There are constitutional rules that promote private property and protect intellectual property, free enterprise, and the principle of non-discrimination. The Constitution provides that foreigners in Panamanian territory shall receive the same treatment as nationals.

There is no legal foreign investment statute in Panama, however, a foreign investment law is currently being studied.

PRO-PANAMA is the National Commission for the Promotion of Foreign Investments, and is authorized to coordinate investment promotion efforts.

Panama has never had a specific law on foreign direct investment. Its general juridical regime is applied on equal terms to nationals and foreigners, and equality is enshrined in the 1972 Political Constitution of Panama, reformed by the 1978 Reform Acts and the 1983 Constitutional Act.

Article 19: "There shall be no personal privileges nor discrimination based on race, birth, social class, sex, religion, or political ideas."

Article 20: "Panamanians and foreigners are equal under the law, but for reasons of work, health, morality, public security and national economy, the law may subject foreigners to special conditions or deny them the right to engage in specified activities. Based on the circumstances, the law or the authorities may also take measures affecting only nationals of specific countries in the event of war or in accordance with the provisions of international treaties."

Without prejudice to the above, International Conventions on Investment Protection contain definitions of foreign investment.

Foreign investment does not require prior authorization, except investments that resort to incentive regimes. Furthermore, the Foreign Exchange Law establishes that, to be able to operate in the country, every bank must have a license issued by the National Banking Commission, attached to the Ministry of Finance and Treasury.

Yes. Both natural and juridical persons.

Yes. Both nationals and foreigners.

Yes. Based on the principle of equality under the law.

No.

All foreigners may work in the country provided they satisfy the requirements established in Panamanian legislation. In any company, up to 10% of the total workforce may be foreigners and up to 15% in the case of technical or specialized personnel. Nevertheless, the percentage of foreign technical or specialized staff may be increased for a specific period with due authorization by the Ministry of Labor.

In Panama there is no control of foreign exchange or transfer of funds. Furthermore, there are no restrictions on or problems with the repatriation of capital. Capital may be transferred freely.

Panama has certain peculiar features: a) it does not have its own paper money; the US dollar is the medium of exchange. As a result there is no type of exchange restriction; b) nationals and foreigners are equal under the law and this principle is enshrined in the Political Constitution of Panama.

Article 19 of the Constitution of the Republic of Panama: "There shall be no personal privileges or discrimination based on race, birth, social class, sex, religion, or political ideas."

They compete on equal terms. Nevertheless, the State reserves the right to intervene when there is a threat to law, morals or good habits.

Foreign investors may invest in any sector of the economy pursuant to the provisions established in the laws governing the activity in which they propose to invest. There are very few activities limited to nationals, namely: acquisition of land at a distance of less than 10 km from the borders, retail trade, mail and telegraph services, fishing in Panamanian waters for products to be sold in the country, broadcasting and some provisions of the Banking Regime.

The sectors or economic activities reserved exclusively to the State are:

a) Goods existing in the country that belonged to Colombia.

b) The rights and assets owned by Colombia, within or without the country, by virtue of the sovereignty exercised by Colombia over the territory of the Isthmus of Panama.

c) Goods, income, farms, securities, rights and assets that belonged to the defunct Department of Panama.

d) Fallow lands.

e) Mineral wealth that may be developed by mixed or state corporations or may be granted as concessions or contracts for their development pursuant to the law. Mining rights granted and not exercised within the terms and conditions established by law, shall revert to the State.

f) Salt deposits, mines, subterranean and thermal waters, hydrocarbon deposits, quarries and deposits of all kinds, may not be privately appropriated, but may be exploited directly by the State, through state or mixed corporations, or may be granted as concessions or other contracts for exploitation by private companies.

g) Historical monuments, documents and other property relating to the national history.

h) Archeological locations and objects, pursuant to the law.

