Any legal person that intends to operate a money remittance house in Panama must request the corresponding authorization from the Panama Ministry of Commerce and Industries, through the Directorate of Financial Companies.
The relevant law does not limit the operations of the company to brick and mortar style companies – any such business can be an online, digital company owned/run/staffed from anywhere in the world. That said the company must have a physical address in Panama and will be subject to inspections from the Panama Directorate of Financial Companies and from the Panama AML regulator.
The application will be presented through a local Lawyer and must contain the following information:
- Name or business name of the applicant.
- Type of company in question
- Date of its registration in the Public Registry, with indications of the respective registration details
- Name of its directors, officers and legal representative
- Legal domicile of the applicant in the Republic of Panama
- Commercial name of the company
- Exact physical address of the commercial establishment and telephone numbers in the Republic of Panama
- An indication of the capital with which the business will operate.
The application must be accompanied by the following documents:
- A copy of the public deed of protocolization of the articles of incorporation and the amendments, if any, duly registered in the Public Registry
- A certificate from the Public Registry issued within the thirty days prior to the date of submission of the application, stating the validity and registration data of the company, its share capital and the name of its directors, officers, and legal representative
- Certification issued by an authorized public accountant stating that the minimum initial paid-in capital stock is fifty thousand dollars (US$50,000.00). (The corresponding shares must be fully subscribed, paid and released. This means the share capital must be paid in full).
- A check or money order issued in favor of the Ministry of Commerce and Industries as an issuance fee for the sum of one thousand dollars (US$1000.00).
- Authenticated photocopy of the personal identity card/passports of the Applicant’s directors, officers, and Legal representative.
- Description of the objectives and economic and financial projections of the company.
Please also note that Natural persons, legal persons and representatives of legal persons authorized to develop the business of a money remittance house must be domiciled in the Republic of Panama. This entails that the management of the company is in Panama. Nominees are not recommended as these would not pass the review of the authorities due to lack of expertise and knowledge of the business.
In addition, the applicants that wish to operate a money remittance house must establish and maintain in favor of the National Treasury a guarantee of fifty thousand dollars (US$.50,000.00), to respond for the amount of losses resulting from negligent or intentional action with the funds they manage, and, before the Government, for the sanctions imposed on them in accordance with the Laws of Panama.
Compliance and AML
All operations or transactions carried out by money remittance houses will be recorded in writing on the corresponding forms, which will contain, at least, the place and date of the transaction along with details of the transaction including:
- Name of sender and beneficiary
- Class and number of the sender’s identification document
- Principal amount of the transaction carried out
- Fee charged
- Place of origin and destination of the transaction
- Operation control number
- Currency in which the remittance will be paid and the exchange rate agreed upon at the time of the transaction.
Within the four months following the closing of their corresponding fiscal year, money remittance houses must submit their financial statements, duly audited by an authorized public accountant, to the Directorate of Financial Companies of the Ministry of Commerce and Industries.
Every year the Financial Companies Directorate of the Ministry of Commerce and Industries must carry out, at least, one audit in each money remittance house, to determine its financial situation and whether in the course of its operations it has complied with the provisions of the governing Law and the existing laws on the prevention of money laundering.
In order to prevent the operations of the Money Remittance Houses from being used to commit the crime of money laundering and the financing of terrorism, said companies have the obligation to identify their clients according to the following details:
- Full name of the natural or legal person, personal identity card, passport, and RUC (Unique Taxpayer Registry)
- Residential and commercial location. Home and office phone numbers, PO box and email
- Delivery of declaration reports to the Financial Companies Directorate, for the Financial Analysis Unit (UAF).
The Money Remittance Houses must apply the proper communication and internal control procedure to prevent money laundering and terrorist financing, taking into consideration the following aspects:
- The instituted obligation to combat money laundering and terrorist financing
- The adoption of a Manual of Procedure and Internal Control aimed at the prevention of money laundering and the financing of terrorism
- The operational structure to enforce regulations that are required against money laundering and terrorist financing
- Appoint a person to work in the company to coordinate and execute compliance activities with a sense of responsibility.
- The risk of money laundering and terrorist financing. The MRO must promote a continuous training program to prevent money laundering, which should consist of conferences, talks and seminars, as well as the distribution of literature on the subject.
