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RELOCATION TO PANAMA

RELOCATION TO PANAMA. Escobar, Della Togna, Icaza & Jurado Attorneys at Law. September , 2011 – Panama City, Panama. Background. Jacqueline Escobar – Graduated from Duke University – Masters in Law (Real Estate Expert )

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RELOCATION TO PANAMA

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  1. RELOCATION TO PANAMA Escobar, Della Togna, Icaza & Jurado Attorneys at Law September, 2011 – Panama City, Panama

  2. Background • Jacqueline Escobar – GraduatedfromDukeUniversity – Masters in Law (Real Estate Expert) • Marisel Della Togna – FormerDeputy Director of PanamanianInternalRevenue Service (TaxConsultant) • Marisel Jurado – MBA and Masters in Accounting (CorporateLawExpert) • Maruquel Icaza – Graduatedfrom American University, – Former Vice ConsulPanamanianEmbassy at Washington, D.C. (ImmigrationConsultant)

  3. Panama´sOverview

  4. Reasonable life here on about $1,200 a month. Comparative advantages Panama´s Economy: - Dollarized economy. - Services based economy (banking, commerce, transportation, ports and tourism). - The country's industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, textiles and more.

  5. HEALTH CARE AND INSURANCE • Infrastructure (e.g. Punta Pacífica Hospital which is affiliated to the John Hopkins Hospital in the US) • Low cost medical services and health insurance premiums • Recognized local and international insurance companies (Blue Cross Blue Shield) • Your health insurance policy can cover you for hospitalization and/or medical expenses. You can obtain Local or International Coverage. • By Law, all vehicles have to be insured.

  6. INCORPORATION IN PANAMA

  7. Themostcommon legal instrumentsforIncorporations in Panama: 1- PanamanianCorporations (Usedto do business in Panama ortoprotectassetssuch as properties, any legal activity) 2- PrivateInterestFoundation (AssetProtection)

  8. PANAMANIAN CORPORATIONS • Law 32 of 1927 • IDENTITY OF DIRECTORS • Nationals or foreigners may establish a corporation • • SHARE STRUCTURE • Bearer and nominative shares are also permitted. • A single person or a corporation may own all shares. • • CORPORATE DIGNITARIES & RESIDENT AGENT • Panamanian law requires a President, a Secretary and a Treasurer, and a local resident agent. • DURATION AND DOMICILE OF CORPORATION • Law 2 of 2011 • KNOW YOUR CLIENT – DUE DILIGENCE

  9. Stepsto Set Up a Corporation • Checknameavailability in thePublicRegistry. • Preparation of legal documentation (i.e.corporateby-laws). • Uponregistry, theResidentAgent prepares share certificates and legal booksforthecorporation. • The annual corporate tax is of US$300 • Length of time fororganizing a company: 3-5 days

  10. Doing Business in Panama • Set up a company • Obtention of taxpayer I.D. number (R.U.C.) • Obtain a CommercialLicensetooperate in Panamá (Aviso de Operación – RetailactivitiesrestrictionbyLaw) • Registerthecompany in theMunicipality Office (Municipal Taxes) • Hirepersonnel / Labor contractssealed in theMinistry of Labor • Registerpersonnel in the Social Security of Panama (Theratepaidis of 12%employers – 8%employees)

  11. ASSET PROTECTION PRIVATE INTEREST FOUNDATIONS

  12. PrivateInterestFoundation • Law 25 of 1995 • These private interest foundations shall not be profit oriented. • • They may engage in commercial activities in a non-habitual manner. • • The founders must select a name to identify the foundation. • • The objectives, duration, domicile, and board of the foundation must also be indicated, along with the beneficiary or beneficiaries.

  13. PrivateInterestFoundation • Foundation charter must be notarized and registered as trust deed does. • The private interest foundation is very similar to a trust in its operation, but unlike the trust, there is no need to transfer the assets to a third party. • When the assets are from outside the territory of Panama, no taxes are levied when these assets (whether movable or immovable, shares, bonds, and others) are transferred.

  14. PrivateInterestFoundation Itmaybeestablishedforthebenefit of a personorpersons, a family, or a specific social purpose. PIFs are a viable solutionfor estate planning, providingprivacy, and protection of assets.

