Despite its small size, Panama performs consistently well both in terms of its Foreign Direct Investment (FDI) rates and GDP, which promises profitable returns for entrepreneurs both native to the country, and international investors ready to make a splash in the country.
As a business owner, expanding your brand into a new country can be a challenge, with so many things to take into consideration. One of the biggest is where to incorporate a new business – with so many Latin American markets all offering a unique set of benefits and market share, choosing the right one for your needs can turn into a head-scratching process.
If you’re yet to consider Panama, then add it to your list today. The country has key FDI partners in territories such as the United States, United Kingdom, Switzerland, and South Africa, and has seen a huge increase in FDI inflow as more entrepreneurs realize the benefits of the territory and make their own investments. And those investments have not happened by chance – there is significant value in setting up a company in Panama, both in terms of new trade, and adding to your existing business growth. Below, we explore why…
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Setting up a Company in Panama – Access into Latin America
One of the most obvious benefits of company incorporation Panama is the overnight ability to enter into markets across Latin America. Comfortably nestled between Costa Rica and Colombia, Panama has a strong geographical spot, giving you access into Northern Central, Southern markets without the need to open your own distribution center.
Indeed, businesses with a long-term plan to invest across the Latin American market can set up their businesses in the country, utilizing Panama’s impressive array of road, rail, shipping and air transportation services to both meet with clients and business partners in other markets, and distribute goods and services into territories that are outside of their reach.
There are several legal entities to consider when establishing a presence in the market, and each offers easy access into the country. Many entrepreneurs choose to establish offshore jurisdictions which offer shareholder confidentiality and tax exemptions for trade across the Americas, whilst onshore companies offer similar benefits, including the ability to allow shareholders from any country, and unparalleled confidentiality compared with other territories, where every piece of shareholder information and profit sheet is in the public eye.
Company registration in the country can be completed in as little as four weeks, and board meetings can be held anywhere in the world, allowing you to ‘set up shop’ without entering into Panama or securing permanent residence into the country. Come and go as you please.
A Progressive Government
Doing business in Panama allows entrepreneurs to take advantage of its progressive government policies and free trade agreements. Indeed, lawmakers have worked hard to establish policies that encourage “economic liberalization” in the territory, designed to encourage foreign investment, boost employment and add money to the country’s coffers.
The government has also created laws designed to establish Special Economic Zones (SEZ) in the country, allowing companies to benefit from tax and labor incentives and reduce their overall expenditure. Panama has, quite effectively, dangled a carrot for businesses from all over the world to enter into an SEZ, taking advantage of its skilled workforce and progressive attitude to innovation. Since the inception of the SEZ scheme, there have been several high-profile success stories across bioscience, telecommunications, and the environment.
Tax Advantages for Your International Business
Entrepreneurs looking to find ways to lower their tax bill should also consider Panama when expanding into a Latin American market, as the country has a territorial taxation system, meaning that companies are only subject to income tax on income that they source within the country. You can effectively use the country as an offshore bank, doing business in Latin American and North American markets, reducing the tax burden and ‘leakage’ of profits.
If you have international operations with aspirations to crack more Latin American markets, then Panama is a top choice for this reason. On top of its enviable taxation schemes, the country has the General Revenue Office (DGI) which works to negotiate tax agreements with companies that operate in countries with bilateral tax agreements, potentially offering even greater tax savings and allowing you to increase your shareholder returns in the process.
A Regional Financial Hub
Panama has a dollarized economy, making it easier for businesses around the world to do trade and enjoy growth without being tied to currency exchange woes. With low levels of inflation and a world-class banking system (with close to 100 national and international banks operating in the territory), Panama is a regional financial hub to be reckoned with.
Additional benefits associated with the country’s financial hub include:
- No exchange control in the inflow and outflow of capital.
- No central bank – lots of competition for business, which lowers costs.
- Tax-free interest earned on all deposits made in the country.
- A significant number of other foreign companies operating in the country.
- Depositors are offered protections and confidentiality.
Set Up a Company in Panama
In order to take advantage of the benefits that Panama has to offer businesses ready for an international expansion, you must first incorporate your business in the country. The process is relatively straightforward and inexpensive, and so doing so as soon as possible is key.
If you require the assistance of an experienced and dedicated back-office support company in Panama and beyond, do not hesitate to contact the team at Biz Latin Hub, where personalized services and support are waiting for you.