Panama: The Republic Of Panama: A Hub For Multinationals

Last Updated: 12 August 2014
Article by Alvaro Tomas and Carlos Ernesto González Ramírez

What has made corporate stalwarts such as Maersk (shipping), Procter & Gamble (consumer goods), LG (electronics), Caterpillar (construction equipment), CEMEX (construction materials) , Nike (sports equipment and apparel) and Heineken (breweries), just to name a few, choose to establish their headquarters in this small country with a population of merely 3.5 million? The answer lies in great part in the vision of a well-known lawyer who, given all the benefits Panama already afforded foreign companies, decided to take it to a whole new level.

We all know that Panama has a privileged geographical position, nestled between the two America's and a stone's throw away from the Caribbean. Almost 5% percent of the entire world's trade goes through the Panama Canal. We know that it uses 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. Moreover, it enjoys a good climate the whole year round, its tourism industry is growing at breathtaking speed, its is free of natural disasters, its capital -Panama City- is filled with world class hotels and restaurants and as our most recent elections (held on May 4th, 2014) showed the world, the political and social stability of a democratic country.

The lawyer who fathered this law, Dr. Eduardo Morgan González, states "the sole purpose of this law was to introduce special legislation to attract and promote investment, create jobs and transfer knowledge and technology, in the process making the Republic of Panama more competitive in the global economy by optimal use of its geographical position, physical infrastructure and international services."

So our esteemed colleagues can have a better understanding of the benefits that Law no. 41 of August 24, 2007 may offer corporate clients searching for a place to establish their base of operations for Latin America, we summarize the most important aspects of said piece of legislation:

Definition of Multinational Headquarter ("MHQ"). A global or regional headquarter is defined as a legal entity that provides services of the following nature or any combination thereof:

  1. Management and/or administration of companies belonging to an economic or corporate group in a specific geographic area or globally, including strategic planning, business development, managing and/or training of personnel, operation, control and/or logistics.
  2. Logistics and/or warehousing of components or parts required for the manufacturing or assembling of any products manufactured by the company.
  3. Technical assistance to companies of an economic or corporate group or to customers having acquired products or services from any such companies, for which the latter shall be under the obligation to provide support services.
  4. Financial management, including treasury services, of an economic or corporate group.
  5. Accounting for an economic or corporate group.
  6. Drawing plans as part of designs and/or construction works, in the normal course of business of the headquarters or any subsidiaries thereof.
  7. Electronic processing of any activity, including the consolidation of operations of an economic or corporate group. This service includes network operations.
  8. Consulting, coordinating and monitoring marketing and advertising strategies for goods or services produced by an economic or corporate group.
  9. Support of operations and research and development of products and services of an economic or corporate group.
  10. Any other analogous service previously approved by Cabinet.

Capital Requirements. The MHQ group capital must be equal or more than US$200 million.

Tax incentives. Law No. 41 provides for several tax benefits, both at corporate and personal level (for management).

At corporate level, tax incentives are:

  • Total exemption on Income Taxes. Since Panama has a territorial tax system, and since the MHQ will be operating offshore (providing services to its operations outside Panama), there is no taxable income. Given the case that the MHQ provides service to a local operation, such local operation will have to be provided through a separate legal entity (another company), and any transfers of funds from that entity to the MHQ will have to retain 12.5% as income tax.
  • Possibility of negotiating a tax scheme. A MHQ will not pay taxes in Panama, but if for reasons of global tax planning it wants to pay taxes, it can do so through an agreement with the local tax authorities. This agreement can include the tax rate, and any other provision that the MHQ deems necessary, provided that such provision is not against Panamanian public policy or morals.
  • Exemption from sales tax for services rendered to relate corporations abroad. MHQ invoicing to offshore operations are not subject to the 7% sales tax.
  • It is important to point out that exemptions from these taxes do not include exception from filing tax information with tax authorities.

Foreign personnel of the company with a Multinational Headquarters License that is covered by a Permanent Employee Visa for a Multinational Headquarters Company ("Visa de Personal Permanente de Sede de Empresa Multinacional") will not generate income taxes if payment is received from abroad. They are also exempted from Social Security contributions. However, for these employees and their dependents the company must provide private health insurance, which must be issued by an insurance company with license in the Republic of Panama.

Additionally, holders of a Permanent Employee Visa for a MHQ may import their household goods free of import tax and may import a vehicle for its family use every 2 years. However, sales taxes must be paid.

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 MHQ, 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 MHQ. These visas are processed before the Ministry of Trade and Industry. These visas are:

  • Special Visas for Permanent Personnel of MHQ. These visas are issued to foreign personnel at a managerial or executive level, and to their dependants. The visas will be issued for a 5 year period.
  • Special Visas for Temporary Personnel of MHQ. These visas are issued to any personnel of a MHQ that has to come to Panama for activities related to the MHQ. It has a maximum duration of 3 months. This type of visa also eliminates the requirement of obtaining a working permit or any other permit from any governmental authority.
  • Special visas (permits) for special events. These visas are to be issued to personnel of the MHQ that come to Panama to attend a specific event. These visas are only for MHQ personnel that hold a nationality which requires a visa to enter the country. All other personnel will not need to apply for this visa if coming only for a specific event or short visits, such as meetings, planning, technical training, etc.

Please note that the Permanent Employee Visa for a MHQ 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 MHQ from the application of labor quotas, in the case of holders of Special Permanent or Temporal Permits for Permanent or Temporal Personnel of MHQ. These means that the proportion of 10% foreigners to 90% Panamanians required by the Labor Code, does not apply when foreigners working with the MHQ are holders of these Special Residence Permits.

License requirement. In order to benefit from all of these incentives, a MHQ will have to apply for a license before the Licensing Commission for Multinational Headquarters.

As a final note, 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 MHQ that are moving to Panama.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Similar Articles
Relevancy Powered by MondaqAI
Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Similar Articles
Relevancy Powered by MondaqAI
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Mondaq Free Registration
Gain access to Mondaq global archive of over 375,000 articles covering 200 countries with a personalised News Alert and automatic login on this device.
Mondaq News Alert (some suggested topics and region)
Select Topics
Registration (please scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions