In the framework of a globalized world and social networks that are established as a measure of possible interest of economic, social and political groups, data protection regulations become more relevant. In fact, the European Union through the General Data Protection Regulation 2016/679 of the European Parliament and of the Council of April 27, 2016, establishes mandatory requirements, as of May 25, 2018, on regard to data protection, and which also apply to individuals in charge of the processing of data who are outside the European Union but who handle personal data of interested parties residing in the European Union.
In the case of Panama, our greatest protection is directly established through our Constitution, mainly in articles 42 to 44. These articles establish the regulatory framework in which the criterion that must be met is the consent of the owner of the personal data to obtain, process and store them. Additionally, it allows them to have access to that information in order to update or delete it from the respective database. The habeas data action is established in these articles to guarantee the right of access to personal information.
How does this affect companies?
For labor purposes, our Labor Code establishes the obligation for the employer to keep a record with information of the workers; this record is subject to inspection by the Ministry of Labor and Workforce Development. The worker in accordance with the constitutional protection has the right to access, update and amend that information, as appropriate.
Based on the regulatory framework and principles established in the Constitution, in case of the local practice, personal data protection has been included in special laws that regulate them depending on the specialization of the matter or business. Special laws such as the following, all of which follow in general terms the constitutional principles:
- Law 51 of July 22, 2008, as amended, which defines and regulates electronic documents and electronic signatures and the provision of data storage services for documents and certification of electronic signatures and adopts other provisions for the development of electronic commerce;
- Law 51 of September 18, 2009, as amended, that dictates rules for the storage, protection and provision of data of telecommunications services users and adopts other provisions;
- Law 24 of May 22, 2002, as amended, which regulates the information service on the credit history of consumers or clients;
- Executive Decree 52 of April 30, 2008, which adopts the single text of Decree Law 9 of February 26, 1998, as amended, and which regulates the banking regime and the Superintendency of Banks;
- Law 68 of November 20, 2003, as amended, which regulates the rights and obligations of patients, in terms of information and free and informed decision;
- Law 81 of December 31, 2009, which protects the rights of users of credit cards and other financing cards; and
- Law 33 of April 25, 2013, as amended, which creates the National Authority of Transparency and Access to Information.
Remarkably, there is no express prohibition in Panama regarding the movement of personal data outside Panama. Existing laws have a more focused approach to the administration and processing of information and its storage. In this sense, there is the General Directorate of Electronic Commerce of the Ministry of Commerce and Industries, which regulates data storage service providers, an entity that regulates the protection of data that must be followed by businesses and imposes the obligation to maintain security measures and protection of information.
I would like to conclude by mentioning that to date, there is a Personal Data Protection Bill that has been submitted to the National Assembly, being the second attempt this year to pass a national law that compiles the regulation on this matter.
New Law establishes a legal framework for the comprehensive approach to Sexually Transmitted Infections (STIs) and the Human Immunodeficiency Virus (HIV)
Law 40 of August 14, 2018 has, among other, some provisions that affect the workplace, such as the following:
Obligations and prohibitions for employers:
- Any discrimination and stigmatizing or segregating act is prohibited to the detriment of those affected, as well as against their relatives and friends.
- Every employer is obliged to implement practical ILO recommendations on STI and HIV, and must take all necessary measures to effectively protect the life and health of its affected workers.
- The worker is not obliged to inform his employer or his co-workers about his condition as an affected person. If he does, the employer must keep strict confidentiality of the case and seek, if necessary, to make adjustments in their work environment according to medical criteria, for the best performance of their duties.
- No employer can deny affected workers the economic benefits to which they are entitled by law, such as deprive them of advancement in rank or promotion within the company.
- The health condition of the affected worker can not be a reason for exclusion in relation to bonuses, awards, training, work trips, recreational activities and any other benefit or activities in the company.
Work permits for appointments or treatments:
- Individuals affected will be granted work permits when required to take care of their health and medical treatments. Additionally, they will be granted up to a maximum of 144 hours, as long as their condition causes a disability.
