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ARTICLES

Special Economic Area: Panama Pacifico

By means of Act No.41, in 2004 the Republic of Panama subscribed a special regime for the establishment and operation of a Special Area in the district of Arraiján, a province of Panama called the Panama-Pacific Special Economic Area.

The purpose of the Law is to create a special legal, tax, customs, labor, immigration and business regime, designed to encourage and ensure the free flow and movement of goods, services and funds so as to attract and promote investments and the generation of jobs and to make the Republic of Panama more competitive within the global economy.

Any natural or corporate person that establish themselves in the Panama-Pacific Area may carry out any kind of activities, of any nature, that are not expressly forbidden by the legal regulations in force in the Republic of Panama on the matter of health, security and public order.

It also has an autonomous entity called the Panama-Pacific Special Economic Area Agency charged with implementing the regime.

To obtain the registration for a natural or corporate person, the following is required:

• Names and surnames, nationality, copy of personal identity card or passport of the applicant, in the case of a natural person; the trade name, the name of the country under whose laws it has been organized, including data regarding its registration at the Public Registry of Panama, as well as the particulars of its Legal Representative and its Registered Agent, in the case of a corporate person.
• Description of the activities to be developed, the jobs that will be generated, as well as the initial and future investment.
• Copy of the organizational deed and its amendments, in the case of a corporate person.
• Recent certificate evidencing the good standing of its corporate personality, directors, officers and Registered Agent, in the case of a corporate person.
• Other documents and requirements as may be determined by the Agency

Carrying out economic activities in the Panama-Pacific Area is open to nationals and foreigners.

There shall be no halls within the Panama-Pacific Area for exhibiting the products that are commercialized wholesale internationally in other free zones or under a special tax treatment.

Panama Pacifico has a “One Stop Shop” which is an office that represents over 17 government agencies and offers its variety of services onsite, One Stop Shop deals with all necessary permits and procedures for companies moving to and based in Panama Pacifico

Panama Pacifico as a Special Economic Area provides attractive incentives exclusively for companies based in the area.

Tax exemptions

All activities, businesses, services, operations or transactions within the Panama-Pacific Area shall be one hundred per cent free from direct and indirect taxes, levies, rates, duties and national encumbrances, including but not limited to the following exonerations:

• Exemption from any tax, levy, rate, encumbrance or import duty on any kind or class of merchandise, products, equipment, services and other goods in general that are entered into to the Panama-Pacific Area, including but not limited to machinery, material, containers, construction, pre-fabricated material or merchandise, raw material, fuel and lubricants, production input material, final products, cranes, vehicles, automobiles, artifacts, supplies and spares entered into the Panama-Pacific Area.
• Exemption from the Tax on the Transfer of Movable Property and the Rendering of Services (a kind of sales tax) on all kinds or types of merchandise, products, equipment, goods, services and other goods in general entered into the Panama- Pacific Area, as well as any tax, rate or duty on the rendering of services. This exemption includes the financial lease of any equipment or other movable good, as well as equipment, raw material and production input material.
• Exemption from any tax, duty, rate, levy or fee with regard to the movement or storage of fuel or other hydrocarbons and their derivative.
Exemption on the payment of any fee for commercial or industrial licenses or registration.
• Exemption from Stamp Tax.
• Exemption, on commercial and industrial improvements, from real estate taxes on land and improvements as well as from the Tax on the Transfer of Immovable Goods. For the purposes of the Tax on the Transfer of Immovable Goods, it must be evidenced in the respective public deed only that the immovable good that is being transferred is located within the Panama-Pacific Area, and it shall not be necessary to have the exemption from the payment of tax and the data of the respective affidavit evidenced, the notaries public being able to bear witness of the respective agreement.
• Exemption from any tax on the export or re-export of any type or class on merchandise, products, equipment, goods or services.
• Exemption from any tax, rate, duty, encumbrance, withholding or other fees of a similar nature applied to payments to foreign creditors, for the interest, commissions, royalties and other financial fees generated by the financing or refinancing granted to the Companies of the Panama-Pacific Area and for the financial lease of the equipment required for the development of the activities, business or operations carried out within the Panama-Pacific Area.
• Exemption from the payment of the tax levied on international telephone calls.

The Companies of the Panama-Pacific Area shall be subject to payment, pursuant to the legal tax rules in force, of the following taxes:
• Income Tax on the net taxable income earned from the activities, businesses or operations carried out within the Panama-Pacific Area.
• Tax on Dividends withheld from earnings or dividends paid to their shareholders or partners and the Complementary Tax.
• Tax on Remittances or Transfers sent Abroad, withheld from the payment of commissions, royalties, payments for technical assistance services, or for any other account.
• Tax on Imports and Tax on the Transfer of Movable Property and the Rendering of Services, specifically for companies that render services inherent to the exercise of professions regulated in a special manner by the legislation in force.

