the electricity bill.

For those who would like to hire help, Panama City also offers interesting options. A full time maid can cost as little as $250 a month. Some may choose to hire a part time maid, in which case you usually pay $15 per visit, including cleaning, laundry, cooking and sometimes babysitting.

Costs are low also for entertainment. Movie tickets in Panama cost about $6, and a combo with popcorn, nachos and a soda may cost just as much. Most films are played in the original language with Spanish subtitles.

Lifestyle in Panama City

Panama City is appropriate for most life styles, offering from ultra-modern skyscrapers like the ones you may find in a thriving financial centre, to quite neighbourhoods you may easily find in small towns.

There is also a wide variety of restaurants in Panama City, where in some cases you can have lunch for $7 or $10 and a beer for as little as $1.

When you think of the luxuries you have denied yourself during your life, it is not bad to think of the life style you may have in Panama, where you can maybe play golf on a regular basis, afford weekly massage sessions, and go out to fancy restaurants more often than you did back home.

Bocas Del Toro: Panama’s Caribbean Gem

Bocas del Toro may very well be considered to be a secret Caribbean gem, as it is a destination unknown for many. Near the border with Costa Rica, Bocas del Toro is part mainland and part archipelago.

Only one hour flight away from Panama City, in Bocas del Toro you will find yourself in a totally different world, surrounded by hundreds of islands, some of them completely uninhabited.

Bocas del Toro is a true Caribbean paradise, with turquoise waters, white sand and coconuts growing from palm trees. Although the Caribbean has two times the rainfall than the Pacific coast, this continues to be a popular touristic destination among Panamanians and foreigners as well. This region, like the rest of Panama, is completely outside of the hurricane belt and is visited by different kinds of tourists. In Bocas del Toro you will find long term backpackers, surfers, families, bohemian people and also wealthy individuals vacationing in luxury resorts.

Also, in this region you will find a large community of expats, mostly in Isla Colon, in their mid-twenties, retirees and everything else in between. Many have started their businesses here and chose this place as their place of residency, living a laidback life style in this magical Caribbean paradise.

Boquete, one of the top retirement havens

Boquete is a town located in the province of Chiriqui, in western Panama. It has a population of 6,000 people and a large community of retired expats, who moved there in search of a simpler and quieter way of life.

Boquete has long been considered one of the top places in the world to retire and this is not surprising at all.

This town enjoys a cool climate due to its location near the mountains, and its breath-taking landscapes attract both Panamanians and foreigners.

Boquete is located not far away, a 40 minute ride to be exact, from Panama´s third largest city, David. David is the commercial hub of the region, with the facilities and comfort inherent to all important urban centres. Boquete is also an hour ride away from the beach, which makes this town a unique place, where residents can enjoy a cool and nice climate while being close to the beach and to an important city at the same time.

Agriculture is very important to the economy of this region. Rich and aromatic coffee beans are grown here along with citrus and oranges in particular.

For all these reasons Boquete remains one of the favourite destinations for expats in general and especially for those who are looking for a quiet retirement place. The perfect climate, the wonderful landscapes, the strategic location and healthy life style options undoubtedly make Boquete a unique place where to enjoy life.

Real estate in Boquete

Besides from the fact that property prices in Boquete have risen during the last few years, real estate in this region is still affordable. There is a wide variety of options available, from modern houses to traditional cabins, with a broad spectre of prices.

If you need help finding the perfect property for you in Boquete, you are welcome to contact us for a consultation with our real estate experts.

David, everything you need to know

David is the capital of Chiriqui province, and it´s the most important city of western Panama. This city presents a developed infrastructure and it is the most important commercial and business centre of the region.

Many expats choose David as their place of residency due to the fact that the cost of living is much lower than in the capital, but still presents the advantages of a developed city.

David also has the highest temperature in all the country, for which it is known as the warmest city in all Panama.

Retire in David

David is also a great place for retirement. There is a well-developed infrastructure, high speed internet, excellent phone signal, accessible and affordable healthcare system and great connections. There is one flight to and from Panama City every day.

David also has a relatively low cost of living compared with other popular retirement havens. It has been reported that a couple can live here on only $1,400 a month. Moreover, the retirees, especially those who have a pensionado visa, enjoy the benefit of many discounts.

Chitre

The city of Chitre is the capital of the Herrera province and it has a population of approximately 80,000 people.

Chitre is only a three-and-a-half ride away from Panama City and it´s the most important city of the region.