- Workers affected with STIs or HIV can only be dismissed from their jobs for just cause, with prior authorization from the Ministry of Labor.
This Law repeals Law 3 of January 5, 2000.
The Executive Body, through the Ministry of Health, must regulate Law 40, in a period of 180 days as of August 14, 2018.
Partner Ramon Varela and associate Ana Carolina Castillo contributed with the Panama chapter of Chambers & Partners Alternative Energy & Power 2019.
The guide analyzes the most relevant aspects that affects the energy industry in twenty-nine jurisdictions, including Panama.
The complete guide is available here.
Morgan & Morgan´s Panama office, and fifteen attorneys of the firm were recognized in the Chambers Global 2018, guide of the best lawyers and law firms across 190 jurisdictions in the world.
The firm has been ranked in the first Bands within the areas of Corporate/Commercial, Banking & Finance, Dispute Resolution, Intellectual Property, Offshore, Shipping and Shipping Litigation.
Likewise, the guide noted in the first Bands partners Francisco Arias, Inocencio Galindo, Ramon Varela, Simon Tejeira, Luis Vallarino, Enrique Jimenez, Roberto Lewis, Luis Manzanares, Enrique De Alba, Jazmina Rovi, Juan David Morgan Jr. and Francisco Linares. Associates Roberto Vidal, Allen Candanedo and Maria Eugenia Brenes has been also ranked in the publication.
One of the clients interviewed stated that “the firm is client-focused, eager to assist and flexible when finding solutions”.
About Morgan & Morgan
With over 80 lawyers and 20 practice areas, Morgan & Morgan is a full service Panamanian law firm, regularly assisting local and foreign corporations from different industries, as well as recognized financial institutions, government agencies and individual clients. Learn more at www.morimor.com.
Important notice to our clients:
Whilst recent changes in data protection standards around the world have obliged us to update our Privacy Statement, our commitment to never use your personal data for commercial purposes is steadfast and so is our belief that you should have the ability to inquire as to how we collect your personal data, as well as your rights to control said data.
In the past and in the future, as a valued contact in our client database, we may periodically send you newsletters, legal updates, invitations and news (“communications”). If you are content receiving our communications, you need not take any action. If, however, you do not wish to receive any further communications in the future, you may opt-out at any time by informing us at email@example.com.
You may rest assured that Morgan & Morgan has in place a robust technological platform and a highly skilled team that has developed a strategy to enhance the safekeeping of our client´s personal data.
Albalira Montufar, Partner, Immigration Law
Panama has become a popular destination to immigrate in the region, due to its economic growth and socio-political stability, which contrasts with other neighboring countries´ intricate conditions. Within the last decade, multiple infrastructure projects, as well as incentives favorable to establish and operate multinational companies, have resulted in an increase of foreign nationals within the country, creating a multi-ethnic and multi-cultural society.
Nevertheless, Panama’s immigration law enacted in 2008 and article 17 of the Panamanian Labor Code dated 1972, both modified throughout the years, constitute a complex scenario to immigrants and employers willing to comply with the laws and changing policies. Separate processes to obtain (i) residency before the National Immigration Service and; (ii) a work permit before the Ministry of Labor, are one of the main aspects to be considered when immigrating and hiring foreign employees.
How to obtain legal residency in Panama?
In Panama, Law Decree No. 3 of 2008, which creates the National Immigration Service, and Executive Decree No. 320, which establishes the requirements and procedures applicable to obtaining temporary and permanent residency, are the core provisions regarding immigration.
As a general rule, foreigners enter as tourists for a period of 3 to 6 months, allowing them to do tourism, business or investment activities within the country. However, nationals from certain countries including China, India, and many other Asian and African countries, must request an entry visa which, when granted, is stamped at a Panamanian Consulate before traveling, and is valid for 1 month as a general rule. This entry visa applies unless the person has a valid multiple entry visa from the U.S., Canada, U.K. or Australia, and has used it at least once to enter the territory that issued said visa, in which case the person can enter Panama without a prior authorization.
