General Practice Law at Panama
Panama operates under a civil law system, heavily influenced by Spanish legal tradition and Roman laws, with some elements of Anglo-American law, such as habeas corpus and, increasingly, judicial precedent. For individuals and businesses seeking to navigate the legal landscape in Panama, understanding the general practice areas is crucial.
Here's an overview of key areas in general practice law in Panama:
1. Corporate and Commercial Law:
Company Formation: Panama is a popular jurisdiction for incorporating companies, particularly the Sociedad Anónima (S.A.) (Panamanian Corporation). Key features include:
Minimum of three directors (can be individuals or legal entities, no residency requirement).
Minimum of three officers (President, Secretary, Treasurer), though one person can hold multiple roles.
Minimum authorized capital of USD 10,000 (not required to be paid up).
Appointment of a licensed Panamanian attorney or law firm as a resident agent is mandatory.
Requirement for a registered office within Panama.
Shareholder identities are not publicly disclosed, offering a degree of confidentiality.
Foreign Investment: Panama actively promotes foreign investment through business-friendly legislation, including 100% foreign ownership of companies and no requirement for local shareholders or directors.
Contracts and Agreements: Lawyers assist with drafting and reviewing various commercial contracts, including sales agreements, service agreements, joint ventures, and licensing agreements.
Mergers and Acquisitions: Legal counsel is essential for structuring and executing M&A transactions, ensuring compliance with Panamanian law.
Regulatory Compliance: Businesses need to comply with various local regulations, permits, and licenses depending on their industry.
2. Real Estate Law:
Foreign Ownership: Foreigners generally have the same property rights as Panamanian citizens, with few restrictions. They can own most types of real estate directly or through Panamanian companies/foundations.
Restrictions: Key exceptions include:
Land within 10 km of international borders cannot be owned by foreigners.
The first 22 meters from the high tide line of beachfront property is considered public domain and cannot be privately owned.
Insular lands are typically subject to government concession for tourism projects, not direct ownership.
Due Diligence: It is crucial for buyers to conduct thorough due diligence, including verifying property titles for liens, debts, or legal issues, confirming boundaries, and checking for easements or encumbrances.
Transfer of Property: Ownership is evidenced through the Public Registry of Panama, where all purchase and sale agreements are registered via public deeds.
Taxes: Various taxes apply to real estate transactions and ownership, including a 2% real estate transfer tax, a 3% income tax advance payment on the sale price (or 10% on actual capital gain), and progressive annual property taxes.
3. Immigration and Residency Law:
Work Permits and Visas: Any foreign national intending to work in Panama requires a work permit. Certain professions (e.g., engineering, law, accounting, psychology) are reserved for Panamanian nationals.
Residency Programs for Investors: Panama offers several visa programs designed to attract foreign investment and provide a pathway to permanent residency, such as:
Panama Pacific Economic Area Investor Visa: Requires a minimum investment of US$250,000 in a company operating within this special economic zone.
Friendly Nations Visa: Available to citizens from designated countries (including the U.S.), offering permanent residency with a US$5,000 bank deposit and a valid employment contract.
Self-Economic Solvency Visa: Involves an investment in a time deposit at a Panamanian bank.
Reforestation Investment Program: Investment in approved reforestation projects.
Digital Nomad Visa: Allows remote workers to reside in Panama for up to 18 months, requiring proof of employment outside Panama and a minimum monthly income (e.g., US$3,000).
Requirements: Common requirements across programs include valid passports, criminal record certificates, medical certificates, and proof of financial solvency.
Employer Sponsorship: For work permits, employer sponsorship is often required, and employers must comply with employment quotas (typically foreign workers up to 10% of the total workforce).
4. Tax Law:
Territorial Taxation: Panama operates on a territorial tax system, meaning that only income generated or produced within Panama is subject to Panamanian income tax. Foreign-source income is generally not taxed, regardless of where contracts are signed or income is received. This is a significant attraction for international businesses.
Corporate Income Tax: The standard corporate income tax rate is 25% on Panamanian-source income.
Individual Income Tax: Progressive tax rates apply to Panamanian-source individual income, with exemptions for income below a certain threshold (e.g., up to US$11,000 is 0%).
VAT (ITBMS): A value-added tax (ITBMS) of 7% applies to most goods and services.
Other Taxes:
Capital gains tax (typically 10% on the sale of assets).
Withholding taxes on dividends (generally 10%), royalties, service fees, and interest (12.5%).
Social security contributions (by both employees and employers).
Annual franchise tax for corporations (currently US$300).
Special Economic Zones: Panama has various special economic zones (e.g., Panama Pacific, Colon Free Zone) and special regimes (e.g., SEM for multinational company headquarters) that offer specific tax incentives and preferential rates for certain activities.
5. Intellectual Property Law:
Protection: Panama's intellectual property laws cover trademarks, patents, copyrights, industrial designs, and utility models.
Trademarks: Registration with the Directorate of Industrial Property (under the Ministry of Commerce and Industries) is crucial for protecting brand identity. Trademarks are renewable for ten-year periods.
Patents: Patent protection is generally granted for 20 years from the filing date.
Copyrights: The Copyright Law (Law 15 of 1994) modernizes copyright protection, covers computer software, and facilitates the prosecution of infringers. Panama is a member of key international IP treaties (WIPO, Berne Convention, Paris Convention, etc.).
Enforcement: Dedicated commercial courts hear IP cases, and government agencies have ex-officio authority to seize suspected counterfeit materials.
6. Labor Law:
Employment Contracts: Governs the terms of employment, including wages, working hours, and termination.
Employee Rights: Protects worker rights, including minimum wage, social security benefits, and conditions for dismissal.
Foreign Workers: Specific regulations apply to the hiring of foreign workers, including quotas and work permit requirements.
7. Litigation and Dispute Resolution:
Judicial System: Panama's judicial system is headed by the Supreme Court of Justice, with civil, criminal, and contentious-administrative sections.
Arbitration: Panama recognizes and facilitates arbitration as a method of dispute resolution, with laws supporting arbitral tribunals. This is often preferred for international commercial disputes.
For anyone engaging in legal matters in Panama, especially foreign investors, working with a reputable Panamanian law firm is highly recommended. They can provide essential guidance on local regulations, ensure compliance, and navigate potential complexities arising from language barriers or specific cultural/legal nuances.
RELATED Blog
0 comments