TAXATION MATTERS

In the Republic of Panama, the income tax imposed over the net obtained from the operations carried out within the territory of the Republic of Panama. The rents obtained from the operations carried out abroad are not rents obtained from sources in the Republic of Panama; therefore, they are not subject to taxation under Panamanian tax law.
Even if the corporation has an office, personnel and a license to carry out business operations in the Republic of Panama, it will not be subjected to income tax payments, provided the transactions from which the monies derive took place outside the Republic of Panama.

The dividends distributed from rents outside the Republic of Panama are not taxable. Additionally, Panamanian law provides that a Panamanian corporation whose only sources of income, dividends or participation are received from another corporation, Panamanians or foreign sources, are not subject to income tax or dividend payments in the Republic of Panama. Only the dividends distributed from incomes that are generated from a Panamanian source, at a rate of ten percent (10%), whether they are received from corporations or individuals resident or non-resident, are subject to tax impositions.

It is also possible for a Panamanian corporation which has only received incomes from abroad, to distribute the totality or part of their goods, when dissolving, merging, or selling those from its shareholders without being subject to any tax imposition over the capital earnings. In relation to the individuals who receive salaries or any other type of compensation from a Panamanian corporation, we must make clear that they are subject to income tax payments only if they are considered permanent residents of the Republic of Panama. Corporations whose only income is from a foreign source are not obliged to publish any type of financial statements or to register any type of income tax declaration.

OTHER CONSIDERATIONS

• The directors and officers of the corporation do not need to be shareholders.
• Meetings of the shareholders and directors can be conducted wherever it may be most convenient, be it in the Republic of Panama or abroad, and without any prior notice if all the shareholders or directors, respectively, are present. It is necessary for meetings to be conducted regularly.
• The minutes of shareholders’ and directors’ meetings must be recorded by the Secretary of the corporation in a registry book, called the Minute Registry, and must be signed by the persons who act as President and Secretary, respectively, of the meeting.
• The registry of transactions consummated outside the Republic of Panama need not necessarily be kept in Panama.
• The capital shares of the Panamanian corporation can be issued in a nominative manner or to the bearer or without preference, in various types, with or without their right to vote, and must be registered in the Share Registry Book, kept only by the corporation.
• The State does not keep any type of shareholder registration.
• There are no requirements or provisions as to whichever portion of the authorized capital must be subscribed or paid by the corporation.
• The duration of the corporation is usually indefinite; however, a corporation may have a predetermined duration and can be dissolved at any time.
• There are no controls with regard to trade or restrictions with the legal currency in Panama; the US dollar circulates freely.
• There is legal protection based on the Confidentiality Principle, which provides secrecy in matters of bank accounts and bank transactions.
• There is no income tax payable on interest earned from bank deposits.

GENERAL CONSIDERATIONS AND REQUIREMENTS FOR SETTING UP AN INTERNATIONAL BUSINESS COMPANY IN THE BRITISH VIRGIN ISLANDS

The British Virgin Islands are located in the Caribbean and they are comprised of thirty-six islands and islets. These islands and islets constitute a colony of the British Crown, where corporate law based on the British legal system exists and has had an excellent reputation for political stability. The islands are autonomous and are governed by a Governor who presides over the Executive Council. A judicial system, under the direction of the Supreme Court of Oriental Caribbean Countries, is subject to final appeal through the Council of Governors in London, England.

The International Business Company Law (IBC), created in 1984 to be a special kind of Corporation to take care of business offshore, is authorized to conduct any legal activity without the need for complicated or extensive objectives clauses.

To constitute a British Virgin Islands (BVI) corporation we require the following information:

1. Corporation name. It is necessary for you to provide us with three (3) possible names. The words Limited, Corporation or Incorporated, Anonymous Corporation or Societé Anonymous, or their abbreviations, must be a part of the name. The use of the words Assurance, Bank, Building, Society, Chamber of Commerce, Chartered, Cooperative, Imperial, Insurance, Municipal and Royal are prohibited to International Business Companies (IBCs). Despite this, however, special concessions may be granted to an IBC to allow it to enter the banking business, subject of course to the issuance of a restricted license awarded under the British Virgin Islands Banking Law. Consequently, the utilization of the word Bank is allowed in these cases.
2. The authorized social capital, indicating the number of shares in which it will be divided and the amount of each share.
3. The number of shares that will be issued and the names and addresses of the shareholders (unless the shares are issued to the bearer).
4. The name and address of at least one Director and Secretary.

OTHER ASPECTS

The corporate package contains the Memorandum and Articles of Association, the Certificate of Constitution, a Subscriber´s Resolution naming the first directors and officers, the Corporation Seal, the Minutes of the first board meeting at which the corporate seal is adopted and the shares are authorized, five Share Certificates, and the Share Registry Book.

The corporations can keep their Seal, their Share Registry and Minutes Book in any given place. Despite this, however, the law requires that an impression of the Company Seal and a copy of the Share Registry be kept in the Registry Office.

There is no requirement for special formalities with regard to the Minutes Book or other registries. This issue is left to the consideration of the directors. Nevertheless, we recommend that an impression of the Seal be made on the interior of the corporation’s book.