During the above periods, the foreign national that wishes to apply for a residence permit must choose from a wide spectrum of options that were created to promote investment and to establish the rules to fill the need of skilled and non-skilled personnel. For purposes of this article, we will refer to the main available modalities.
Options related to the applicant’s nationality
- Residence Permit for Nationals from Countries with Professional and Economic Ties with the Republic of Panama
Foreign nationals from a list of approximately 50 countries, including the United States of America, France, Canada and Spain, can apply for a permanent residence permit in Panama if they prove to have a professional, economic or investment relationship in the country. This residence permit, also known as a Friendly Nations permit, can be obtained by setting up a Panamanian corporation or by being hired to work as an employee of a company duly established in Panama. The applicant must prove the existence of either an economic or professional activity, as well as economic solvency (the latter by means of filing a bank certificate from a local bank showing a balance of at least 4 average figures).
Once the permanent residency is granted, it is possible to apply for an indefinite term work permit that will allow the person to legally work in Panama. The challenge with this option is that if the foreigner applies for this category for work purposes, he or she must first obtain the permanent residency, and then file the work permit application. Therefore, there is a black out period in which the foreigner is not allowed to work. Anticipated coordination of this category is required to minimize risks.
- Residence Permit for Nationals from Italy
The Treaty of Friendship, Commerce and Navigation between the Republic of Panama and the Italian Republic, provides that the citizens of each of the contracting parties enjoy national treatment in the territory of the other, to carry out economic or professional activities. The main requirement is to prove the Italian nationality, as well as economic solvency (as described above).
Once the permanent residency is granted, if the foreigner intends to work, it is possible to apply for an indefinite term work permit that will allow the person to legally work in Panama. Note that Italian nationals will be exposed to the same black out period mentioned above regarding the Friendly Nation’s option.
Options based on the Company’s Quotas
- Ten or Fifteen Percent Quota
The Panamanian Labor Code sets forth the general rules applicable to hiring foreign personnel. The code provides that 90 percent of employees must be Panamanian citizens, or foreign nationals married to a Panamanian, or foreign nationals that have resided in Panama for 10 or more years. The 10% quota is a result of this rule, and applies to both the headcount and salaries of the workforce. Additionally, the Labor Code provides that companies can hire skilled staff, managerial or technical positions not exceeding a 15% limit of the total salaries and headcount.
Consequently, foreigners hired to work for a company registered in Panama, can obtain residence permits within a 10% limit for positions that are not skilled, managerial or technical, and a 15% limited for skilled, managerial or technical positions. These options grant provisional residency for two years and allows to subsequently apply for permanent residency in the country, provided that the foreigner receives a minimum wage of at least US$850.00 monthly.
In this case, once the provisional residency is filed before the National Immigration Service, it is possible to apply for a temporary work permit valid for 1 year, renewable for equal terms which, once approved, allows the person to legally work in Panama.
The challenge with this option is that the high number of foreigners in Panamanian payrolls makes it difficult to comply with the quotas. Additionally, labor policies determining how other immigration categories and work permits count in payroll have had constant changes impacting the filing and approval of these work permits.
- Multinational Headquarters
The multinational headquarters special regime established by means of Law 41 of 2007, applies to regional or headquarters offices of companies which carry out operations or services from Panama to their main offices or subsidiaries in other countries. These companies must be granted with a Multinational Headquarters’ License or “SEM” License (for its acronym in Spanish). The main advantage of this option, in regard to the hiring of foreign managerial personnel, is that these companies are not subject to the quotas established in the Labor Code, therefore making possible to hire an unlimited number of foreign workforce.
Foreign employees working for a SEM company can apply for a residence permit for Permanent Personnel valid for 5 years, renewable for equal terms. With this residence permit, there is no need to request a work permit before the Ministry of Labor, since Law 41 provides that holders of this residence permit do not require further authorization to legally work in Panama. This category also has the advantage that there is no income tax in the foreign employee’s salary in Panama, when receiving the salary from a foreign source.