Expats can find here a variety of properties to fit every budget, from traditional one storey houses to modern apartments.

If you are worrying about finding what to do in Chitre, then worry no more. Chitre offers different entertainment activities from shopping to golfing and great restaurants.

There are other important expat communities not too far away from Chitre like Pedasi and Las Tablas.

The climate is one of the biggest advantages of Chitre, with average temperatures of 26-28° Celsius and lows around 21°.

Santiago

Santiago is the capital of the Veraguas province and it has a population of approximately 100, 000 people.

One of the main draws of this city is the Santiago Mall, which is the biggest mall outside of Panama City.

Due to the fact that it is located at an elevation of 299 feet, Santiago has a cooler climate in comparison with other cities in Panama. Nevertheless, the seasons are exactly the same as in the rest of Panama. Panama has only two seasons, dry and wet. The wet season begins in mid-April and lasts until December.

Panama is a small country of 4 million people with 1.5 million located in Panama City which is a modern international city, similar to Miami in look and feel. The country has always been “special”, due to the Panama Canal which is not only one of the wonders of the modern world but is also responsible for over 5% of the world trade. Due to this, there is perhaps, an unwritten consensus showing that most of the world’s countries try not to interfere with Panama and Panama tries to be friendly and indeed politically neutral towards all. This makes Panama an ideal hub to establish a centre of operations as it is neutral to many countries that have differing political views such as the United States, China, and Russia. Besides, Panama does not have an army and does not involve itself in world politics or interfere in the internal affairs of other countries, which makes it similar to Switzerland.

Panama obtains revenue of about 2 billion a year from the Panama Canal alone, which means that its economy is very stable considering its small population. Indeed, Panama has a rating. Due to this and the revenue to related industries such as the freezone (the largest in Latin America and one of the largest in the world) Panama does not need to levy exorbitant taxation on its population to pay for its welfare programmes.

It is not only because of this that Panama punches well above its weight. Over the years, but especially under the rule of former president Martinelli, Panama deliberately modeled itself on Singapore and tried to emulate Singapore´s legislation and policies on foreign investment.

Consequently, Panama has positioned itself as one of Latin America’s business, logistics and banking centre with a range of investor friendly legislation that has made it amongst other things, Latin America’s banking hub (often called the Switzerland of Latin America), Latin America’s trading hub with obvious transshipment and logistic advantages by air and sea, with an increasingly friendly business investment and freezone legislation.

Under Martinelli’s government, and indeed prior to him, Panama boasted the fastest GDP and economic growth rate in Latin America with many sectors including real estate booming at a monumental rate of 10%, a matter not even affected by the global economic crisis. Panama also won numerous international awards and acclaim for having the best retirement immigration policies in the world with numerous countries being allowed residency with no investment under the friendly nations visa policy .

The combination of a territorial taxation system (no tax on worldwide income), excellent freezone legislation, great schooling and living facilities and relatively low cost of real estate, made Panama one of the most, if not the most vibrant investment and business destinations in Latin America until 2017.

In 2017, an unfortunate combination of the release of the Panama Papers (an ICJ report designed to destroy Panama’s reputation) and a very weak president who failed to take any steps to support the country or the economy, lead very quickly to a major loss of confidence in the country by foreign investors. This is now rebounding back to its former status (see below).

Political stability -9

Personal safety -8

Lifestyle – 7.5

Taxation -10

Investment potential -8

TOTAL: 42.5 (out of 50) AAA

However recently, a number of events have occurred that have started returning Panama back to its former glory, and most experts and financial analysts predict that this economic renaissance will continue strongly over the next ten years. These include:

  • Panama has been removed from the OECD blacklist as it has agreed to comply with OECD standards and BEPS substance initiatives, but nevertheless has been allowed to maintain its territorial taxation system,  ie: no tax on worldwide income .
  • The President of China has visited Panama and has concluded a number of deals including a 14 billion infrastructure development into Panama, with consequential real state projects by China’s biggest developer (Citigroup). Chinese banks are now opening branch offices in Panama.
  • The Pope has visited Panama, thus bringing the attention of the World Catholic community on this small country and adding to an increasing tourism wave .
  • The Canal has been widened to accept bigger ships and twice more volume in shipping.
  • The biggest copper mine in the world has now started its production in Panama.

