Panama: Business Environment

Accounting Rules

Tax Year: The fiscal year begins on January 1st and ends December 31st of the same year.
Accounting Standards: Panama converted to IFRS as from 2009 and has historically utilised accounting principles that complied with the IAS Committee. The National Accounting Management created an integrated system of financial administration (in Spanish only).
Accounting Regulation Bodies: National Accounting Management
Accounting Reports: The accounting structure should include:
- The balance sheet: Assets (current assets, liquid assets, bad debt allowance, salaries, other, income tax, inventories, expenses incurred, Total current assets), equipment (machinery property, Depreciation), and other assets ;
- The income statement: Revenues, Gross profit, Operating costs, Operating earnings, Total operating costs, Earnings before income taxes, Net income ;
- The management balance; and
- The appendices.
Publication Requirements: The Panamanian commercial law does not itemize the contents that have to be included in the accounting or the certification of the accounts. It is generally established practise that companies maintain a journal, a big ledger, the inventory and also annually prepare the necessary documents for financial analysis.
Professional Accountancy Bodies: Panama College of Public Certified Accountants , (Spanish only).
Certification and Auditing: In Panama, all companies as well as subsidiaries of foreign companies are required to seek the services of an external auditor to carry out an annual financial audit of their organization. The auditors have to be certified public accountants and have to satisfy the government of the accuracy of the published accounting information.
You can contact an external auditor: Deloitte, KPMG, Ernst & Young, PricewaterhouseCoopers.
Accounting News: Panama Association of Certified Public Accountants

Tax Rates

Consumption Taxes

Nature of the Tax: IVA: Value Added Tax
Tax Rate: The VAT standard rate is 7% except on alcoholic drinks (10%) and tobacco products (15%).
Reduced Tax Rate: Certain goods and services are exempt from VAT: foodstuffs, medical and commercial services, fuel, books and basic agricultural products.
Other Consumption Taxes: Excise Duties are chargeable on several products such as all products derived from tobacco and alcoholic drinks, and services such as cable television and mobile service.

Learn more about Service Providers in Panama on Globaltrade.net, the Directory for International Trade Service Providers.

Corporate Taxes

Company Tax: 25%
Capital Gains Taxation: Capital Gains are generally taxed as income.
Main Allowable Deductions and Tax Credit: Expenses are deductible for depreciation and depletion, net operating losses, payments to foreign affiliates, certain taxes.
Other Corporate Taxes: Real property tax, stamp duty, social security contributions, payroll tax, transfer tax

Country Comparison For Corporate Taxation

	Panama	Latin America & Caribbean	الولايات المتحدة	Germany
Number of Payments of Taxes per Year	62.0	33.2	11.0	16.0
Time Taken For Administrative Formalities (Hours)	482.0	384.7	187.0	215.0
Total Share of Taxes (% of Profit)	50.1	48.0	46.8	48.2

Source: Doing Business - Last Available Data.

Individual Taxes

Tax Rate

Individual income tax	Progressive rate from 0% up to 25%
PAB 0 - 9,500	0%
PAB 9,501 - 12,000	20.5%
PAB 12,001 - 15,000	21.5%
PAB 15,001 - 20,000	23%
PAB 20,001 - 30,000	24%
Over PAB 30,001	25%

Allowable Deductions and Tax Credit: All medical expenses incurred in Panama, donations, interest on residential mortgage loans, student loans and home improvement loans can be deducted.
Special Expatriate Tax Regime: If someone has been in Panama for less than 180 days within a calender year, he is subject to a tax of 15% plus and education tax of 2.75%.

Double Taxation Treaties

Countries With Whom a Double Taxation Treaty Have Been Signed: Panama has recently signed double tax agreements with several countries.
Withholding Taxes: Dividends:10%; Interest: 15%; Royalties: 15%.
Bilateral Agreement: Egypt and Panama are not bound by a double taxation agreement.