Options based on the applicants’ investment
Panama’s immigration law provides the option to obtain permanent residency when investing in the country a minimum of US$300,000.00. There are 3 options to meet this requirement: (i) a deposit in a bank account maintained at least 3 years in a Panamanian bank, on the name of the applicant; (ii) investing in a US$300,000.00 (or more) real estate property located in Panama, free of liens. The real estate property can either be in the personal name of the applicant, in the name of a Panamanian Private Interest Foundation or a corporation (as long as the main applicant is both the Founder and main Beneficiary in the foundation’s case and that the shares are on the applicant’s name in the corporation’s case); and (iii) a combination of real estate property and deposits on a deposit bank account, for an aggregate of US$300,000.00 or more.
In this case, the provisional residency is granted for two years, and allows to later apply for permanent residency in the country.
The National Immigration Service and the Ministry of Labor have been tightening their policies due to the considerable influx of foreigners, in order to verify and control that foreigners stay legally in the country and that companies comply with applicable regulations.
The Government of Panama recently announced certain measures to reduce the stay as tourists for nationals of certain Latin American countries, in order to force a prompt legalization of those that decide to have a residency in the country. In this regard, the government established that nationals from Venezuela, Colombia, and Nicaragua, previously granted with a 6-month period stay as tourists, are now allowed a 3-month period only.
Moreover, Law 59 of September 12th, 2017 increases fines and sanctions to companies that hire foreign employees without a valid work authorization issued by said Ministry. Fines, that are were established in US$50.00 to US$500.00, have increased significantly due to this law, which includes (i) a US$500.00 sanction per foreign employee without a valid work permit, the first time is inspected by the authorities; (ii) a US$1,000.00 fine for each foreign employee without a work permit, the second time is inspected; (iii) a US$10,000.00 fine without considering the number of foreign employees plus the suspension of the company’s commercial license, the third time is inspected; and (iv) the cancellation of the commercial license for the fourth time.
Furthermore, said law provides that fines to companies having 10 or more foreign employees without a valid work permit, will be doubled. The names of the sanctioned companies will be listed in the Ministry of Labor’s website.
Panama’s immigration and work permit laws and policies provide a wide range of options to immigrate and work in the country. The large number of foreigners that have arrived within the last years has resulted in stricter policies and regulations. However, certain options still remain flexible. By understanding and keeping up to date with the modifications in regulations and policies, foreigners and companies can duly coordinate an anticipate applicable options and requirements, therefore reducing labor and immigration risks.
Alvaro E. Tomas and Carlos Ernesto Gonzalez Ramirez, partners, Morgan & Morgan
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 4 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 6% percent of the entire world’s trade goes thru 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 the political and social stability of a democratic country.
The person 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.”
For 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:
- 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.
- Logistics and/or warehousing of components or parts required for the manufacturing or assembling of any products manufactured by the company.
- 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.
- Financial management, including treasury services, of an economic or corporate group.
- Accounting for an economic or corporate group.
- Drawing plans as part of designs and/or construction works, in the normal course of business of the headquarters or any subsidiaries thereof.
- Electronic processing of any activity, including the consolidation of operations of an economic or corporate group. This service includes network operations.
- Consulting, coordinating and monitoring marketing and advertising strategies for goods or services produced by an economic or corporate group.
- Support of operations and research and development of products and services of an economic or corporate group.
- Any other analogous service previously approved by Cabinet.
The MHQ group capital must be equal or more than US$200 million.
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.
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.
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 live in Panama.
By: Amanda Barraza de Wong, Associate, Tax Law
With Panama being a jurisdiction whose tax system is based on the Principle of Territoriality, and whose economy revolves around financial, legal and logistic services… what policy should it have with regards to foreign capital? Certainly a policy for attracting direct foreign investment. Capital that provides financing for development itself. And that capital does not arrive alone; it is accompanied by natural or legal persons, which motivates the analysis of whether to consider them tax residents or not.