However, nothing has changed in Panama’s basic fundamentals so it is expected that the country will be experiencing a boom within the next five years which will eclipse its former growth. Some other  reasons why Mundo sees these opportunities include the following:

    1. Recently Nito Cortizo has been elected president of Panama. Nito comes from a Jewish business background and has vowed to increase Panama’s reputation and standing in the business world. Since Panama has a strong middle class and has always been pro business, as well as having the biggest Jewish community in Latin America, it is expected that the environment created by president Cortizo will increase foreign confidence and lead to a return in foreign investment.
    2. Panama has only territorial taxation, this means that companies and individuals with tax residency in Panama have zero tax on their world wide personal and corporate tax. Panama also has no inheritance tax, death duties and is free of many of the world’s most unattractive taxes. Indeed, in this respect Panamanians enjoy an income and lifestyle very similar to the one of Hong Kong, Singapore and Switzerland.
    3. Panama has one of the most enviable and beautiful lifestyles on earth. Multiple clean unpolluted and uncrowded beaches, great diving, great seafood and wonderful eco tourism opportunities as good as if not better than Costa Rica. There are dozens of foreign schools ranging from English and American to Chinese and Japanese, French and Italian, meaning that expats have a huge choice of schooling for their children. Panama has more restaurants per capita than any other country in the world as well as fantastic nightlife, clubs and casinos plus a 16th century old city which thrives with nightlife. 
    4. Opening a business is easy with no currency controls, low admin compliance, and due to the shortage of skills in Panama, almost any business that is opened will face success. This is coupled with an extremely friendly and easy migration and residency programme that means entrepreneurs, business men, skilled professionals and investors are welcome and can expect high returns and great lifestyle. 
    5. Medical facilities are on par with the best that the United States has to offer. There are numerous international hospital facilities in Panama city including a John Hopkins Hospital. Many doctors are graduates of top American medical schools.
    6. Panama has no communist or socialist leanings, its population is almost fully employed with major government housing subsidies, similar to Singapore and virtually free schooling and health care all paid for, largely by the canal and the middle class, and large entrepreneurs are very much in control of the country and its future direction. Investors are welcome and supported and wealth is admired.  The population is aware that low taxation benefits them and they support it. The chances of a situation like Venezuela, Ecuador or Argentina happening in Panama are much smaller than the same situation happening in France, Germany or the United States.


Panama Highlights


Advantages of Panama


Business Opportunities in Panama

Panama has virtually full employment for skilled professionals due to the fact that there are more business opportunities than there are skilled professionals to fill them. This is because Panama is a growing economy and there are huge opportunities in almost any sector, whether it is large, medium or small business. Although it is impossible to cover all the sectors, we will try to address the major ones below:

Panama has an abundance of wilderness and coast line equal to and indeed, in some cases superior to Costa Rica. This ranges from the Caribbean typical island of Bocas del Toro, with its amazing sea beach and island experiences, to the unexplored jungles of the Darien, where you can live with Indians and catch giant prehistoric size fishes in untouched waters. Yet, despite having the biggest biodiversity on earth, Panama’s tourism sector is virtually virgin. As an example, only two hours by boat from Panama are the Pearl Islands and yet, there are almost hundred untouched pristine islands ready for development and eco-tourism. The country abounds in tourism and eco-tourism opportunities and in fact the government has deferred tax incentives for tourism operations. Whether you wish to establish a game fishing lodge or develop an island eco-tourism and tourism in general, will be a booming industry in the years to come with low prices of land and readily available tourism licenses. 

Panama is crypto friendly, and indeed it supports a number of crypto exchanges and dealing in crypto is tax free. The free zones including Ciudad del Saber (City of Knowledge) contain a number of high tech and crypto and blockchain incubation startups and even several home grown crypto investment funds. The opportunity for entrepreneurs to establish blockchain and crypto related businesses is immense and soon Panama is expected to enact a crypto friendly regulation allowing companies to apply for licenses to trade in crypto. 

Panama has a growing financial sector with the opportunity to establish banks, lending institutions, and money management centers. Many Swiss money managers and finance professionals are moving to Panama, which many be called the Switzerland of Central America. PANAMA EVEN HAS ITS OWN STOCK MARKET. 

The construction industry has been experiencing a downturn due to the Panama Papers; however, this presents the opportunity for the acquisition of land and projects at excellent rates and in some cases at distressed sales. It is expected that with the new surge of Chinese and foreign investment, construction will again come back to its Martinelli days. Companies like Citigroup China are building the Tao Panama and a number of large scale luxury brands such as Fendi and Yoo are being built already, showing that these companies have done their research and expect growing demand. 

