Doing Business In Panama

Like Ireland Back In The Day…Only Better

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, the new city being built where a U.S. military base used to be, about 20 minutes outside downtown Panama City. Businesspeople who set up shop here enjoy all kinds of perks, benefits, and tax breaks, including, in some cases, unlimited work permits for non-national labor.

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–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 2 ½ 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.

As the example of my friend shows (and as we’ve found ourselves), you can operate here with very controlled overheads. You can find educated, English-speaking staff at a very competitive cost. And, depending on the business you’re in and how you structure things, you can operate completely tax-free.

Kathleen Peddicord