Panama: Regional Headquarters for Multinationals Companies

Panama has been chosen by numerous Fortune 500 companies dedicated to all kinds of commercial activities as a profit center and a real base to coordinate their multinational or regional operations.

Multinational companies have established their operations base in Panama to provide their products and services to LatAm and the Caribbean.

The Republic of Panama has a service based economy that offers the investor -

• Freedom from exchange controls and monetary restrictions and full use of the US$ dollar as legal tender
• Political stability and respect to the principles and application of the laws.
• International banking, insurance and financial center.
• Excellent legal framework allowing 100% foreign owned investments.
• Strategic geographical location with state of the art container ports at both the Pacific and Atlantic oceans. The Panama airport offers more than 130 daily flights to more than 45 destinations in 31 countries, with direct flights to most countries in North America, South America and the Caribbean as well as direct flights to Europe
• Abundance of international transportation services and excellent telecommunications services.
• Availability of office, commercial, industrial and housing space
• Cosmopolitan city offering excellent living conditions
• Simple visas, residence and work permit requirements.
• Availability of skilled, multilingual office and staff employees.

All of this makes of Panama the ideal place to establish a Regional Headquarters of a Multinational Company, while supporting the national economy by capital investment, local consumption of goods and services, creating employments and transferring technology and knowledge. Together with the private sector, the Government of Panama approved a new Law that supports the development of this important sector, through the gathering of tax and immigration incentives under one legal framework and the creation of a Single Window Service to grant Licenses for Multinational Companies Headquarters. 

Law 41 of 2007 came into force promoting the opening of multinational corporations in the Republic of Panama. This area is the responsibility of the new "Licensing Commission on Multinational Enterprise Headquarters”. Some of its functions are establishing licensing requirements for these firms, ensuring that Panama becomes an attractive center for multinationals and creating mechanisms to facilitate monitoring. All licenses are processed by the Regional Headquarters Office at the Ministry of Industry and Commerce.

The benefits granted by Law 41 to multinational companies establishing their headquarters in Panama are:

CORPORATE TAX INCENTIVES

• Exemption on Income Tax from Foreign Source Income. Since Panama has a territorial tax system, and since the MHQ will be providing services to its operations outside Panama, there is no taxable income.

• Exemption from sales tax for services rendered to the Corporate Group abroad. MHQ invoicing to foreign operations are not subject to the sales tax.

• Exemption will be exempted from income tax, and social security and education contributions of employees, when their salaries are paid from abroad.

• Exemption from import tax from household items of employees, upon arriving for the first time in the Republic of Panama.

IMMIGRATION 

Law No. 41 created a One Stop Window Service through the Ministry of Commerce and Industry to speed up the process in order to obtain the MHQ License and visas for the foreign personnel and their dependents. 
 

• Visas for Permanent Personnel of MHQ

These visas are issued to foreign personnel at a management or executive level, and to their dependents. The visas will be issued for 5 years, renewable for the same time frame.  Holders of these types of visas will not be required to obtain a labor permit.

• Visas for Dependents of MHQ Personnel

These apply for spouse, underage children or students under twenty five years old and for parents of the MHQ personnel that will remain in Panama under the responsibility of the MHQ executive.

• Special Visas for Temporary Personnel of MHQ.

These visas are issued to any personnel of a MHQ that has to come to Panama for activities related to the MHQ. It has a maximum duration of 3 months. This type of visa also eliminates the requirement of obtaining a working permit or any other permit from any governmental authority.

• Special visas permit for special events

These visas are to be issued to personnel of the MHQ that come to Panama to attend a specific event or short visits, such as meetings, planning, technical training, etc.

EMPLOYMENT 

MHQs can have as many upper management personnel needed for their back office          operations in Panama.  Dependents, who wish to work in Panama, can change their immigration status through the One Stop Window Service in the Ministry of Commerce & Industry

There are more than 100 Headquarters of Multinationals Companies in Panama -

According to Law 41, a multinational regional headquarters is considered as such if it operates any of the following activities:

• Global or regional management from main headquarters or holdings to sister companies
• Logistic and/or storage of components, parts required for the manufacture or assembling of products
• Technical support to sister companies or clients who have purchased services or products and therefore bind to provide an after sale support service
• Financial management including treasury management
• Accounting management
• Surveys and construction designing that constitute as a common activity of the main headquarter
• Electronic network processes of any activity including consolidating company’s operation
• Guidelines and coordination for marketing and advertising of company’s products
• Research and operational supports
• Any other related services, previously approved by the Panamanian government

For more information or assistance, please contact pardini@padela.com