Investment in Panama 2019 KPMG in Panama Investment in Panama | 1 © 2019 by KPMG © 2012 by KPMG © 2009 by KPMG © 2006 by KPMG © 2000 by KPMG © 1996 by KPMG © 1992 by KPMG Peat Marwick © 1984 by Peat Marwick Mitchell & Co. All rights reserved KPMG, a Panamanian civil partnership and a member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative (“KPMG International”), a Swiss entity. Images of the Panama-Pacific Special Economic Area are courtesy of London and Regional Panama. Investment in Panama | 2 Contents Chapter 1 ...................................................................................................................................................... 9 Panama at a Glance .................................................................................................................................... 9 Geography and Climate ............................................................................................................................ 9 History ....................................................................................................................................................... 9 Government ............................................................................................................................................ 10 Population, Languages and Religion ...................................................................................................... 10 General State Budget .............................................................................................................................. 11 Currency .................................................................................................................................................. 11 Economy ................................................................................................................................................. 11 Taxation System ..................................................................................................................................... 11 Housing ................................................................................................................................................... 12 Transportation Infrastructure ................................................................................................................... 12 The Panama Canal, and its expansion ................................................................................................... 13 Chapter 2 .................................................................................................................................................... 15 Businesses ................................................................................................................................................ 15 Types of Legal Entities ............................................................................................................................ 15 Partnerships ............................................................................................................................................ 15 Joint Ventures ......................................................................................................................................... 15 Private Interest Foundations ................................................................................................................... 15 Corporations ............................................................................................................................................ 16 Legal Requirements for Incorporation ..................................................................................................... 16 Share Structure ....................................................................................................................................... 16 Identity of Directors ................................................................................................................................. 17 Identity of Corporate Officers .................................................................................................................. 17 Term and Place of Domicile of the Corporation ...................................................................................... 17 Resident Agent and Annual Tax Fees .................................................................................................... 17 Procedures .............................................................................................................................................. 17 Registration Fees .................................................................................................................................... 18 Accounting Requirements ....................................................................................................................... 18 Legal Entity Annual Franchise Duty ........................................................................................................ 18 Notice of Operation ................................................................................................................................. 19 Process for Obtaining a Notice of Operation .......................................................................................... 19 Procedural Requirements ....................................................................................................................... 19 Industrial Activities .................................................................................................................................. 19 Wholesale Business ................................................................................................................................ 19 Retail Business ....................................................................................................................................... 20 Activities exempt from the notice of operation ........................................................................................ 20 Other Approvals and Licenses ................................................................................................................ 20 Commercial and Industrial Protection ..................................................................................................... 20 Product Registration ................................................................................................................................ 20 Patents .................................................................................................................................................... 21 Trademarks ............................................................................................................................................. 21 Copyrights ............................................................................................................................................... 21 Electronic Commerce and Related Issues .............................................................................................. 21 Bookkeeping ........................................................................................................................................... 23 Chapter 3 .................................................................................................................................................... 25 Income Tax System ................................................................................................................................... 25 Overview of Panamanian Tax System .................................................................................................... 25 Basic Principles in Levying Income Taxes .............................................................................................. 25 Investment in Panama | 3 Taxpayers and Taxable Income .............................................................................................................. 30 Taxation Year .......................................................................................................................................... 30 Tax Rates ................................................................................................................................................ 30 Procedures for Paying Income Tax ......................................................................................................... 30 Stability of the Investment System .......................................................................................................... 30 International Taxation (TDT/TIEA) .......................................................................................................... 31 Transfer Pricing ....................................................................................................................................... 34 BEPS and Exchange of Information ....................................................................................................... 34 Chapter 4 .................................................................................................................................................... 36 Corporate Income Tax .............................................................................................................................. 36 Taxable Income ......................................................................................................................................