Also belonging to the State and not for public use, and therefore not subject to private ownership are:

a) The territorial sea and the waters of lakes and rivers; the banks and shores of the same and of navigable rivers, ports, and estuaries.

b) Lands and waters intended for public use and all types of communications.

c) Lands and waters destined or allocated by the State for public irrigation, hydroelectric power, drains and aqueducts.

d) The air space, the submarine continental shelf, the seabed and ocean floor of the territorial sea.

e) Property defined by law for public use.

In addition to the above, only the State may carry out activities related to games of chance and betting, and mail and telegraph services.

a) Acquisition of public or private property situated at least 10 km from the border.

b) Retail trade.

c) Broadcasting, ham radio, and radio announcers.

d) Fishing in Panamanian waters for products to be sold in the country.

Foreign investors may invest in any sector of the economy pursuant to the provisions established in the laws governing the activity in which they plan to invest. The Constitution grants equal treatment to both nationals and foreigners.

There are no performance requirements such as minimum percentage of exports or rules on local management.

Yes. The legal framework of privatization in Panama does not distinguish between the participation of local or foreign investors in privatization projects.

The most favored nation clause is used in international treaties signed by one country with another. In the case of Panama, as a rule, this clause is contemplated in the treaties that Panama has signed with Central American countries, Mexico, and Colombia, as well as in foreign investment treaties. In all these cases, exception clauses have been included particularly in trade agreements.

On entry into the World Trade Organization (WTO), Panama acquired the commitment to grant all WTO members most favored nation treatment.

This clause is part of Panama’s general policy.

Panama is a member of the World Intellectual Property Organization, the Geneva Convention, the Brussels Satellite Convention, and the Universal Copyright Convention.

Law No. 15 of August 8, 1994, approved the Copyright and Neighboring Rights Law and passed other provisions.

Expropriations are considered, however, they can only be carried out in case of public or social interest, by means of a special trial and prior the payment of a fair compensation.

Article 45 of the Constitution: "Private property entails duties for the owner in order to fulfill its social role. Because of public or social interest defined in the law, expropriation can take place by means of a special trial and compensation."

Article 47 of the Constitution: "In case of war, serious change in the public order, or compelling social interest, which demand immediate action, the Executive Power may mandate the expropriation or occupation of the private property. When the occupied property is feasible to be returned, the occupation will take place only during the period of time when the provoking circumstances are still present. The State is invariably responsible for all expropriations the Executive Power carries out, as well as for damages caused by the occupation. The State will pay when the expropriation or occupation has ceased.

In general, it is determined in accordance with the real investment value at the time of the risk or expropriation. It has not been established how it should be settled.

Yes, pursuant to the provisions of the Constitution and the law.

The Constitution of the Republic of Panama guarantees private property acquired by juridical or natural persons under the law and also provides that all authors, artists or inventors shall enjoy exclusive right to their work or invention for such period of time and in the manner established by law (Copyright and Neighboring Rights Law No.15 of August 8, 1994).

Patents, trademarks, and trade names are regulated by Articles 1987-2035 of the 1916 Administrative Code.

A new industrial property law is under discussion.

There are no restrictions, without prejudice to tariffs and taxes in conformity with the law.

Panama has no control on foreign exchange or transfer of funds. There are no restrictions on transfers of profits, dividends, interest and royalties. In addition, there are no limits on capital repatriation. Capital may be transferred freely.

There is no type of foreign exchange restriction in Panama.

Profits, benefits, dividends As of July 1, 1995, persons established in the Colon Free Zone must pay, on their taxable income from foreign operations, income tax at a flat rate of 15%. Income from local operations is taxed at 30%.

Juridical persons shall pay taxes on their net income taxable in fiscal year 1995 and subsequent years at the flat rate of 30% with the exception of those that are registered in the Official National Industry Register, and those that hold public contracts, in which case the terms of their contracts shall apply.

The payment of dividends to local or foreign shareholders is subject to a 10% tax on locally generated profits.

