5 Ways You Can Invest in Panama from Abroad

Panama has increasingly become more popular for foreign investment due to its stable political environment, pro-business government, rising real estate market, and growing economy. There are several ways to invest in Panama, including stock, American depository receipts, real estate, and starting a business.

Panama’s stock market exchange is called the Bolsa de Valores de Panama, which trades stock, corporate debt, and government securities. Although relatively new and smaller in size, the Bolsa de Valores de Panama is attracting more companies to list their stocks. For example, one of the more heavily traded stocks on the exchange is Grupo ASSA, S.A., a large Panamanian insurance company that services clients in Panama, Costa Rica, Nicaragua, and El Salvador.

Typically, one of the simplest ways to gain exposure to an individual country is to invest in an exchange-traded fund (ETF) that either specializes or has high exposure to that country. However, Panama does not have a suitable ETF that completely fits this mold. As of Jan. 25, 2019, the Invesco Frontier Markets ETF (FRN) has the highest exposure to Panama, with 7.87%.

Investors looking to gain exposure can seek other ties to Panama by investing in an American depository receipt, or ADR. As of January 2019, there were two available Panama ADRs on U.S. exchanges: Banco Latinoamericano de Exportaciones y Importaciones, S.A (BLX) and CopaHoldings S.A. (CPA).

Panama’s real estate has been on the rebound and recovered from the global financial crisis of 2008 faster than most other Central American countries.

Much of the real estate recovery has been attributed to the growth of retirees moving to the area and the milder tropical weather. Panama offers a retirement incentive that includes the import of tax-free household goods and many discounts on hotels, restaurants, movies, and other professional services.

The country has many different real estate companies that can help foreign investors choose the right property. Knowing Spanish is not a necessity, as many of the real estate firms are accustomed to English-speaking investors.

Panama also has several incentives for construction projects. New residential construction valued up to $120,000 gets 20 years of property tax exoneration on the improvements. Construction ranging from $120,000 to $300,000 gets 10 years of property tax exoneration, and anything above $300,000 gets five years.

The Panama Pacifico Special Economic Area is assigned to the production of goods and services that add value to Panama’s economy. It's located at the former Howard Air force base and provides foreign investors with several incentives.

Panama encourages international trade, corporate offices, call centers, aviation services, film production and more in this special zone. Some fiscal incentives include exemption from certain import, levy, real estate, stamp, commercial and industrial taxes. Panama also offers several labor incentives, such as fixed rates for overtime and holiday hours for employees, and exemptions for hiring foreign laborers.

Panama allows foreign investors to establish their businesses in the country as one of three structures: sole proprietor, partnership, or corporation. To begin the process, you must file a registro fiscal, or income tax registry, with the government. Then, you need to obtain a commercial license and a social security number. Finally, you must pay all municipal taxes, along with any necessary permits that coincide with the type of business that is being run.

Panama is a very popular place for companies to establish as their home country, due to the favorable tax laws and financial privacy. Offshore companies and their owners are exempt from corporate, withholding, income, capital gains, and estate taxes. Panama also maintains strict financial privacy laws that allow a corporation and its members to remain completely anonymous if need be. Additionally, Panama has few tax treaties with other countries, so offshore banking has little to no reporting requirements associated with it.

When opening a business in Panama, knowing Spanish is useful but not required. What is highly recommended is a good business attorney to help ensure that the business is going through the correct process with both the national and local governments.