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Highlights
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 ecommerce 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:
- Biotechnology, Marine Resources, Reforestation, Tropical Medicine and
Aquaculture.
- Information Technology, Telecommunications, Geographic Research and Data
Transfer.
- 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 labor 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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