In Panama, we have specific criteria to determine after a study of each particular case, whether a natural or legal person can be considered a tax resident under the provisions of both the Tax Code and the Treaties to Avoid Double Taxation in force.
Tax residence certificate
The residential tax certificate is the document that accredits a person, being a natural or legal person, his/her tax residence in our country and it is only issued by the General Directorate of Revenues (DGI) based on article 762-N of the Tax Code, Executive Decree 958 of 2013 and regulatory resolutions.
The basic requirements established by the DGI for the issuance of the Tax Residence Certificate in the Republic of Panama are the following, in addition to the criteria that underlie the analysis:
- Petition addressed to the DGI containing:
- Clear and express identification of the applicant.
- Specification of the tax treaty or agreement to which it wishes to be allocated, when applicable.
- Original Public Registry Certificate, in the case of legal persons.
- Copy of identity card or passport of the applicant or the Legal Representative.
- Power of attorney, in case of legal persons.
- Other relevant evidence.
Since the fiscal year 2010, there have been several regulations issued on this concept; it is a topic that has been developed particularly over time and we believe that it will continue to evolve.
By Enrique de Alba Arango, Partner of Morgan & Morgan Law Firm
On June 27 of the present year, a historic event for the Canal and the International Merchant Marine Registry of the Republic of Panama occurs.
One day after the new locks of the Panama Canal were inaugurated with the transit of the container vessel “Cosco Shipping Panama, the first vessel registered under the Panamanian flag transits, which coincides with being the first transit of a liquid petroleum gas vessel named “Lycaste Peace” in its commercial traffic from Houston, Texas to the Port of Hitachi, Japan, owned by the Japanese shipping Line Nippon Yusen Kaisha (NYK Line) and represented in Japan by Mitsubishi Logistics Corporation. The Resident Agent of this first transit of the vessel registered in Panama is Morgan & Morgan Law Firm.
Since the inauguration of the Expanded Panama Canal, the vessel that has paid the highest toll so far and also set a new record due to the Expanded Canal was the vessel “Mol Beyond” which paid the sum of $837,203.00.
Several precedents are well marked on the Panama Canal and its International Merchant Marine Registry, whose origin is given with the enactment of Law 63 of December 15, 1917 which amends and supplements the Fiscal Code, giving the power to grant the national flag to a vessel that so requests it and which will celebrate its 100th anniversary next year 2017. It is understood according to records that the first vessel registered under the national flag was the carrier Belén Quezada.
By Law 8 of January 12, 1925, procedures for the nationalization of merchant vessels are created and this law formally establishes the Merchant Marine Registry of the Republic of Panama.
Nowadays, the Maritime Registry of Panama is proud and honored to be the world’s largest register with approximately 8,831 registered vessels to June 14 of this year representing 235,295,719.26 gross tons. The registration of vessel and other activities under the umbrella of the Panama Maritime Authority, as of December 2015 contributed to the treasury the sum of $162,089,501.00.
Among the legal instruments that have brought success to the merchant marine of the Republic of Panama, we can mention in addition to those already mentioned:
- Law 2 of January 17, 1980, which creates the Directorate General of Consular and Maritime Affairs.
- Law 14 of May 27, 1980, whereby the preliminary registration of ownership titles and mortgages through proprietary merchant marine consulates and directly with the Public Registry of the Republic of Panama is regulated.
- Decree-Law 7 of February 10, 1998 creating the Panama Maritime Authority, grouping into a single entity all activities related to the maritime sector.
