Panama as Headquarters for Multinationals
Panama is increasingly ranked on decision makers’ shortlists when it comes to choosing the location of their international and regional headquarters. Panama provides access to the LatAm market of 400 million people. Offering a high quality of life, a central location and tax incentives, among other advantages, companies view Panama as a strategic location from where they can oversee investment in the developed and emerging countries of the region. Coupled with English-speaking staff and strong cultural ties, the country is gaining attention as an international management centre and an ideal hub to enter neighboring markets. More than 140 multinational corporations have located corporate management functions on the country, between them: Procter & Gamble, Heineken, Caterpillar, BMW and ArcelorMittal.
What sets Panama apart from the rest of its regional neighbors is its privileged geographical position, located between the two America’s and minutes away from the Caribbean Sea and the Pacific Ocean. Five percent of the entire world’s trade goes thru the Panama Canal. The US Dollar as currency, has a solid and competitive financial center. An enviable port and logistics system, the second largest free zone in the world, a service based economy and the region’s best airport and cargo facilities. Panama also possess one of the best transport infrastructure in the region, its tourism industry is growing very rapidly, it enjoys a good climate the whole year round and the country enjoys political and social stability of a democratic country.
Panama is also a long established key intermediary for foreign investment. In fact, trade and investment are of vital importance to Panama’s economy since the 15th century and, according to the 2017 Index of Economic Freedom, annual index and ranking created by The Heritage Foundation and The Wall Street Journal, Panama occupied the position #96 in the table of 181 nations. Some of the most highly respected names in financial services, manufacturing, shipping, petroleum, logistics, pharmaceuticals and many others have in turn chosen to establish operations in Panama and use the country’s strategic location as a springboard for development in the LatAm region and beyond.
Based in Panama
Companies from all economic sectors have located regional headquarters or certain key functions on the country. The international trading arm of Procter & Gamble has its headquarters in Panama, and shipping company Maersk manages its LatAm operations from the country. Pfizer found the country to be a convenient location to establish a regional center as a result of the country’s favorable situation in the region. Nestle set up a sales, services and support center in Panama in an effort to break down the barriers of distance, language and culture. Companies from the finance sector have also found Panama a profitable base. The oil and gas industry represented in Exxon, Chevron, Total, BP and others have also discovered Panama as a safe service center in the South & Central America and the Caribbean, while in the IT sector Panama has become a prime jurisdiction for gaming companies offering games to players worldwide. The pharmaceutical industry is another prominent example of strategic investment in the country, with Pfizer, Hoffman-LaRoche and Sanofi Aventis operating a regional sales and marketing unit in the country, which is responsible for the LatAm region.
Doing business in and from Panama is easy: as home to a major international financial services sector, the country has one of the most developed business infrastructures in the world, making it an ideal base for region-wide corporate coordination and central management functions, sales, marketing and customer service. A neutral, pro-business and economically stable country, Panama offers companies a perfect climate to successfully compete in the region. A fiscally efficient tax structure leads the way and is complemented by a network of multiple double-taxation treaties, facilitating international business and ensuring a smooth trading environment. Political stability and solid legal, banking and accounting systems make investing in Panama attractive and safe.
There is optimism in Panama that the country’s importance as a management center is set to grow. The country believes it is particularly attractive as a location for US, European and Asian firms wishing to cover the LatAm markets. In its efforts to persuade growing numbers of foreign companies to use it as a base, Panama emphasizes that it is also a great place for small and medium-sized enterprises seeking growth opportunities outside their home countries. With operational costs being 20 to 30 per cent lower than in most US cities, Panama offers smaller companies a conducive business environment in which to build up LatAm, US, Asia Pacific networks.
An Eye on Asia
As growth opportunities continue to move away from the traditional markets, most multinationals want Asia to become part of their expanding global footprint. It is a continent ripe with potential; and an increasing number of corporates believe locating key business functions close to the growing number of Asian consumers is now more important than ever. Despite a number of challenges, China is undergoing a transformation that is difficult to ignore. The continent is seeking to accelerate its own economic growth and offers investment and trade opportunities across all sectors, including energy, retail, tourism, leisure, utilities, transport, telecoms, health and education. In this climate, Panama’s profile as a safe and secure gateway to these developing markets is taking shape and the country is emerging as a preferred entry point for companies with operations across Asia. Some of the first companies to take advantage of the huge market at its doorstep were Panama’s retailers and distributors. Many of them have successfully expanded and now undertake the distribution management for a number of leading brands. Panama’s business community believes the country is well suited to be a base for the sale and distribution of a vast range of consumer goods into LatAm markets. Believing in Panama’s potential as a launch pad to nearby markets, and that includes LG, Samsung, Hyundai and others.
Besides geographical proximity to major markets, Panama also scores high on connectivity. The country has been labeled the “Hub of the Americas” and is connected by air to almost every major city in the North, Central & South America, the Caribbean, Europe and even Turkey, most being just a few hours’ flight-time away. Located uniquely on the main shipping routes, the Panama Canal has also turn the country into a major transshipment hub connected to more than 100 ports worldwide.
The advantages of operating in, or from, Panama also include the county’s flexible, highly trained and multilingual workforce, with wages below average. Foreign companies based in Panama comment favorably on their experiences with their local employees in terms of productivity, profitability, dependability and rapid response times. The country’s low crime rate, tropical climate, competitive personal tax rates, as well as its good educational and healthcare systems also make Panama an easy sell for American, Asian, South American or European expatriate executives, particularly those with families.
The Multinational Companies Law No. 41 of 2007 define a multinational company as a company that operates from Panama, aimed at offering services to its headquarters or its subsidiaries, sister companies or associated companies or sets its headquarters in Panama, Branches will always be part of multinational companies with international or regional operations in their country of origins.
Under this law, there are opportunities for investors to either established its headquarters or established branches, sister companies that can help carry out the operations of the Business Group. Services or activities that can carry out from Panama under this law are the following:
Law No. 41 provides several tax benefits, both at corporate and personal level (for management).
At corporate level, the tax incentives are:
These tax exonerations will not apply to Panamanian employees or other foreign employees that are the holders of a visa different than a Permanent Employee Visa for a Multinational Company, which will be subject to the tax norms and provisions in force in the Republic of Panama.
Visas. Please note that Law No. 41 creates three (3) visas specifically for foreign employees of the Multinational Company. These visas are processed before the Ministry of Trade and Industry. These visas are:
Please note that the Permanent Employee Visa for a Multinational Company shall be given for a term that may not be longer than the term established in the employment contract, which shall in no case be longer than five (5) years. Holders of these types of visas will not be required to obtain a work permit (usually required for all other types of visas).
Labor regulation incentives. Law No. 41 exempts Multinational Company from the application of labor quotas, in the case of holders of Special Permanent or Temporal Permits for Permanent or Temporal Personnel of Multinational Company. These means that the proportion of 10% foreigners to 90% Panamanians required by the Labor Code, does not apply when foreigners working with the Multinational Company are holders of these Special Residence Permits.
License requirement. In order to benefit from all of these incentives, a Multinational Company will have to apply for a license before the Licensing Commission for Multinational Headquarters.
In addition, special areas in and around Panama City are being developed with modern infrastructure, logistical systems, communications, schools and housing to cater to the amount of executives and personnel of Multinational Company that are moving to Panama.
Panama has established itself as a magnet for foreign-owned companies and is improving its competitive position steadily. A stable business environment, favorable corporate tax regime, world-class infrastructure and excellent quality of life – these are just a few of the many reasons why companies relocate senior decision makers to perform strategic functions from Panama. In the long term, the prospects are good that Panama will benefit from the growth in the region and become an increasingly popular choice for the location of international and regional headquarters. Review the list of Multinational Companies in Panama, here.
If you want to set up the Headquarters of a Multinational Company in Panama, we have licensed real estate agents, excellent lawyers, investment advisors and other professionals to assist you on all your business needs.
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