Why This Is The Best Place In The World To Start A Business Today
Set yourself up properly, and you’ll be liable for no corporate tax. Not in Panama and not anywhere else either (including, you may be wondering if you’re an American, in the United States).
That’s a big reason why Panama is the #1 place in the world right now to start an online or e-commerce business. It’s also the best place to base yourself if you want to make a living from consulting, travel writing, copywriting, or any other laptop-based profession you can think of.
The key is that your customers are outside Panama. In other words, as long as the revenues of your business aren’t sourced in this country, you don’t pay tax on them in this country. And, again, as long as you structure your corporation properly, you won’t be liable for taxes from the revenues that flow through it anywhere else, either.
That’s hard to beat.
In addition, I’m more convinced that Panama is the best choice for launching and building an Internet-based business the longer we’re operating here for other reasons, as well…
First, the infrastructure works. Not 100%…but I remember suffering through occasional electricity and Internet problems in our office in Baltimore, Maryland, when I was conducting the same kind of business from a base in that city years ago.
Nowhere are you going to enjoy services that are 100% reliable. I’ve opened and operated businesses in the States, Ireland, France, London, Nicaragua, Honduras, Ecuador, Mexico, Argentina, and Panama. The doing-business infrastructure in Panama (electricity and Internet reliability, options for Internet service, office space, etc.) compares favorably with that in the States (which could be used as an international benchmark). It’s light years ahead of the infrastructure in Ireland and every other country in this Central America region. It’s not as sophisticated as in France (but there are other big downsides to doing business in that country).
Second, in Panama, you’re in the same time zone (give or take an hour or two) as North America. If your market and your customers are in North America, this is a big and important plus. Again, I’ve tried doing business with North Americans from different bases in Europe, and the time lag was sometimes a point of frustration (for me and my staff and also for the customer). Sometimes it was even a cause of lost business. For this reason, I recommend against trying to base a business in Europe or, especially, Asia if the marketplace is in North America.
Third, the English-speaking labor pool in Panama is proving broad and interesting. Our experiences as employers in this country for this current undertaking haven’t been 100% problem-free. In nearly three years operating here, two web assistants, one editorial assistant, and one customer service assistant haven’t worked out. But this is not uncommon turnover, and the staff that hasn’t worked out could generally be categorized as the kind that didn’t want to work too hard.
Meantime, we’re finding plenty of other people who do want to work and who are also smart, competent, and truly bi-lingual. We’re still small. Are there thousands of people of the kind we want to hire in Panama City? I don’t know. But to date we’ve found (and currently employ) 11 very good to excellent staff.
Fourth, the cost of doing business in Panama is very controllable. Office rent is affordable on a global scale, and other costs are comparatively low, including Internet and labor.
We moved to Panama from Paris three years ago specifically because we wanted to start this business. If we’d stayed in Europe, our operation wouldn’t be working as well, because our costs would be at least four times greater than they are currently. I was reminded of this fact recently when a friend in Paris sent me the budget for a new business he is planning to launch. Reviewing his projections, I remembered why we’re in Panama City.
Elsewhere in this region, I don’t think we’d be able to find the labor we need. And we’d likely struggle more in our efforts to keep in touch in real time with the rest of the world.
The downsides to being an Internet-based business owner in this country?
Employment law favors the employee, as it does in most of the world but not to the extent it does in most of Europe. The social costs that the employer must cover (including what’s called a “13th month” salary bonus to employees each year) are not insignificant, but, again, not as onerous as they can be in, say, France.
The other challenge can be work permits. You can hire one non-Panamanian employee for every nine Panamanians on your payroll. If those numbers don’t work for you (and you require, as we do, a more international mix among your staff), you’ll struggle to obtain work permits for additional non-Panamanian labor. This is more possible than it is in the EU (where the hurdles to hiring anyone without an EU passport are often insurmountable) but not easy, depending on the circumstances case by case.
Bottom line, though, all things considered, I’d say that Panama is the best place in the world to start a business today. Further, I’d contend that Panama Pacifico may be the best place in Panama to base your new venture, for, operating in this new business zone, the two big downsides to doing business in Panama are mitigated.
Panama Pacifico is a massive venture under way on the site of the former U.S. Howard Air Force Base. London & Regional (L&R), one of the largest private property companies in Europe, has been signed on as master developer for one of the biggest development deals ever recorded. L&R isn’t building a new business center or a new residential community; they’re building a new city 15 minutes outside Panama City, the new Panama City, Panama Pacifico. This is a 40-year, minimum US$700 million, 1,400-hectare project to include a million square meters of commercial space, 20,000 new homes, retail centers and hotels, schools and places of worship, parks, other recreational amenities, and a golf course. It will create 40,000 new jobs.
Setting up shop in Panama Pacifico’s commercial center means you enjoy legal, customs, immigration, labor, and tax benefits. From the point of view of the would-be entrepreneur in this country, perhaps the biggest benefit of basing yourself in the new Panama Pacifico is the fact that doing so means you could be eligible for all the foreign employee work visas you could want.
A friend has worked for the past year or so to relocate his software development business from the United States to Panama. He is now up and running in Panama Pacifico. My friend has rented more than 3,000 square feet of space, for which he pays US$13.25 per meter per month. He has wired and furnished the space, a cost that he is amortizing at about US$1 per meter per month, making his total rent about US$4,300 per month.
He has hired about 40 people, all fully bi-lingual. Average salaries are US$900 to US$1,500 per month. This would compare with US$4,000 to US$6,000 per month in a U.S. city for the same skill level. His top management level people make US$2,300 per month, which compares with US$120,000+ in the States. These are people with five to seven years’ management experience and graduate degrees. He’s hiring most of them from Carnegie Mellon University Panama and having no trouble finding all the help he needs.
Panama is doing what Ireland did in the 1990s (when we, coincidentally, were living in that country)–it is positioning itself as the doing-business capital of the region. When I moved, with my business, from the United States to the Emerald Isle 14 years ago, it was to take advantage of government incentives, including a very appealing corporate tax rate and an English-speaking and educated labor pool that was, at the time, a bargain.
We enjoyed many other benefits, of course, living in Ireland for seven years, and we’re enjoying other things about our time now in Panama. But, again, the primary motivation for relocating from Paris to Panama City three years ago was to take advantage of what we recognized as a very entrepreneur-friendly jurisdiction. In fact, the situation here in Panama is better than it was in Ireland back in the days of the Celtic Tiger. Here, if your business earns its money outside Panama (as any online business does), you owe no corporate tax in this country.
If you’re shopping the world for a place to indulge an entrepreneurial agenda, I strongly suggest you take a close look at Panama. I further suggest that you focus attention specifically on Panama Pacifico.
Editor Lee Zeltzer features a full report on opportunities and incentives currently on offer in this interesting new Panama business investment zone in the June issue of my Panama Letter, due in subscribers’ e-mailboxes.