Subsequently, from 2008 it was decided to update all our legislation related to the maritime activity and four new legal instruments are enacted:
- Law 57 of August 8, 2008, whereby the Directorate General of Merchant Marine is created (grouping into a single law, everything related to this activity);
- Law 55 of August 8, 2008, which replace the Book II of the Commercial Code of the Republic of Panama to create the Maritime Trade Act, as amended by Law No.27 of 28 October 2014;
- Law 12 of January 23, 2009 amending Law 8 of March 30, 1982 and Law 11 of May 23, 1986, which in turn was amended by Law 58 of October 6, 2010 and Law 16 of March 21, 2013, whereby standard maritime procedures are enacted,
- And Law 56 of August 6, 2008, whereby the General Ports Act and its regulations is created.
I mention these legal instruments, because without them, the development of our merchant marine, international forum of maritime litigation and port activity would had been set aside by the competition provided by countries that develop these same type of activities associated with the maritime industry.
The momentum that our lawyers have given to the development of maritime activity in the Republic of Panama to the challenges of trade, should never stop because the success of Panama in this important industry is due to the constant renewal of its legal instruments, seeking new and better ways for the development of the maritime sector.
The foregoing leads us to mention an important bill that is planned to be submitted to the National Assembly this month of July on maritime financing. This bill creates a special legal regime for financing operations of the local and international maritime industry, where tax, labor and immigration incentives are granted to companies that carry out these operations from Panama.
The entities that could benefit from these incentives are the general license, international or representative banks duly authorized by the Superintendence of Banks, companies carrying out operations to design, structure and develop the financial conditions of maritime credit and its guarantees, regulated financial companies and maritime financing entities and joint ventures (Joint Venture) of the Panamanian State with individuals.
Among the tax incentives will be the exemption from paying income tax from such funding for the construction and purchase of vessels. In order to benefit from this tax incentive, these entities must establish a separate accounting which states the recording of the date of execution of each loan.
Those companies whose maritime financing operations are carried out in the Republic of Panama or shipyards engaged in the construction and repair of commercial vessels, yachts and others will not cause the payment of income tax.
There are also exempted from paying income tax, interest and fees earned by banks for maritime financing activities that are duly accredited for such activities, as well as income from insurance and reinsurance that secure credits from certified maritime financing institutions and/or Bankable Maritime Projects.
The bill in question establishes a low import tax on machinery and equipment needed for the development of the maritime industry, no greater than 3%.
As for immigration and special labor regime, it is aimed to create the necessary conditions to help develop the relevant maritime activities with the maximum efficiency required by a maritime center of this nature.
A Certifier and Supervisory Board of Maritime Financing Entities is created, which would consist of the following members:
- A member appointed by the Panama Maritime Authority.
- A member appointed by the Ministry of Economy and Finance.
- A member appointed by the Ministry of Commerce and Industry.
- A member appointed by the Ministry of Labor and Workforce Development.
- A member appointed by the National Immigration Service.
- A member appointed by the Council of Financial Regulations.
- A member appointed by the Panama Canal Authority.
Before I conclude and the reason for this article is partly to draw attention to a provision that has been introduced at the last minute to the maritime financing bill mentioned herein, where it is imposed a term of 20 years to the tax exemptions, incentives and other benefits that this new project aims to create in the Republic of Panama.
It is advisable to study this condition or term carefully, because such a sophisticated and specialized activity as the maritime financing activity, should not be set a peremptory period, given than this period would undermine completely the intention to create a new activity that could pay off to the economy of the Republic of Panama, which in other international financial centers produce optimal results.
Let us hope that all the good spirit that every Panamanian has had in recent days with the opening of the newly expanded locks of the Panama Canal and its role as a facilitator of international maritime trade, help to understand how important it is to maintain our competitiveness in this important industry.
It is a true and lawful translation into English of the original document written in Spanish – Michelle Williams – Authorized Public Translator – Resolution No. 5775 of November 12, 2014 – Republic of Panama.
By Giselle Moncada, Associate, Morgan & Morgan, Chiriquí office
The possibility of buying real estate rests normally on the capacity of an individual or company to acquire debt, reason why credit entities play an essential role in the success of the real estate market. Lately, we have noticed that in addition to the traditional loan guaranteed by a mortgage, there is an offer for loans guaranteed by a security trust.