Labor regulations

The rules of the Labor Code and other legal provisions in force on labor matters shall be applicable to the labor relations within the Panama-Pacific Area.

Any employer duly authorized to operate within the Panama-Pacific Area may engage foreign staff that does not exceed ten percent (10%) of the total of the ordinary employees, specialized foreign staff, both as to the merely technical aspects of the respective activity, as well as in matters inherent to administrative management, such that fifteen percent (15%) of the total of the employees of the company is not exceeded.

• 24/7 operations allowed
• Fixed rates for overtime (25%) and work conducted on national holidays or during employees’ day off (50%)
 Flexibility to assign employees’ day off
 Work termination possible in case of losses or demand fluctuations
 A higher ceiling on the proportion of workforce from outside Panama than in the rest of Panama
 Special investor and worker visas available, visa benefits also extend to worker’s immediate relatives

Immigration regulations

Foreigners engaged by Companies of the Panama-Pacific Area apply for and obtain a Work Permit for the Panama-Pacific Area and a Work Visa for the Panama-Pacific Area. According to the kind of foreign worker concerned, the Work Visa for the Panama- Pacific Area shall be issued in the following terms:
 The Work Visa for the Panama-Pacific Area granted to workers within the ten percent (10%) of the ordinary employees of a Company shall be valid for up to five years. Subject to verification of labor continuity, once five years have elapsed since the issuance of this Visa, the person in whose favor same was issued shall have the right to fix his or her permanent residence in the Republic of Panama by requesting a definitive residence.

 The Work Visa for the Panama-Pacific Area issued in favor of foreigners engaged by Companies of the Panama-Pacific Area in order to work as specialized staff in respect of technical aspects and/or in matters proper to administrative management, in a percentage that does not exceed fifteen percent (15%) of the ordinary employees, shall be issued for a term of up to three years, renewable up to two additional years, subject to verification of work continuity.

 The Work Visa for the Panama-Pacific Area issued in favor of foreigners engaged as patronage employees by Companies of the Panama-Pacific Area that engage exclusively in maintaining offices for the purpose of conducting transactions that are perfected, consummated or that have effect abroad shall be issued pursuant to the terms and conditions set forth in the national legislation in force regulating such matter.

 The Work Visa for the Panama-Pacific Area issued in favor of foreigners that work at the service of Companies that have less than ten employees shall be issued pursuant to the terms and conditions set forth in the national legislation in force regulating such matters.

As following you will find a list of some of the companies that are established in the Panama Pacific area:

 Intel Data Technologic, Inc.
 Garal Bravetek, S.A.
 Valhalla Ventures, S.A.
 Stratus Building Solutions of Panama, S.A.
 Productos Mixtos, S.A. (PROMIX)
 Global Profile, Inc.
 Thermaflex Panama
 Osala, S.A.
 Albacrome, S.A.
 Sunborn Corp., S.A.
 Eternity Panama, Inc.
 Action Panama, S.A.
 Worldwide Logistic Services, Inc.
 3PL Panama, S.A.
 Panama Pacific Logistic, Inc.
 Transcanal Agency, S.A.
 Canal Transit Services, S.A.
 C. Fernie & Co., S.A.
 Associated Steamship Agents, S.A.
 Gateway Transit Limited Inc.
 Wilford & McKay, S.A.
 Yermont Enterprises, Inc.
 Barwil Agencies, S.A.
 WWL Pacifico, S.A.
 Norton Lilly International (Panama), S.A.
 C.B. Fenton & Co., S.A.
 Arturo Araúz Howard, S.A.
 Grunenthal, S.A.
 Trucklogic Consulting
 Panamericana de Logística (PANALOG)
  Agencia de Aduanas Selhorn, S.A.
 KMS Colon, S.A.
 Kendall, S.A.
 Alliance Transport Logistics, S.A.
 Panama Customs Brokers, S.A.
 Vapores Boyd, S.A. (Boyd Steamship Corporation)
 HB Logistics Services C.A.
 C.B. Fenton & Co. (Panama)
 River Latinoamérica Industrial, S.A.
 Canarias Logística
 I.P. Leather Corp.
 Manantial Química, S.A.
 3M Panama Pacifico, S de R. L.
 Global Cold Chain System Corporation
 Green Ivory International, Inc.
 Ecotécnica Agroindustrial
 Aggreko International
 Arsenal Industries Panama, Inc.
 Compañía Panamericana de Cigarrillos, S.A.
 Global Filters Panama Corp.
 W.R. Grace (Panama), S.A.
 Samtec Interconnect Assembly Panama, S. de R.L.
 Caterpillar Latin America Support Services
 Flavor Infusion International, S.A.
 BASF Panama, S.A.
 Aquacorp C.A.
 Hidropana S.A.
 Dell
 VF Sourcing Latin America S.A. R.L.

Author(s)

Jose Agustin Preciado

Senior Partner

Jose Antonio Sierra

Senior Associate

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