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Doing Business In Panama

Why Panama Is The Best Place In The World To Start An Internet Business

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 nearly nowhere in the world is).

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 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 two years, 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. Commercial rents have risen dramatically in this country over the past few years and haven’t fallen as residential rents have in the past 12 months or so. Still, office rent is affordable, and other costs are comparatively low, including Internet and labor.

We moved to Panama from Paris two 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 three times greater than they are currently 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 far 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 need to obtain work permits for your 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.

One way to mitigate the work-visa challenge would be to set yourself up in the new Panama Pacifico special economic zone being developed at the former Howard Military Base. Base your business here, and it could be eligible for all the foreign employee work visas you could want. More here.

Kathleen Peddicord

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