The vehicle becomes more common every day thus making it essential for consumers to understand it because although it’s been used for such purpose for decades, it’s becoming more popular nowadays to guarantee bank loans.
In Panama, the trust is governed by Law 1 of January 5, 1984, “Whereby matters concerning trusts are regulated in Panama and other provisions are adopted”. This legal figure allows for several uses in the real estate sector as well. Notwithstanding the foregoing, we will focus on the security trust used to finance the purchase of real estate.
Doctrine states that “in a trust with these characteristics, the debtor (trustor) delivers part of its patrimony to a trustee to be kept by the latter, appointing the creditor as beneficiary of the guarantee agreed thereby and to proceed, in case of default, as mandated, to encumber the trust fund. Upon payment of the credit as established in the contract clauses, the trustee shall return the trust fund to the debtor (trustor)”.
The person asking for a loan to purchase property will deliver this to a trustee who will keep it encumbered at the Public Registry until the debtor settles the loan in full. The trust names the creditor as beneficiary since if the debtor defaults the loan, the trustee proceeds to transfer the property to the creditor expeditiously in accordance with the procedures set forth in the trust. However, if the debtor fulfills the obligations under the loan, the trustee returns the property to the debtor evidencing this at the Public Registry. For all purposes, the debtor holds the same rights and obligations of the property owner except for the restrictions established in the trust.
In the event the debtor defaults the loan making its collection impossible, the security trust seems to represent a swift manner to execute the real estate guarantee and more effective the process of converting a bad asset into a good one. This is one of the advantages for credit entities and indirectly, also for consumers seeking more comfortable interest rates since, in theory, a bad or illiquid credit portfolio could affect the structuring of interest and expenses in the granting of loans.
Another advantage is the possibility of designating a substitute beneficiary in case the beneficiary (debtor) dies. Another scenario in case of the debtor’s death is a formal probate process to adjudicate the property.
Such is the usefulness of this figure that on March 18, 2015 Bill 189 was presented to the Assembly of Legislators, which is waiting its first debate at the Commercial and Economic Matters Commission, proposing an amendment to the current trust law. Without going into details, the improvements to be introduced by the Bill include more detail in the requirements that the trust agreement ought to contain, clarification on the exemption to pay the sales tax for the transfer of real estate placed upon trust or in case of return to the trustor or blood relatives up to the fourth degree or second of affinity (although in practice, this tax is not paid upon transfer of the guarantee to the trust or return to the trustor). Among other things, the goal is for this figure to receive the same tax treatment and benefit as mortgages provided that the trustee holds a license issued by the Superintendence of Banks of the Republic of Panama.
Despite its great acceptance among consumers, greater disclosure is needed about this legal figure and its use in financing the purchase of real estate.
 PAPA, Rodolfo G., Trusts for lawyers and accountants, 2014, pg. 300, quotes CAMPI, German, “The Security Trust. Superposition of trustee-beneficiary roles”. Published in the financial supplement for lawyers of Universidad del Cema (Ucema), included in newspaper La Ley of 18/12/2009.
Por Giselle Moncada, Asociada, Morgan & Morgan, oficina de Chiriquí
La posibilidad real de comprar un inmueble depende generalmente de la capacidad de endeudamiento de una persona o empresa, motivo por el cual las entidades crediticias juegan un papel esencial en el desarrollo exitoso del sector inmobiliario. En los últimos tiempos, nos hemos podido percatar que adicional al tradicional préstamo con garantía hipotecaria se nos ofrece un préstamo pero con garantía fiduciaria.
Cada día la figura es más usada en la plaza, por eso se hace indispensable que los consumidores comprendamos la misma, que aun cuando ya se ha usado con ese propósito desde hace décadas, hoy día se ha popularizado para garantizar préstamos bancarios.
