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Doing Business In Panama

Why We Continue To Choose Panama

When looking around the world in search of a place to base your business, these are the factors to consider:

  1. Corporate tax rates
  2. Availability of qualified labor
  3. Import and export duties
  4. Infrastructure (including options for air and/or sea transportation, internal roads, and telecommunications)

Each of these factors will be more or less important depending on the business you want to operate.

Taking a very big-picture perspective, considering all these criteria, Panama comes out on top in Latin America. That’s why we chose Panama, four years ago, as the place to base our Internet publishing business, and it’s why many, many other businesses, including many very big international operations, are also choosing to settle in this country.

Infrastructure is of critical importance for any business, whether it’s the Internet that moves your goods (as in our case) or, say, ships. As the Hub of the Americas, Panama boasts the best infrastructure in Central America and is close to being on par with the best of South America. Telecom cables connecting east and west, north and south run through and by Panama, allowing the country to plug into high-speed telecommunications. Local Internet companies continue to upgrade the available speeds they offer, and, for companies that need it, getting a dedicated trunk link isn’t complicated or expensive.

Panama’s Copa Airlines serves 59 destinations in the Americas and is expanding its routes regularly. Further, Copa is affiliated with Continental/United, so options for connecting around the world from Panama are good. This means that, if you’re shipping goods by air or need to travel for consulting or other in-person business agendas, you have easy access from this base.

The downside is that Copa doesn’t have a lot of competition, so fares for flights around the region aren’t cheap. With no discount carrier like Ryan Air or Southwest to keep prices down, the hour flight from Panama to Medellin (a flight Kathleen and I have been taking often lately) costs about US$600 round-trip, including taxes and fuel surcharges. You can fly to the States (minimum 2 1/2;-hour flight) for less much of the time.

The other hub of activity in this country revolves around the Canal. Container ships come through by the thousands every year, meaning the options for receiving and sending sea freight are plenty.

If your business involves physical goods and you aren’t selling to the local Panama market, then you could locate in Panama’s duty-free or free-trade zone for added tax benefits. Many countries have these zones available to allow international businesses to operate without being taxed locally.

Panama doesn’t tax people or corporations that don’t earn money in Panama, but the free-trade zone allows businesses to conduct activity in the country and then to ship the resulting goods back out without paying Panama income tax on the associated profits.

You could, for example, buy and import leather from Argentina and use it to manufacture gloves in Panama and pay no income tax in Panama on the profits from the sale of the finished goods to a wholesaler in the United States…as long as you operate in Panama’s duty-free zone.

If you run a business in Panama that sells to the local population, the corporate tax rate is 25%, which is an average rate on a global scale. However, again, the only way you’d incur this tax would be by operating and selling locally. Run a virtual business in Panama (base yourself here as a consultant, for example), and you’d have no local tax liability whatsoever as long as your clients are all outside this country.

Panama also offers a well-educated, English-speaking labor force if you need it. This is an important reason why many big international call centers are locating themselves in this country. Dell, for example, has more than 2,000 call center employees in Panama City, and several outsourcing call centers (centers that do work for small- to medium-sized businesses that don’t have enough demand to run a call center of their own) have as many as 3,000 employees handling both English and Spanish inbound and outbound calls.

Lief Simon

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