Get valuable advice from our Senior Legal and Sector professionals for US companies in Panama. Panama continues to be recognized as one of countries with the largest economic growth and political stability in the Central American region, providing big opportunities to foreign companies that are looking to expand their business in Central or Latin America.
The improvements of infrastructure, such as the Panama Canal Extension, and the progressive development of the subway facilitates connections in the country, creates opportunities to establish new companies and encourages the economic growth.
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Expand your US company into Panama
Panama, as many know, is a Central American hotspot for foreign business. As a foreign company, you don’t have to kick-start your global expansion into Panama alone. Seek expert advice and support from local corporate law and accounting professionals who are experienced in bringing new business into the country.
Our Senior Corporate Lawyer in Panama shares with us the top 5 tips for US companies doing business in Panama.
1. Identify potential markets in Panama
Services represent the strongest sector in Panama. Panama facilitates the process for businesses to move into the services sector, to make the market attractive for foreign companies. The Panamanian government makes no distinction between domestic and foreign companies for investment purposes.
US companies can take advantage of the attractive benefits that Panama offers company owners and executives. The service sector welcomes new market entrants with government-backed technology development, trained employees and diverse job opportunities. Incentives for business in Panama also target an increase in the country’s economic growth.
The development of infrastructure also encourages the US companies to establish themselves in other provinces of the country, to continuously develop Panama’s countryside to expand the investment market.
Special economic zones and preferential trade
US companies in Panama can also establish themselves as a commercial hub in the country to import and re-export goods in the special economic zones such as ‘Panama Pacífico’ or ‘Colón’ free Zone, which will guarantee the exemption of the import and export taxes, and labor and immigration benefits.
Even without the special economic zones, US companies can enjoy preferential trade access through the Panama-United States TPA (Trade Promotion Agreement) of 2012: This free trade and economic integration agreement ensured that nearly 90% of industrial goods imports from the United States became duty-free, including:
- information technology equipment
- agricultural and construction equipment
- aircraft and parts
- medical and scientific equipment
- environmental products
- fertilizers and agro-chemicals.
There are valuable business and trade conditions for US companies in Panama, and for those wishing to exchange goods between the countries.
2. Knowing your residence visa benefits
Being a US national gives you the opportunity to be in Panama as a tourist for 180 days which is plenty of time to start the expansion of your business. However, if you’re looking for more permanent residence, as a US citizen you can apply for the ‘Friendly Nations Visa’. Basically, US citizens will need a Personal Bank Account with at least US$5,000 and be a shareholder of a company in Panama. You will then be eligible to apply for a permanent residence in Panama which will be granted in 6 months or less.
The other requirements to apply to this visa are the following:
- Confirm and present your power of attorney
- Your passport, valid for the next 6 months at least, plus 5 passport-sized photos
- Another identification document, such as a citizenship certificate or ID card Apostilled
- Criminal background check from the FBI (Federal Bureau of Investigation), authenticated at a Panamanian Consulate or apostilled in that country. This must be less than 6 months old
- Medical certificate demonstrating good health. This must be issued in Panama and signed by a qualified doctor
- Material proving your Panamanian economic or professional ties. This documentation may differ depending on your status as an investor/business owner or worker
Additionally, for opening a bank account in Panama, you must provide:
- Bank references (letter of confirmation from your bank in your country).
- Evidence of income (you can use a tax declaration from your country).
- a copy of your passport and second identification document (such as a driver’s license).
- Utility bill of your home country to prove your address.
- Extra forms provided by the bank that you will need to fill out.
Editor’s note: Changes have been made to the Panama Friendly Nations Visa, applicable as of August 2021. Read more here.
3. You can hire foreign employees in Panama
Under Panamanian labor law code, only 10% of your business workforce can be filled by foreign workers. This is true for local and foreign companies operating in Panama. If foreign individuals are considered specialized, technicians or trusted individuals, this allowance increases to 15%.
As an employer or employee, it, is very important to understand the Panamanian labor laws. You need to be mindful that in most cases to be a legal employee in Panama, you need to be a legal resident in Panama first to avoid any legal sanctions from the Ministry of Labor (Ministerio del Trabajo y Desarollo Laboral, or Mitradel).
The Panamanian legal entities can enforce legal penalties to the company and the employee(s) if someone is working without fulfilling their legal requirements.
4. Speak the local language
You’ll be operating with a language barrier in Panama, but thankfully there are multilingual specialists available who can help you.
It does however pay to brush up on your Spanish before you begin your expansion; your business growth and relationship building will be affected if you can’t understand your local partners and clients. Show your willingness to integrate as a US company in the Panamanian market, and support a faster business development rate by speaking Spanish during your interactions. Speaking Spanish will also help you to better understand the local market.
5. US influence is strong in Panama
US products are highly regarded in Panama, and the US brand carries influence and credibility. US products do well in terms of sales in the country. Use this advantage to promote your brand and increase your chances to successfully expand your business into Panama.
Year after year, American brands successfully establish themselves in Panama such as clothing stores, technology stores, restaurants. Many experience success because of the prestige they bring from the United States.
You can protect your brand as well by applying for a trademark in Panama. This ensures you retain the influence of your brand and protects the profitability of your business.
Our multilingual professionals support US companies
Take advantage of the benefits offered to US companies doing business in Panama. Start your expansion in this vibrant Central American country with the right support to succeed.
At Biz Latin Hub, our team of local and expatriate professionals work alongside foreign companies in Latin America to ensure they expand, incorporate and operate within full compliance of local corporate regulations.
We offer a full suite of market entry and back-office services in Panama and the rest of Latin America, making us your single point of contact for fully customized corporate secretarial support.
Contact us now, or visit our website at bizlatinhub.com for a personalized quote.
Learn more about our team and expert authors.