En Panamá el fideicomiso se rige por la Ley 1 de 5 de enero de 1984 “Por la cual se regula el Fideicomiso en Panamá y se adoptan otras Disposiciones”. Esta figura jurídica tiene varios usos y también en el sector inmobiliario. No obstante lo anterior, nos vamos a enfocar en el fideicomiso de garantía utilizado en el financiamiento de compra de bienes inmuebles.
La doctrina ha señalado que “en un fideicomiso con estas características, el deudor (fiduciante) entrega parte de su patrimonio a un fiduciario para ser conservado por este, designando beneficiario al acreedor del crédito que por dicho contrato se garantiza, para que, en el caso de incumplimiento, proceda de acuerdo a la manda, enajenando el patrimonio fideicomitido. Cumplido el pago del crédito, conforme lo establecido por las previsiones contractuales, el fiduciario devolverá el patrimonio fideicomitido al deudor (fideicomisario).”
Quien pide el préstamo para comprar una propiedad entregará ésta a un fiduciario que lo conservará gravado en el Registro Público hasta que este deudor cancele todo el préstamo. En el fideicomiso se designa como beneficiario al acreedor del crédito ya que si el deudor incumple con el préstamo, el fiduciario procede a transferir el inmueble al acreedor en forma expedita, conforme a los procedimientos establecidos en el fideicomiso. Pero si el deudor cancela las obligaciones del préstamo, el fiduciario devolverá al deudor el inmueble haciéndolo constar en el Registro Público. El deudor para todos los efectos conserva los mismos derechos y obligaciones de un propietario de bien inmueble; salvo las restricciones que se establezcan en el fideicomiso.
En el evento que el deudor de un préstamo lo incumpla y se haga imposible su recobro, el fideicomiso de garantía parece representar una forma más expedita de ejecutar la garantía inmobiliaria y hacer más eficiente el proceso de reconvertir el activo malo en bueno. Esto es una de las ventajas para las entidades crediticias e indirectamente lo es también para los consumidores que aspiramos a tasas de interés cómodas; pues en teoría, una cartera de créditos malos o ilíquidos podría incidir en la estructuración de los intereses y gastos para el otorgamiento de préstamos.
Otra ventaja de la figura es la posibilidad de designación del beneficiario sustituto en el evento de que fallezca el beneficiario (deudor). En otro escenario ante la muerte del deudor tendría que abrirse un formal proceso de sucesión para adjudicar el bien inmueble.
Tal es la utilidad que la figura está adquiriendo en la plaza, que el 18 de marzo de 2015 fue prohijado el Anteproyecto de Ley 189 en la Asamblea de Diputados y está pendiente de discusión en primer debate por la Comisión de Comercio y Asuntos Económicos, que propone una modificación a la ley vigente de fideicomiso. Sin el ánimo de describir en detalle las modificaciones, por las mejoras que el Anteproyecto podría sufrir, éste establece con más detalle los requisitos que debe contener el contrato de fideicomiso, aclara una laguna sobre la exención de pagar el impuesto de transferencia de bien inmueble por la transferencia de los bienes inmuebles transferidos al fideicomiso de garantía bancario, o en el caso que retorne al fideicomitente o a sus parientes dentro del cuarto grado de consanguinidad o segundo de afinidad (aunque en la práctica no se paga este impuesto al transferir la garantía al fideicomiso o retornar ésta al fideicomitente). Entre otras cosas, se busca dar a la figura el mismo tratamiento y beneficio fiscal que tienen las hipotecas siempre que el fiduciario tenga licencia expedida por la Superintendencia de Bancos de la República de Panamá.
A pesar de que el producto tiene mucha aceptación entre los consumidores, se le debe dar mayor divulgación a la explicación de la figura jurídica y su uso en los financiamientos para compra de propiedades.
PAPA, Rodolfo G., Fideicomiso para abogados y contadores, 2014, página 300, cita a CAMPI, Germán, El fideicomiso de garantía. La superposición de los roles fiduciario-beneficiario”. Publicado en el Suplemento de Finanzas para Abogados de la Universidad del Cema (Ucema), incluido en el diario La Ley, de fecha 18/12/2009.