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8Recommend Legalinfo-Panama!

The formation and operation of
Panamanian Corporations
(Part III)

TAXATION

As of the 1st of March, 1985 there has been imposed an Annual Franchise Tax of US$150.00 on all Panamanian corporations. The said tax is payable in the following manner:

(a) Corporations which were registered at the Publics Registry office after the above date, are required to pay the said tax within three months of the date of registration of the Articles of Incorporation, or the anniversary thereof in subsequent years.

(b) Corporations registered before the above date, are required to pay the tax within three (3) months subsequent to the anniversary date of the registration of the Articles of Incorporation at the Public Registry, and in similar fashion for subsequent years.

Failure to pay the aforementioned tax will result in a penalty of US$30.00 for each year, or fraction thereof, for which payment is overdue.

Income Tax in Panama is levied only upon Net Income derived from operations within the territory of the Republic of Panama. Income obtained from corporations consummated abroad is not income obtained from sources within Panama and, therefore, is not taxable under our laws.

Even if a Panamanian corporation has an office in Panama, employees in Panama and a license to engage in business in Panama, it still does not pay Income Tax in Panama, if the transactions out of which the income arose were consummated outside of the Republic of Panama. No tax liabilities arise even though payment of the merchandise is made from the Republic of Panama, or payment therefor is received in the Republic of Panama or if the sale or purchase corporations are directed from an office situated in the Republic of Panama.

If a Panamanian corporation engages in business within the territory of the Republic of Panama and also outside the Republic, it is subject to Income Tax only on that portion of its net income arising out of business carried on within the territory of Panama.

Only dividends distributed from income arising from Panamanian sources are taxable at a flat rate of 10% whether received by corporations or individuals resident or non-resident. However, dividends distributed from income arising from sources outside of Panama are not taxable. Panama law further provides that a Panamanian corporation which has, as its only income, dividends or participations from other corporations, Panamanian or foreign, is not subject to Panama income or dividend tax.

FEES

The cost of a corporation may vary depending on the law firm. In any case, you should be charged for:

Notarial fees and stamped paper

Registration Tax at the Public Registry Office. The registration tax is payable only once, upon the tendering of the Articles of Incorporation at the Public Registry Office for registration (ex. a corporation with a capital of US$10,000.00 must pay a US$60.00 tax). When the shares are without par value, assessment of the tax is made by fixing an arbitrary value of US$20.00 for every share without par value. The registration tax corresponding to shares with no par value will not be in any case above US$1,200.00.

Translation of Articles of Incorporation

Miscellaneous expenses (including reasonable telex expenses, stock register and minute books)

Professional fees, including first year's Resident Agent fee. The law requires that every corporation should have a Resident Agent within the Republic of Panama, who must be an attorney or a firm composed of attorneys.

Annual Franchise Tax. An annual franchise tax of US$150.00 must be paid by all Panamanian corporations. The said tax is payable upon registration at the Public Registry and annually no later than three (3) months after the anniversary of the constitution date. Failure to pay the aforementioned tax will result in a penalty of US$30.00 for each year, or fraction thereof, for payment which is overdue.

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This information has been provided by Patton, Moreno & Asvat

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