Panama has the biggest Cooper mine in Latin America and one of the biggest in the world. This will support a whole industry and infrastructure in servicing the mine from machine repair to engineering and housing for the workers. 

Despite the canal and the fact that surprisingly, there is no serious ship repair and maintenance, Panama has a demand for all maritime related industries . Already many foreign (especially Italian) companies are beginning to establish marine related industries here.


Key Business Areas 


Panama´s industry sectors 


Surprising facts about Panama’s economy

Panama has been consistently voted as the best retirement and lifestyle destination in Latin America by various international agencies and publications. The factors that have contributed to this assessment include the following: Panama is by far, the safest country in Latin America with a very low crime rate in Panama city and almost no violent crime; Panama has diverse living from mountains and cooler climate to tropical Caribbean beach paradises at very affordable prices; there are over 30 international schools: medical facilities are first-world and on par with the United States: the city is considered an international first class city with close access to the world. This is the reason why many business men are choosing to leave the United States, Europe, China, and Latin America and move their families to Panama. Indeed, Panama is extremely multicultural and extremely tolerant to foreigners. In any night you will see Jews, Arabs, Italians, Germans, Russians, Chinese and people of all races, cultures and religions mixing in the nightclubs. There is no religious intolerance, racial discrimination or terrorism here. Sounds like paradise? Well, it is. 

Those who want to have a residency in Panama have approximately 20 different options, however, the major types of residence that are the easiest and most common include :

Income tax is only levied on income derived from operations within Panama. This is true of both individuals and corporations.

This means that there are considerable advantages for a Panamanian individual or corporation to establish tax residency in Panama.  In terms of a corporation it is important to point out the following: 

 A Panama business entity can direct its offshore activities from Panama without becoming liable for tax. The Fiscal Code (Article 694) excludes the following types of income from taxation:

  • the profits of reinvoicing external goods or services;
  • the profits of operations that are directed from Panama but carried out externally;
  • the distribution of dividends derived from external income, including the above types of income.

Interest on deposits with Panamanian banks is exempt from taxation no matter the source of the cash.

An entity with both external and Panamanian business activities is taxed only on the Panama-derived income, and is subject to withholding tax only on that income. 

 

Panama business entities with only external operations are exempt from dividends (withholding) tax, undistributed profits tax, business tax and from stamp duty on contracts executed in Panama to be performed elsewhere.

An individual wishing to obtain tax residency in Panama must first obtain residency. After this, he/she must establish significant economic and social ties to the country sufficient to be granted a tax residency certificate. The granting of such a certificate depends on the assessment by the authorities as to his tax residency status at a particular time and is renewed each year. Of course, it is better to give up on an existing tax residency before applying for a Panamanian tax residency.

In order to maintain tax residency, the individual or company must file tax statements every year prepared by a locally certified accountant. Although tax needs to be paid on local income (apartment rental receipts, wages or consultancy earned within Panama, sale to local Panamanian entities, the good part is that your worldwide income is absolutely tax free and can be lawfully declared with zero tax.


Information on tax residency in Panama


Tax residency requirements

There are over 60 banks in Panama because Panama is the top banking and financial centre in Latin America. The reasons goes back to Panama’s friendly taxation system, ie, banks do not pay any tax on their international profit from foreign sources. This means that of course, banks can invest worldwide and not pay local tax. This has firmly placed Panama as a banking hub of Latin America. In fact, Panama has been called the Switzerland of Latin America .

Most serious banks prefer you or your corporation (preferably both) to be resident in Panama and to be tax resident in Panama. This saves them the huge paperwork of having to report to other countries under the CRS and makes the relationship far smoother and easier. If you, as the UBO of your company do not have tax residence in Panama, then generally the bank will request you to identify or certify the place of your tax residency, which is the place the bank will be obligated to report to. This is the same requirement for most countries (except the United States and several others) who have been forced by the OECD to report bank accounts to the place of residency under the OECD. 

Panama is an onshore banking destination with all the advantages of an offshore banking destination due to the territorial taxation system. Furthermore, many Panamanian banks have highly qualified international staff from Switzerland and other highly developed countries to take care of their foreign and expat clients. It is usually important for you to visit the bank so that a professional who can speak your language can be assigned to you, to work with your account or business. 