  15. PrivateInterestFoundation • YourFoundationbooks are mantained 100% private and confidentialbylaw. • TheBeneficiaries are notregistered in thePublicRegistry. • Beneficiaries can beappointedthrough a Privateletter of wisheswritten and signedbythe Protector. • The PIF doesnotrequirePaid In Capital

  16. IMMIGRATION

  17. PENSIONADO PROGRAM Law No. 9 /June 24, 1987 • Pension income of at least US$ 1,000.00 per month and an additional US$ 250.00 for each dependent. • Private and public pensions apply (retired by the government, social security or private pension programs)  • Your application must be processed by a Panamanian attorney through a Power of attorney. • Indefinite legal residence status • Does not grant you a Passport nor a Panamanian I.D. Card

  18. PrivateIncomeRetiree Visa • This visa has an income requirement of US$ 850.00 monthly. • Approximately US$350K (Time deposit) with current interest rates. • The time deposit has to be free of any liens. • This visa has to be renewed every five (5) years. • Grants Special Panamanian Passport but not Panamanian I.D. Card

  19. IMMIGRANT VISA AND RESIDENCE PERMIT TO FOREIGNERS WITH ECONOMIC SOLVENCY • The Self-Economic Solvency Visa offers three (3) different investment options to qualify for residency status in the Republic of Panama: • InvestmentOption A:Requires a minimum of US$300,000 in a three (3) year time deposit (or "certificate of deposit" or "CD") without liens at any licensed bank in Panama. • Investment Option B:Requiresa minimum of US$300,000 in a titled property (real estate) in Panama without any liens. • Investment Option C:Requiresa time deposit and property, for the amount of US$ 300,000 for both investments.

  20. General DocumentationRequired • Registration Process is the first step. To register at the Immigration Office, the applicant must go in person with his original passport and 2 pictures. • Power of attorney (we provide it) • Health certificate issued by a Panamanian Doctor. • Police report. • Complete passport copies (all pages including cover), notarized in Panama (we take care of that). • Six (6) photographs • Sworn statement about personal background. (We provide the form) • All document coming from a foreign country needs to be authenticated by a Panamanian Consulate in the U.S or by Apostille. If it is a private document, it has to be notarized before sending it to the Consulate. • All documentations requires to be translated into Spanish by a Panamanian authorized translator.

  21. OPENING BANK ACCOUNTS

  22. BANKING REGULATIONS • A foreigner can have a Panama Bank Account. • The bank account minimum is $1000, for both checking and savings accounts, in USD or Euros. • Article 194 of this law specifically enshrines the client’s right to privacy and confidentiality in its relationship with the bank with respect to third parties, and Article 110 makes explicit the bank’s obligation to maintain this confidentiality. • More than 75 banks are stationed in Panama, 36 of them with international (offshore) licenses. The financial sector represents a full 8% of the GDP, and employs 17% of the labour force.

  23. BANK ACCOUNT REQUIREMENTS- PERSONAL ACCOUNT AND CORPORATE ACCOUNT- Please note that requirements can vary from Bank to Bank. • Requirements to apply for a personal account (deposit) – Basic requirements. • Personal interview with Branch Manager – Main Branch • Required documents: • - Passport – original • - Bank reference letters (preferable two) • - Personal reference letters (from a known friend /customer with residence in Panama ) • - Business reference letters (job, accountant, lawyer or broker). (Two in total). • Internal bank papers will need to be signed and completed by applicant. • Application documents will be evaluated by our Compliance Office • Bank reserves the right to request additional information if considered necessary • Brief description of background and current activities.

  24. Requirements to apply for a deposit account in the name of a corporation (local) with foreign directors and/or signers – Basic requirements • Personal interview / bank forms • Copy of articles of incorporation and its amendments (if applicable) • Legal I.D. for all directors of corporation are required • Reference /Presentation letter from lawyers in Panama. • Bank reference letters • Business/commercial letters of reference of corporation and or directors and signers to account • Validation Certificate of Corporation issued by the Registry Public in Panama (recent) • Brief description of background and current activities of the authorizing signatures.

  25. PANAMANIAN TAX LEGISLATION& BENEFITS

  26. M A J O R T A X E S • 1. INCOME TAX • Individuals Companies • 2. ALTERNATIVE METHOD FOR CALCULATION • Companies with taxable income of more than 1.5 millions pay income tax on the greater of applying the traditional method (25%) or 4.67% of total net revenues • 2.1 ADVANCE INCOME TAX - Companies that earn taxable income • 1% of themonthlytaxableincome

  27. 3. TRANSFER OF MOVABLE GOODS & SERVICES TAX / VAT (7%) Exceptions – (10% & 15%) 4. SELECTIVE CONSUMPTION TAX (varies depending on the goods such as cars, cigarettes, liqueurs, etc.) 5. COMMERCIAL OR INDUSTRIAL LICENSE TAX • 2% of the company’s total capital , with a minimum payment of 100  and a maximum of 60.000  • INCOME TAX RELATED TO REAL ESTATE • Habitual Business • Brand new - ProgressiveTable • Used – general income tax tariffs as individuals or companies • Non-habitual Business a. Income tax at a rate of ten percent (10%) on taxable income. The taxpayer is obliged to pay a sum equal to 3% of the total value of the transfer or the cadastral value, whichever is greater • TRANSFER OF REAL ESTATE TAX a. Property vs. Panamanian Corporation (2%)