Sources of Fiscal Information

Tax Authorities: Tax Collection Directorate
Customs
Other Domestic Resources: Taxation in Panama

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Intellectual Property

National Organizations: The Directorate General of the Industrial Property Registry. Panama signed the General Inter-American Convention for Trade Mark and Commercial Protection of 1929.
The new intellectual Property Law, approved in April 1996 fulfils the WTO requirements. The law strongly punishes brand name and patent piracy and provides for speedy proceedings in the case of conflict.
International Membership: Member of the WIPO (World Intellectual Property Organization)
Signatory to the Paris Convention For the Protection of Intellectual Property
Membership to the TRIPS agreement - Trade-Related Aspects of Intellectual Property Rights (TRIPS)

National Regulation and International Agreements

Type of property and law	Validity	International Agreements Signed
Patent Law 35 of May 10th 1996	Validity period of 20 years (Spanish only)	Patent Cooperation Treaty (PCT)
Trademark Law 35 of May 10th 1996	10 years, renewable for 10 years (Spanish only)
Design Law 35 of May 10th 1996	10 years, period can be extended up to 5 more years (Spanish only)
Copyright Law 15 on copyright 1994	Lifetime right for the author and his heirs as provided by the text.	Berne convention For the Protection of Literary and Artistic Works Convention for the Protection of Producers of Phonograms Against Unauthorized Duplication of Their Phonograms Rome ConventionFor the Protection of Performers, Producers of Phonograms and Broadcasting Organizations WIPO Copyright Treaty WIPO Performances and Phonograms Treaty
Industrial Models Law 35 of May 10th 1996	10 years, see text

Legal Framework

Independence of Justice: Despite the fact that the constitution provides for an independent judiciary, it remains inefficient, politicized and prone to corruption.
Equal Treatment of Nationals and Foreigners: From the judiciary's point of view, foreign nationals can expect the same treatment as Panamanians.
The Language of Justice: Spanish.
Recourse to an Interpreter: It is always possible to have an interpreter (contact your Embassy).
Sources of the Law and Legal Similarities: The main source of the law is the Constitution of 1972 (amended several times, last amendment in 2004). The legal system is based on a civil law system. Panama accepts compulsory ICJ jurisdiction but with reservations.
Checking National Laws Online: Panama Judiciary (Spanish Only)

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Standards

National Standards Organizations: COPANIT, Panama Committee of Industrial and Technical Standards.
Integration in the International Standards Network: Panama is a member country of the International Organization of Legal Metrology (OIML), of the International Organization of Standardization (ISO), of the International Eletrotechnical Commission (IEC) and of the Pan American Standards Commission (COPANT).
Classification of Standards: Panama's standards are the COPANIT. The body responsible for standardization is the Panama Commission of Industrial and Technical Standards (COPANIT), which is under the Ministry of Commerce and Industry and whose executive body is the DGNTI (Management of Standards and Industrial Technology).
Online Consultation of Standards: Standards can be consulted on the DGNTI (Directorate of Standards and Industrial Technology, link in Spanish) website, the executive body of the COPANIT (Panama Commission of Industrial and Technical Standards).
Certification Organizations: DGNTI Directorate of Standards and Industrial Technology.

Business Practices

General Information: Doing Business in Panama
Opening Hours and Days: Banks open Monday to Friday from 9 AM to 4 PM in Bogota and from 8 AM to 11.30 AM then 2 PM to 4.30 PM in the rest of the country. They close at 12 PM on every last day of work of each month. Government offices are open Monday to Friday from 8 AM to 12 PM and 2 PM to 6 PM.

Offices are open Monday to Friday and sometimes Saturday from 8 AM to 12 PM and 1 PM to 5 PM.

Businesses are open from Monday to Saturday 9 AM to 7 PM.

Shopping centers are open everyday from 10 AM to 7 PM. Some Supermarkets are open around the clock everyday.

Public Holidays

New Year	January 1st
Martyrs' Day	January
Carnival	February-March
Ash Wednesday	February (Wednesday First week)
Maundy Thursday and Good Friday	End of March
Labor Day	May 1st
Panama City, District of Panama and Province of Panama Foundation	14th August
Independence Day (From Columbia)	November 3rd
Flag Day	November 4th
Independence Day (From Spain)	November 28th
Christmas	25th November

Periods When Companies Usually Close

Holy Week	End of March, week before Easter
Christmas Holidays	From December 15th to January 12th

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