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Pro-Business Panama: Keys to Doing Business

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Steady economic growth and progressive policies have boosted Panama’s ranking among places to do business. There are ups and downs, but as a whole it’s easier to start a business in Panama than anywhere else in Latin America. Furthermore, the government is working to reduce the remaining barriers.

 Globe

Doing Business: Panama
Published: May, 2015

 

No matter the field, everyone in business knows that success is never an accident. Success is made, planned, built. In Panama, business-friendly policies and laws ensure that the foundation for that success is solid so that growth continues and a healthy, diverse economy emerges. The country continues to implement critical confidence-building steps that make doing business in Panama easier than ever.

Investment and relocation key
Panama’s pro-business environment has attracted much notice over the past decade, and perhaps no policy has gained more attention than Law 41, which established a commission in 2007 to license multinational regional headquarters. The law provides a number of tax, labor, and immigration benefits to foreign corporations that set up regional headquarters in Panama. For companies making the move, these incentives have been substantial. The proof is in the numbers: In 2007, when Law 41 was passed, 18 companies took advantage; by the end of 2012, there were 63, and by October 2014, around 110 corporations had opened branches under the regime.

Law 41 is not without its opponents. Critics point to the revenue losses from uncollected taxes, but supporters make a number of key points in defense. Law 41 is not a one-way flow of benefits; what Panama fails to collect in taxes is gained across many sectors of the economy.

In another effort to attract targeted investment to the country, the Panamanian legislature passed Law 481 in 2012. Law 481 encourages direct investment in the tourism industry, providing incentives to hotel and resort developers with the provision that they invest outside of Panama City to bring growth to designated provincial regions including indigenous tribal lands, areas within the national forests, and the archipelagos off both coasts.

These laws might be meaningless were it not for the Investment Stability Law of 1998, also known as Law 54, which assures that foreign and national investors will enjoy the same investment and business rights. Foreign investment does not require any special permits or prior authorizations as long as investors meet a minimum investment of $2 million. Law 54 guarantees registered investors that all applicable taxes and rules regarding labor, customs, and other key areas will remain constant for a ten-year period after registration. The law applies to a wide range of permitted business sectors.

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