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Highlights
Panama is working to become an international hub specializing in Information and Communication Technologies (ICT). A new strategy is being executed by the institutional entity known as SENACYT and the Chamber of Information and Communication Technologies (CAPATEC), which are supported by national and international agencies. The plan "ICT National Strategy 2008-20182" is a strategy designed to develop the IT sector and turn the nation into a global center.
Aiming to develop infrastructure, technology, personnel and support in both the governmental and private sectors for the acquisition, production, storage, processing, communication, recording and presentation of information contained in by signals of acoustic nature (sound), optics (imaging) or electromagnetic (alphanumeric data).
In the area of trade services, using electronic means, for long distance commercial transactions or sales.
New Legal Framework for Electronic Commerce
Law 51 of July 22, 2008 defines and regulates electronic documents and electronic signatures, and the provision of technological storage services for documents and certification of electronic signatures.
In addition, other regulations are adopted for development of electronic commerce. It defines 37 terms in the field of e-commerce, from "electronic certification" to others as "storage technology media” and “brokerage services agent”.
Another aim is to regulate activities as described in Title IV, Chapter I, Article 43: "Every natural or legal person, domestic or foreign, conducting business as a technological storage of documents broker from third parties, must register with the Directorate General for Electronic Trade as Technological documents storage of documents agent.”
On the other hand, Article 69 (Chapter V) creates the General Directorate of Electronic Trade, at the Ministry of Commerce and Industry. Its responsibility is to ensure the smooth running of provision of technological storage of documents and certification of electronic signatures, using the internet as a tool for delivery of business services. This institution is empowered to regulate, monitor and discipline service providers of electronic signature certifications, registrations and / or cancel licenses to providers, in accordance to the law and regulations.
The purpose is to ensure that all systems are reliable and to perform every necessary action to provide services related to these activities. This Directorate will issue all technical regulations needed to meet the minimum technical conditions required by natural persons or entities that use the Internet for commercial activity.
This law also creates a special regime to ensure the confidentiality of information stored in databases to support operations within foreign countries or jurisdictions which are used by private and public companies. National or international entities are also included. Companies benefiting from this provision may operate its own database. Foreign companies wishing to conduct this activity may develop a branch or a subsidiary organized under the Panamanian law, with that sole purpose.
Why anyone should move its e-commerce activities to Panama?
a) Main Advantages
- US dollar based economy
- Earthquake free
- No active volcanoes
- No hurricanes
- No taxes on foreign source income
- Excellent living conditions
- Fully bilingual certified engineers
- Best submarine fiber optic access of the region
- No pollution
b) Telecommunication infrastructure
Panama has the best access to multiple high-bandwidth continental fiber optic networks in telecommunications infrastructure. The extremely low risk of natural disasters (hurricanes etc.), gives the Panama telecom sector security and reliability of service as well as a competitive advantage over other offshore jurisdictions.
c) Accessibility for installation and maintenance
Panama is extremely easy to access from almost anywhere, due to its central location in the middle of the Americas. Its proximity to large cities in the US and Europe makes it relatively cost effective to bring in specialist know how for installation and maintenance.
d) Relevant technical know how and human resources
Panama’s long history as a international banking and services jurisdiction, has resulted in the availability of technical know how in internet technology and information technology as well as sufficient human resources to install and maintain e-commerce operations.
e) Location
Accessing Panama is easy from anywhere in the world. Living conditions are very similar to the US, but the cost of living is one-half.
f) Favourable tax regime
Panama is a zero tax jurisdiction. There are no double tax treaties that can be used for commercial activities. No VAT is payable on good or services exported from Panama.
g) Hub for CyberCommerce
All the preceding advantages, incentives and infrastructure place Panama as an ideal location for:
- Internet Service Providers
- E-Commerce Providers
- Applications Outsourcing ASP
- Broadband Content Providers
- New Media Content Providers
- Exchange Traffic
h) Panama’s Continental Fiber-Optic Network Link
 The MAYA and ARCOS ring systems link the continental Americas and the Caribbean Basin.
Total investment for the two fiber--optic trunk systems is targeted at $217 million, and is to be divided between a mainly 14-member consortium, including world-class carriers such as AT&T, CTC Mundo, France Telecom, MCI, SPRINT, Star Telecom, Swisscom, TelMex WorldExchange and Cable & Wireless.
The MAYA-1 ring features relays in Florida, Mexico, Guatemala, Costa Rica, Panama, Colombia, Puerto Rico, Jamaica and Grand Cayman Island and, in addition to its own communications structure, provides a restoration path for the Pan-American cable. The ARCOS-1 trunk spans Florida, Mexico, Belize, Guatemala, Honduras, Nicaragua, Costa Rica, Panama, Colombia, Aruba, Puerto Rico, the Dominican Republic and the Bahamas.
The GLOBAL CROSSING project connects Asia, the US, goes through the Panama Canal, the Caribbean countries, and Europe.
These submarine networks give Panama four (4) international connections via high-bandwidth, fiber-optical trunk routes, superseding the current satellite link--feed system that is now in operation. This in turn is already enabling fast and reliable connections for B2B, banking, e-commerce and other businesses as well as additional high-speed consumer activity units.
The OXYGEN network links the US Caribbean, goes through the Panama Canal, and connects to the Pacific ocean within Colombia, Perú, Ecuador, Chile, Brazil and Europe.