Reinvestment of profits From 1996, profits from the transfer of real estate that are reinvested in new construction are exempt from income tax, provided the cost of such construction is at least four times the profits in question and the reinvestment is made directly in housing.

Remittances abroad In Panama, a royalty tax of 15% is payable on remittances abroad. Similarly, interest paid abroad is subject to a withholding tax of 6% on the remittance.

Interest on foreign loans 6%.

Services contracted abroad 15%

Value added tax Up to 5%, except food, pharmaceutical products and fuel, which are exempt.

No

Panama only taxes income derived from sources within the Republic of Panama, regardless of where such income is received. Income received from abroad is not liable to income tax in Panama.

There is an Agreement with the United States related to ships and airplanes.

Nevertheless, there are investment incentives that are equally available to nationals and foreigners. These laws are: Law No. 1 of March 20, 1986 (on employment and productivity); Law No. 2 of March 20, 1986 (incentives to agricultural output and exports); Law No. 9 of June 24, 1987 (exemptions to retirees, pensioners, persons retired from active life, and retired persons living off the income from investments); Law No. 9 of January 19, 1989 (incentives to micro and small business in the country); Law No. 3 of January 28, 1988 (exemptions to mining companies); Law No. 1 of January 14, 1991 (adopting measures in respect of property that reverted from the Canal Zone); Law No. 25 of November 30, 1992 (special integral simplified regime for the creation and operation of Export Processing Zones); Law No. 24 of November 27, 1992 (incentives to the reforestation industry); Law No. 8 of June 14, 1994 (promoting tourist activities); Law No. 15 of August 8, 1994 (approving Copyright and related rights); Law No. 5 of February 1995 (privatizing and restructuring the National Telecommunications Institute); Law No. 6 of February 9, 1995 (granting administrative concessions for electricity generation); Law No. 28 of June 20, 1995 (adopting measures to universalize tax incentives on production); Law No. 44 of August 12, 1995 (issuing rules to modernize and regularize labor relations)

The provisions of national legislation are applied in the settlement of disputes arising from the interpretation and application of foreign investment regulations. Contracts executed in Panama are subject to Panamanian law and the jurisdiction of Panamanian courts. These contracts must contain a provision that the foreigner renounces diplomatic claim, except in the case of denial of justice. In the case of investment guarantee agreements signed with other countries, the provisions of such agreements are applied.

Panama is a member of ICSID and MIGA.

The Republic of Panama has signed agreements on the promotion and protection of investments with the governments of France, the United Kingdom, Northern Ireland, Switzerland, the United States, the Federal Republic of Germany, and the Republic of China. All the agreements cited above are currently in force. In addition, there are draft conventions on promotion and protection of investments with Argentina, Ecuador, Italy, Peru, Poland, Romania, and Korea.

The 1972 Constitution of the Republic of Panama grants precedence to international conventions within the Panamanian juridical system.

Article 4 of the Constitution establishes that: "The Republic of Panama complies with the rules of international law."

See the preceding reply.

A foreign investment promotion agency called the National Foreign Investment Promotion Commission (PRO-PANAMA) was created by Decree No. 253 of May 11, 1995, signed by the President of Panama, Dr. Ernesto Perez Balladares and the Minister of Foreign Affairs, Lic. Gabriel Lewis Galindo. Pursuant to the provisions of this decree, this commission is attached to the Ministry of Foreign Affairs and its objective is to promote foreign investment in Panama in accordance with the national development policies established by the executive branch.

The Commission shall have an Advisory Council on Investment Promotion comprising 15 persons accomplished in the trade and labor sectors, appointed by the executive branch. The Commission shall appoint an Executive Director who shall be responsible for policy implementation and the administration of the corresponding programs.

On the other hand, Decree 13 of March 13, 1988 (Official Gazette 21,019 of March 30, 1988) assigned to the Panamanian Institute of Foreign Trade the functions formerly carried out by the National Investment Council.