There are numerous types of banking options and below we deal only with the most common ones:

  1. The Brokerage Account in Panama 

There are a large variety of banks and brokerage houses which offer brokerage accounts to both residents and non-residents . The advantages of having a brokerage account in Panama include the following :

  • Having a brokerage account avoids most of the major risks of bank insolvency or collapse, since what you are buying are shares or bonds and since for example, bonds are securities, the only function of the bank or broker is to hold the securities in the name of yourself or your trust. That means you can move the securities to another custodian (bank or broker) without moving funds so that even if the bank collapses, the securities cannot be touched. Very few people know about this aspect of the law, because under international laws, if the bank holds money in its account, it is considered money belonging to the bank, whereas if the bank holds securities it is holding the securities as custodian or trustee for you. This makes all the difference if the bank is put into liquidation, administration or insolvency because of government problems, debt, etc. You cannot lose your securities but you will almost surely lose your bank deposit (remember Cyprus crisis). 
  • Panama is the ideal place to hold a brokerage account since there is no tax in Panama on such investment accounts. Further, you can buy for example bonds, such as bonds of Panamanian airport and other high yielding bonds that can pay up to 7% yearly interest which is much higher than bank rates and indeed safer in most cases. Indeed, most banks simply take your deposits and then invest them into the bond market themselves and live off the difference in the interest. A brokerage account allows you to cut out the middle man. Panama has a large number of highly experienced bond and equities brokers that can give you their expertise on the Latin American, European, Us and even Asian markets, at far less transactional cost than in many other places and at a far lower entry fee. 
  • You can create a borrowing facility against your bond investment which means that you can for example have a steady income of say 1000 000 USD at 7% but if you urgently need money to invest in other investments without touching your portfolio, you can borrow against your own funds at say 2%. This allows you to diversify your portfolio very quickly when the opportunity arises whilst not risking the capital invested. 

There are many other advantages which our experts can explain to you, the good news is that whilst most brokerages will require 1000 000 USD as a minimum to open an account, Mundo has an introductory offer from its expert brokers in Panama for as little as 100,000 USD.

 

Private banking in Panama 


Corporate banking in Panama 

From 2006 until 2016, real estate in Panama City was appreciating in value at a rate of around 10% a year . This rate was not even affected by the global financial crisis. The investment came from all over the world but especially from Latin American buyers who saw Panama City as a Miami in Latin America with safety, schooling and lifestyle; but at the fraction of the price. 

The combination of the “Panama Papers” and a government lead by president Varela, who tried to actively stop many investment projects started by Martinelli, essentially dampened foreign investment into the real estate sector and Panama buying slowed.

The slowdown which has occurred from around 2017 to mid 2019 has meant that many top properties in Panama are now being offered at close to construction prices. 

As Warren Buffet famously said, “be greedy when others are frightened and be frightened when others are greedy”, is a very good maxim for Real Estate Investment. Those who followed this advise during the United States property crises of 2008 have seen returns on their investments of many hundred percentage points. 

The Panamanian real estate market promises double digit growth and more, due to the fact that Panama is a fantastic city to live in and comparable in many ways to Miami but at a fraction of the cost. For example, high level luxury real estate in Miami which costs 1 000 000 USD minimum with architectural design, marble and waterfront can be acquired in Panama City for less than half and sometimes a quarter of the price. 

For investors with a holding strategy, there are a number of interesting distressed assets by developers including very affordable high end commercial real estate. Land and properties in the free zones can also be acquired at rock bottom prices, a situation which is not expected to last long.

Investors in residential real estate at present can pay from 2000-3500 dollars per square meter for prime real estate including highly valued brands. Second hand older but still excellent apartments can be bought for as little as 1500 per square meter.

Rental yields range around 5-7 per cent for residential property with expected gains of around 8 per cent a year and higher for select properties .

Commercial properties can be bought at very low cost at present .

There are many possible options for investment. We can only deal with some of them: 

  1. Panama City: this is a vibrant growing city of 1.5 million people and most of the real state growth and action is here as there is population pressure and predicted demand. Hot areas for investment include the Casco Viejo (old city), Avenida Balboa, Panama Pacifico, and San Francisco areas. There are also nice housing developments in Balboa, Ancon, Diablo, around 15 minutes from the city centre. There is interesting large commercial and residential free zone in Panama Pacifico.

 

    1. The islands around the Pearl Islands are amongst the most beautiful islands in Panama and only 2 hours by boat from Panama City. Some already have developments and represent very good buying. 
    2. The beach areas around Coronado and the Pacific which are around 2 hours drive from Panama City  are oversupplied and unless bought at extremely cheap prices are not a recommended purchase at this stage. There are hundreds of miles of coastline in Panama to choose from.
    3. Chiriquí is a province bordering with Costa Rica. Due to the intended railway, which will link Panama with Chiriquí, this could be fantastic buying for retirement properties. This area has Panama’s best farming and hill properties with permanent spring weather and is only a few hours away from some of Panama’s most beautiful Caribbean beaches, including the famous Bocas del Toro.