- The MRO must make the managers and staff of remittance houses and companies that are part of the economic group aware of the policies, standards and procedures for the prevention of money laundering and terrorist financing.
Taxation
As the company will be required to have a physical presence in Panama and will further require the attainment of the Aviso de Operation or Operations Notice, the company will be subject to Central Government Tax and the Taxes levied by the Municipality where the business locates or sets its office.
Generally, the applicable taxes to this operation would be:
- 25% Income Tax on the net income;
- Estimated income tax (advance payment of income tax for the following year, assessed on the income tax paid for the previous year). This is payable in three installments: April, August and December;
- Complementary tax, applicable when the company does not distribute dividends or when the amount distributed is under 40% of the gains or profits obtained;
- Dividend tax is 10% which is withheld to the shareholders by the company;
- Municipal taxes (differ from Municipality to Municipality and its generally assessed on the type of business)
- 12.5% of Social Security contribution as employer;
- 7% tax on goods and services (VAT) that must be charged on fees charged by the company to its clients.
Notwithstanding the above, if the company is considered as a Micro, Small or Medium enterprise, it can apply for a tax benefit. Registration with the Authority of the Micro, Small or Medium Enterprise will provide the company with exemption of Income Tax during its first two (2) years of operations;
In addition, by means of Law 189 of 2020, provides for a special tax regime for Micro, Small or Medium businesses, always that:
- The income of the company does not exceed US$500,000.00
- Legal persons that are duly registered in the Business Registry of Authority of the Micro, Small or Medium Enterprise.
- Legal persons that do not result, directly or indirectly, from the division of a company into several legal persons, or that are not affiliated, subsidiary or controlled by other legal persons.
- Legal persons whose shares or participation quotas are nominative and whose shareholders or partners are natural persons.
The applicable tax rates in this case would be:
Income Tax on net income
Up to US$11,000.00 0%
US$11,000.01 to US$36,000.00 7.5%
US$36,000.01 to US$.90,000.00 10%
US$90,000.01 to US$150,000.00 12.5%
US$150,000.01 to US$350,000.00 17 .5%
US$350,000.01 to US$500,000.00 22.5%
Further tax relief might be obtained by deployment of legitimate Tax Planning Strategies. For example commonly businesses of this type will have a Service Company or IP Company (incorporated in a nil tax jurisdiction) that will invoice the MRO Licensed Company for services or License fees as applicable thus (potentially substantially) reducing the amount of profit that would otherwise be liable for taxation in Panama.
What OCI can do for you?
OCI CEO Patrick J. Flynn, Attorney at Law for 12 years+ has been an Associate Lawyer with a Panamanian Law Firm with over 15 years in business in the Republic of Panama, providing bespoke legal services in Corporate, Real Estate, Business, Intellectual Property, Immigration, Asset Protection and Estate Planning. The firm has grown rapidly to one of the most successful practices of its size and now has offices in Guatemala, Belize and Madrid, Spain in addition to a network of affiliates and correspondent offices all over Latin America, the US, Canada and Europe.
Moreover OCI can provide company formation services in more than 20 jurisdictions worldwide, as well as establishing bank accounts, obtaining second citizenships and residences in various countries.
In essence, we are your one stop shop for all your legal, accounting and digital marketing needs in the Republic of Panama.
Financials
Below we outline the fees and estimated costs to set up the whole structure of your Panama MRO business:
- Legal fees: US$9,0000 (includes VAT) for the formation of the company, registration of the company before the tax authorities, notice of operation, registration with the municipality and attainment of the MRO license;
- Estimated expenses $2,500(includes all the notarial and registration expenses of the company, costs of the notice of operation and estimated expenses for the attainment of the registration at the local Municipality, estimated expenses for the registration at the tax authority, estimated expenses for the attainment of the MRO license).
- The US$50,000.00 is not included in this proposal as the client must process this bond with a local Insurance Company.
Please note that this proposal does not include setting up an office, however, we have good connections with real estate agents in Panama who will be able to help with locating a suitable office space for your business.
Would you like to know more? Then please Contact Us:
info@offshorecompaniesinternational.com
DISCLAIMER: OCI is a Company/Trust/LLC/LP/Foundation Formation Agency. We are not tax advisers or legal advisers. You are advised to seek local legal/tax/financial advice in regards to your local reporting/tax requirements before committing to set up or use an Offshore Company or other entity.