Ultimately, the main benefit of MAYA, GLOBAL CROSSING, OXYGEN, PANAMERICAN and ARCOS will be lower international prices for consumers. In addition, these new cables incorporate New Wave Division Multiplexing Technology that will allow extraordinary ultra high speed bandwidth applications, such as multimedia and digital video.
The MAYA 1, GLOBAL CROSSING, OXYGEN and ARCOS-1 projects represent yet another building block in Panama’s quest to become Latin America’s Telecom Hub, which the United Nations Education, Science and Culture Organization (UNESCO) has predicted will occur within the next few years.
In Panama, there is an electronic commerce law that ordered the creation of the Electronic Commerce Directorate of the Ministry of Commerce and Industry. It also establishes that the Comptroller General is the certifying entity in the transactions that are made with the State. Other issues to which this law refers to are the electronic signature of documents and the certifying entities.
Infrastructure and Incentives
1. International Technopark of Panama
The Technopark is a mixture of commercial space, offices, technical facilities and ancillary residential properties. The government is supplying 20 hectares of land with complete infrastructure and buildings worth an estimated $50 MM.
Since the Technopark project was unveiled in August 1999, 45 companies have signed up as tenants and more than 40 have expressed interest including: Oracle, Cisco, Microsoft, and C&W. Panama is a country with a long list of advantages such as low cost of living, good quality of life, no pollution, to name a few.
The Technopark opened in January 2000 and is located on what was once the US Army Base at Fort Clayton along the Pacific side of the Panama Canal, five kilometers from downtown Panama City and a few hundred meters from the fiber optic submarine cables crossing the Panama Canal.
Other participants include the Smithsonian Tropical Research Institute (STRI), and a special Technical Cooperation Agreement has been negotiated with the European Union, through which the organization has assisted in Technopark project development, strategic plan definition and in identifying those niches in which Panama has a “comparative advantage”.
Additionally, a growing number of companies are based in the “Hi-Tech Incubator” which has been established with the intention of accommodating and stimulating the creation of technology start-ups. The new entrepreneurs receive seminars and workshops covering the development of business plans, thus attracting venture capitalists to finance their operations.
The Technopark is attracting interest from a diverse group of businesses that may be divided into three separate, but interconnected areas:
1. Biotechnology, Marine Resources, Reforestation, Tropical Medicine and Aquaculture.
2. Information Technology, Telecommunications, Geographic Research and Data Transfer.
3. Multimodal Transport, Automobile, Aviation and Marine Technology
A special legislation applies to all businesses operating within the Technopark. This legislation includes significant fiscal benefits, immigration advantages, and an established infrastructure requiring reduced startup investment. However, it is important to present the specific benefits that the Technopark offer.
The Panamanian Government granted the Technopark and all entities established therein, the following benefits for an extendable 25 year period:
- Exemption of all taxes, contributions, duties or import fees on all machinery, equipment, furniture, vehicles, appliances, or materials necessary for the development of the project.
- Exemption of the movable property transfer tax (VAT) on machinery, equipment, vehicles, appliances and material acquired and necessary for the development of the project.
- Exemption of any tax duty, or lien imposed on the remittance of money abroad, when such remittance or transfer of funds takes place in relation to the purposes of the project.
In addition, special immigration rules are in place to promote the installation of hi-tech business in the Technopark. Special visas will be granted to expatriates who may enter the country with the purpose of participating in the development of listed projects.
2. Private Hi-Tech Parks
 By means of Law 25 of 1992, the Export Processing Zones (EPZ’s) were created promote foreign investment by establishing a special regime to those companies exporting goods or services produced or processed within said zones.
EPZ’s can be created as Private Hi-Tech Parks to host an array of diverse companies. One important highlight is the granting of exclusive rights to EPZ developers to provide their own telecom and energy allowing the possibility of 24 hours redundancy and related services.
The most relevant incentives granted to High-Tech Parks are:
- Exemption of all taxes, contributions, duties or import fees on all machinery, equipment, furniture, vehicles, appliances, or materials necessary for the development of the project.
- Exemption of any national direct tax on capital.
- Exemption of income taxes.
- Exemption of any national direct tax on dividends and interests originated from securities issued by the company and traded in local or international markets.
- Special immigration and labour regime.
3. Panama Taxation
The Republic of Panama is especially attractive to foreign investors for its tax benefits, particularly those referring to income tax.
Income tax is levied on all revenues produced within the territory of the Republic of Panama, with the exceptions that the law establishes. This concept of territoriality is one of the determining factors making Panama a center of international operations.
For ecommerce, this is extremely important for companies planning where to set up a permanent establishment for their sales and payments for future tax planning.
4. Conclusions
Panama motivates potential investors to base their e-commerce operations in Panama as a virtual nation with an environment where international business is welcomed. Panama continues to encourage foreign capital to enter its domain. Of course, this imperviousness to change cannot be attributed to accident or chance, and there are, indeed, several most solid reasons on which the extraordinary stability of Panama as ideal basis for foreign investment continues to rest.
For example, a company can have its headquarters in the US, its manufacturing facility in Mexico, its distribution from the Colon Free Zone of Panama; its e-commerce and payment transactions out of Panama and its customers in North and South America, Europe, and Asia.
The extraordinary facilities afforded to any foreign investor in various hi-tech industries and immigration of technical and professional people, as well as in a wide variety of other activities from high-tech parks to continental fiber optic networks can be envisaged under investment incentives designed to prevail in a very competitive regional environment.
If you want to Set Up Technology or Ecommerce Operations in Panama, please click here to contact us.
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