Investors from over the world find in Panama great security and confidentiality, which is why this country has become one of the most important financial centers.

We will discuss now the banking and other financial licenses that are available in Panama.


Types of banking licenses in Panama 


How to apply for a banking license in Panama? 


Other financial Licenses in Panama


Panama Financial Services License

Investment license  


E-money licence 

Gambling License  

Panama has a number of corporate structures that are ideal for international business establishment. These include:

  1. The Sociedad Anonima or SA which means the same is a company with a requisite of at least three directors. Since Panama has a territorial tax system, the income of the SA is not taxed in the country if it is sourced outside. In order to operate within the territory of Panama, the SA needs to apply for an operating license which is easily granted for most types of activities. The advantages of obtaining an operating license is that the company will be deemed a tax resident of Panama and if it operates via transactional business (not passive investment) under the CRS (Common Reporting Standards), the company will only need to report to the tax authorities of Panama. 
  2. The limited partnership is a look through an entity with limited liability. This means that there can be any number of partners who are taxed in their respective jurisdictions including, if necessary, Panama Partners. 
  3. The Foundation was modeled on the Liechtenstein Foundation Law and is the perfect asset protection vehicle which can hold passive assets. It is often best practice to hold the Panama companies or SA in a foundation. There has never been a case in Panama where the foundation  has been set aside so it is considered one of the best and indeed cost effective asset protection mechanisms. 

Panama is increasingly being considered an onshore solution because there are substance requirements including the filing of accounts. Panamanian accounts can be produced quickly and cost-effectively.


Panama Offshore Company


Foreign Corporation


General Partnership


Limited Partnership


Civil Partnership


Partnership En Commandite


Foundation


Trusts

There are 12 free zone regimes in Panama, the largest of which is the Colon Free zone which has over 800 acres of warehouses and stores and is the second largest free zone in the world. Noteworthy also are the City of Knowledge and the Panama Pacifico free zones, both located within minutes drive from Panama City. 

Panama law also permits companies to buy land and obtain permission from the government to establish their own free zone regimes.

Each free zone has its own specific features; however, the general free zone laws have the following common legislative framework:

  • A Panamanian company (SA) or entity can apply to obtain a free zone license at every reasonable low cost by simply registering its activities in the particular free zone and having an office and staff there.
  • There are banks operating inside the free zone and in most cases Panamanian banks will automatically accept that a company in the free zone is an operating company due to its activities and therefore, it will be deemed a tax resident of Panama. This means that, under the CRS, the company will only need to report to Panama. Under the free zone, all goods and services sold outside Panama are automatically excluded from all taxes including profit taxes. (There is currently only a 1% turnover tax; however, this does not apply in all cases). This is because a free zone company is automatically treated as having its income from sources outside Panama. 
  • The free zone company pays zero duty on the import of goods, services, and/or technology that is destined for export. This means that one can store both tangible and intangible goods and technology in the free zone duty free and export them to Latin America and indeed even to the rest of the world.
  • The free zone entitle you to assemble or put together imported elements of goods and services and have them considered to have been manufactured in Panama; this, in some cases, gives advantage to existing trade treaties between Panama and its neighbours.
  • The free zone is useful not only in the import of goods, it is being used as a centre for the development of blockchain and cryoto technologies, educational and learning facilities and startups.
  • In some cases, special regimes for large companies permit the shifting of an entire company and its staff to the free zone with favorable labor and visa regimes. In the case of large companies, special dispensations and regulations  can be enacted to smooth the transition.
  • With worldwide trade wars and disputes tightening, Panama is an ideal base to set up operations because it is politically neutral and well known as a transshipment hub. 

Besides, it is little known that establishing a free zone company and injecting over 160,000 USD into its founding capital automatically, provides residency and indeed subsequent tax residency to the shareholders who can also become directors. In such a case, they would pay no profit tax on their investments, paid into their personal account in Panama. The free zone company can therefore be considered an ideal base to have the centre of management and control of your international corporate structures.


The free zone zero tax corporation


Investment regimes in Panama


City of Knowledge


Baru free zone


Colon free Zone


Panama Pacifico


The Special System of Multinational Corporation Headquarters (MHQ) 


Free Trade Zones 


Free Zones registered in Panama 

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