  28. PROPERTY TAX a. Progressive table b. 1% of land value for condos (if improvements are exempt) 9. CAPITAL GAINS TAX (10% - 5% witholding) 10. IMPORT DUTIES (varies depending on the good – in many cases ISC supplanted  import tax) 11. BANKING & FINANCIAL INSTITUTION TAX / Insurance Tax (FECI) 12. OTHERS: Oil Tax, Municipal Tax, Vessel Flag Tax

  29. INCOME TAX • Individuals earning income in Panama, who stay more than 183 consecutive or alternate days, must pay income tax • Sums derived from income generated in Panama that are remitted abroad pay withholding tax of 27.5 % (for companies) or 15% (highest rate for indivIduals) on 50% of the total income • Foreign Income non-taxable • Invoicing from a company in Panama • To conduct transactions in Panama that have its effects abroad (offshore) • To distribute dividends generated from foreign income or from companies that do not require commercial license TERRITORIALITY PRINCIPLE

  30. T R A N S F E R S A B R O A D • Interest, commissions and others credited or remitted abroad, pay income tax at regular rates over 50% of remitted sum, withheld from the total amount paid to the foreign creditor. • The beneficiary of the service may deduct the payment remitted from its taxable income.

  31. G E N E R A L P R I N C I P L E S O N D I V I D E N D T A X E S TAXABLE • Distribution of such earnings derived from • its internal sales in Panama. • Dividends: Nominative 10% • Bearer 20% NON-TAXABLE • Foreign source income is not subject to tax. • Example: company has administration and accounting in Panama; operations are abroad. • Co. established in CFZ or special regimes (export & re-export) sales – distribution of such earnings.

  32. R E A L E S T A T E R E L A T E D T A X E S

  33. TAX ABATEMENT – REAL ESTATE

  34. PANAMA AS TAX HAVEN Panama has triumphed in the process of not being considered a tax haven. Finally, after a successful negotiation and subscription of 12 double taxation agreements and the implementation of deep changes within the internal revenue and tax administration, the OCDE introduced our country into the so called “white lists”.

  35. PENSIONADO PROGRAM BENEFITS Selective Consumption Tax (ISC) of 5% plus 7% Service Tax on cars (*) Import tax exemption for households up to US$10,000 Import tax exemption for household goods 25% discounts on utility bills 25% discount on airline tickets and 30% on other transportation 15% discount on loans made in your name 1% reduction on home mortgages for homes used for personal residence (The house has to be purchased at your name not a company or SA) 20% discount on doctor's bills 15% on hospital services if no insurance applies 15% off dental and eye exams 10% discount on medicines 20% discount on bills for professional and technical services 50% discount on entrance to movie theaters, cultural and sporting events 50% discount at hotels during Monday to Thursday, 30% on weekends, among others. (*) Law 33 of 2010

  36. SPECIALTAXREGIMES • COLON FREE ZONE (ANNUAL GROWTH 15%) • EXPORT PROCESSING ZONES • PANAMA-PACIFIC SPECIAL ECONOMIC AREA ($400M) • PETROLEUM OIL FREE ZONES • CALL CENTERS (14,000 JOBS) • CITY OF KNOWLEDGE AND THE INTERNATIONAL TECHNOLOGICAL PARK • TOURISM • PENSIONADO PROGRAM

  37. TIEA PANAMA - US • In effectsinceApril 2011 • 1. Includesthefollowing taxes imposed by the United States: • (a) Federal incometaxes; • (b) Federal taxes related to employment; • (c) Federal estate and gift taxes; and • (d) Federal excisetaxes. • 2. Includesthefollowing taxes imposed by the Republic of Panama: • (a) IncomeTax • (b) Real Estate Tax • (c) VesselsTax • (d) StampTax • (e) Notice of Operations Tax • (f) Tax on Banks, Financial and Currency Exchange Companies. • (g) InsuranceTax • (h) Tax on the Consumption of Fuel and Oil Derivates • (i) Tax on the Transfer of Movable Goods and theProvision of Services • (j) Tax on the Consumption of certain Goods and Services • (k) Tax on the Transfer of Immovable Goods • 3. Under section 274(h) of the U.S. Internal Revenue Code, an individual may deduct from income expenses

  38. Escobar, Della Togna, Icaza & Jurado 47th Street and Aquilino de la Guardia Ave., The Ocean Business Plaza, Suite 1003 Panama City, Panama www.edtij.com– info@edtij.com Tel.(507)340.63.24 Fax. (507)340.63.25

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