Offshore Corporate Administration Inc.

Panama

The Republic of Panama is located in Central America and forms the narrow isthmus that links North and South America. Panama is famous for its canal which joins the Atlantic and Pacific Oceans. With a population of about 2.8 million and due to the importance of the canal, Panama has excellent telecommunications as well as international airline links. There is a sophisticated banking and financial system together with a major freeport. Now firmly established as a democracy, the Country has a legal system based on a constitution and is politically stable with a continuously growing economy.

Currency: U.S. Dollar

Official Language: Spanish

Recent Changes

Annual Franchise Tax

New Incorporations

Under the new legislation, every new company or private foundation will be required to pay a US$250.00 franchise tax when its articles of incorporation or foundation charter are filed at the Panamanian Public Registry. Starting from the second year of incorporation, companies and private foundations will be required to pay a US$300.00 franchise tax per year.

Existing Companies

For existing companies and private foundations, the annual franchise tax will be increased from US$250.00 to US$300.00 per year. Such increase will become effective as of 1st January 2006. In other words, in 2005 all companies and private foundations will pay an annual franchise tax of US$250.00.

Payment Periods

Payment of the annual franchise tax shall be made: (a) On 15th July every year (for entities incorporated between 1st January and 30th June), or (b) On 15th January every year (for entities incorporated between 1st July and 31st December).

Formerly, payments were due on 30th June and 31st December.

Fines and Penalties

Monetary Penalties

Companies and private foundations that do not pay the annual franchise tax for two (2) or more consecutive or alternate periods will be subject to a US$300.00 fine (increased from US$250.00). The penalty for late payment remains at US$50.00 per period.

Statutory Dissolution

According to the new provisions, every company or private foundation that does not pay the annual franchise tax for ten (10) consecutive periods will be subject to a statutory dissolution procedure (i.e. the company or private foundation may not continue existing and must liquidate its assets and liabilities). Such legal entities will be subject to a definitive de-registration at the Public Registry. It is also important to note that fines ranging from five (5) to ten (10) times the amount of the franchise tax owed to the Panamanian Treasury will be applied to any persons (individuals or legal entities) who have received funds for payment of the annual franchise tax but who have in fact not paid such sums in accordance with the provisions set forth in the Law.

Panama Corporation - General Guidelines

Company Status:

Non-Resident Corporation

Company Name:

The name of the corporation may be in any language and must use the title such as Corporation, S.A., INC.

Shelf Companies:

Shelf companies (both aged and contemporary) are immediately available. These companies have never traded nor engaged in any activity whatsoever. We provide written confirmation to this effect with the company documents.

Share Capital:

There is no minimum. The share capital may consist of shares with a nominal or par value or both. The "standard" Articles provide that authorized capital consist of US$10,000.00 divided into 100 shares of US$100.00 each.

Capital Duty:

Registration fee of US $60.00 for capital of US$10,000.00. A sliding scale operates above this level.

Minimum Shareholders:

Sliding scale - Two subscribers required, but only one ongoing shareholder after Incorporation.

Directors:

Minimum three. There is no restriction on location.

Secretary:

Minimum one. There is no restriction on location.

Registered Office:

There is no legal requirement for a Registered Office Registered Agent: Panamanian legislation requires every Panama Corporation to have a Registered Agent in the Republic of Panama who must be either a lawyer or law firm.

Information Disclosed on Public Records:

Deed of Incorporation, names and addresses of Directors, Registered Agent.

No accounts or annual return required

Venue of meetings:

There are no restrictions

Statutory Annual Fees:

Annual franchise Tax - Capital not exceeding US$50,000.00 - Tax payable US$150.00

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Legal Updates

The Republic of Panama approved, on 2nd July 1997, Decree Law No. 5, updating provisions of the Code of Commerce and others relating to Panamanian corporations, in order to modernize them and make them more flexible. The following are some of the changes that will help make the Panamanian jurisdiction more competitive:

Reservation of company names at the Public Registry for a term not exceeding 30 days.
Shareholders, directors, officers, administrators, attorneys at law or liquidators of a corporation may be bodies corporate.
Companies organized under a foreign law may opt to be governed by the laws of the Republic of Panama and to continue their existence as a Panamanian corporation, and vice versa.
Elimination of official page numbering, signing and sealing of corporate books requirement, that is, bodies corporate may keep their minutes, share registers and accounting records by using books, electronic media or other mechanisms.
Offshore corporations are not required to keep accounting records.
Definite options granted to interested party to register or not, general or special powers of attorney.
Acts undertaken and ratified or contracts entered into over the telephone or by telefax or by any electronic communication media shall be considered to have been entered into between individuals who are present if the parties or their representatives or attorneys in fact have been directly in communication with each other.
Meetings of the Board of Directors or shareholders where the participants have been directly in communication through any of the media indicated in the preceding paragraph shall likewise be considered to be meetings with the parties present. In such a case, a minute must be issued indicating the meeting was held, the resolutions adopted and the manner in which the participants were in communication.
Resolution of directors, shareholders or liquidators shall be valid even if the document is signed in different places and on different dates. Board of Directors or Shareholders resolutions shall be entered in the minutes book on record and shall include the date of the prior notice or waiver thereof, the place and date the respective meeting was held and the names of the persons who acted as chairman and as secretary. These persons shall sign such minutes and either of them may certify the minutes.
The share register shall specify the names of the shareholders if the shares are nominative, the share certificate number, the amount in number or percentage that same represents, and the amount paid.
General pledges of corporate' assets granted with all legalization, protocolization and registration formalities at the Public Registry have preference over credits with no special privileges that are evidenced in a public deed, executed judgement or a document with a definite date.
Companies may opt to register their financial statements at the Public Registry.
In the Trust Law, formalities are flexible for trusts constituted by private document, the signatures of settlers and trustees being allowed to be authenticated by any Public Notary regardless of nationality or jurisdiction, whether Panamanian or foreign.
The public offer of securities, whether domestic or foreign, made by any means, towards, from or within Panama, shall be subject to pertinent prior authorization from and registration with the National Securities Commission.
With the exception of the annual "franchise" tax (which is not an income tax), Panama corporations without income arising from operations within the territory of the Republic of Panama are not subject to taxation in Panama.

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Information derived from this site should not be construed as legal advice nor considered anything more than an offer to provide free technical information to suitably qualified parties. Such technical information was accurate at the time of publication and whilst every endeavour is made to maintain such accuracy, it is recommended that independent verification be made.