The Republic of Panama has often been referred to as the “Grandmother of All Tax Havens.” Panama, in contrast to modern offshore areas, has a territorial tax system remains true to its roots in the fiscal code of 1916. The long-established concept of ‘tax territoriality’ means that only operations carried out within Panama are taxable.
Naturally, this makes it the perfect base for setting up an international e-commerce business. E-commerce takings from outside the country can be electronically banked in Panama in US dollars and remain completely tax free. Both Panamanian and international banks offer merchant account facilities for accepting credit cards online.
Panama uses the US dollar as its national currency, and funds may be freely transferred in and out of Panama. There have never been currency restrictions, and the banking industry in Panama has long flourished alongside the country’s development as an international trade hub.
For e-commerce businesses, Panama City, and surrounding areas such as the City of Knowledge at the old Clayton air base, boasts a highly sophisticated communications infrastructure. Combine this with a tax and business-friendly legal and fiscal regime, and the human resources necessary to establish an e-commerce business at half the cost of the United States or Europe. No wonder that large IT companies like Dell have already chosen to locate major operations in Panama.
Looking back, Panama has played a leading role in developing e-commerce in the Latin American region. This began in August 2001, when Panama became the first country in the region to adopt a new law specific to electronic commerce. Both the public and private sectors in Panama have contributed to the enactment of this new law, with the Panamanian government also leading the way on accepting digital filings and signatures.
The telecommunications and internet infrastructure in Panama is up there with the best in the world, with bandwidth now available that is competitive with what you would expect in major US cities. These state-of-the-art telecommunications facilities and services are made available to e-commerce businesses at very competitive rates.
In fact, five major fiber optic networks cross the isthmus of Panama, while the capital city benefits from several fiber optic metropolitan networks deployed as well as world class mission-critical data and hosting centers. Offshore hosting in Panama has become quite a business of its own in recent years, as companies from other countries seek to take advantage of this infrastructure.
In terms of human resources, Panama has a high literacy rate, a large supply of bilingual certified engineers, and excellent English language skills due to the American influence.
Another advantage of Panama, of course, is that it is very ‘liveable.’ It offers all the benefits of a first world city, a safe and secure environment, and a choice of beautiful beaches or pristine rainforests just a short drive out of the city. And with convenient direct air connections to cities all over North and South America and the Caribbean, if you need to travel for business or pleasure, getting in and out of Panama is quick, cheap and convenient.
Overall, Panama is a highly attractive base for offshore e-commerce. If you are thinking of setting up in this business, take a look at this country!
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To say that Panama is a business-friendly country is a gross misrepresentation to say the least. I’ve lived and set-up three business in Panama for the last 8 years and I can only say that Panama is a small business and intrepreneurs “Black Hole”. On paper it looks good but when you actually start a business here is another story..
It is not a coincidence that The World Bank and the International Finance Corporation in their annual report named “Doing Business 2010-Latin America” ranks Panama 13th in Latin America and 56th in the world.
In this day and age it is a misnomer to repeat the old image of Panama being a business and tax haven. Not in the post 911 era.