Stoppage in Transitu

By: R. García De Paredes

Under certain circumstances a seller, who has shipped commodities by sea, in certain manner that their ownership, yet not the possession, has been transferred to the buyer, maintains the right to resume the possession of the commodities in the during its transit to the buyer.

This resumption of the possession by the seller does not imply rescission of the contract, but just exerting the right to insist for payment of the price or cost of the merchandise.

This right, known as "stoppage in transitu", may be exerted:

By a seller of commodities who has not received the corresponding payment, in case that the buyer is insolvent.

Against said buyer and all the persons who may be claiming to him.

Against the beneficiary to whom the bill of lading has been endorsed or any other document of title over the commodities in reference, who has considered or made said endorsement or transfer, unaware of any circumstance that would have impeded considering said endorsement or transfer as a valid transfer of the commodities.

At any time prior to possession by the buyer of the merchandise, by itself or is agent, and the transit has been completed.

These considerations are pertaining to matters of the bill of lading as a security or a negotiable document, or as it is known in maritime law "a document of title".

The coming Tax Reform - "Flat Tax"

By: R. García De Paredes

The flat tax proposed by our president Ricardo Martinelli implies reducing the ISR rate for companies from the current 30% to 10% or 15%; limit the deductions and eliminating a number of subsidies and tax exemptions, including those for banks.

Everybody knows that the Flat Tax would eliminate all exclusions, subsidies, exemptions and credits and would set a uniform fixed tax on the income.

In example, eliminating the CAIR and implementing the flat tax would mean a significant decrease in the income from taxes for the State.  How will they replace the current tax incomes that have been used to finance an important part of public investment?

The system of a flat tax is a fair scheme because individuals and companies receive the same treatment, with no privileges, where simplicity encourages to produce wealth, stimulates the economy and employment and puts an end to the negative slant to savings and investment.  One of the great advantages of this outline is that the incentives to pay taxes as company or as individual disappear, which depended on which was more convenient, and it strongly discourages tax evasion and avoidance because there would not be privileges for sectors or legal concepts, solving to a great extent the sub statement of profits of the companies as well as other juridical maneuvers.

All problems result from causes, and to eradicate problems we should first take care of the causes that produce them.  Although the causes of a decreased economical growth are as complex as the economic process itself, we hay identify several structural factors that definitely inhibit obtaining the capital that is necessary for the economic expansion.  Among them it is how the tax system is designed, because the taxes affect, whether directly or indirectly, in the information transmitted by the price, which distorts the decisions of the economy agents to consume, save and invest.

Specifically, the main advantages of such a system are the following:

It is simple: The international experience is that the main virtue of a flat system is its simplicity.  It is easier to manage and for the people to comply with it.  Paying these taxes is so simple that persons need less than 10 minutes to prepare their statements.  Its simplicity heartens more people to pay their taxes.  It is equitable: Persons like companies, regardless of their income, are subject to the same tax rate, then people with alike incomes pay alike taxes. There being no special treatments, there are no incentives to have profit from other tax payers.  It is progressive: In order for poor people to pay less or to pay nothing at all, different tax rates are not required.  It is enough to apply a sole rate taxing in excess of a generous personal exemption, the same for all, which allows for the necessary progressiveness.  The effective rate is higher as the incomes are higher.  It is efficient:   the economists agree in that the most desirable taxes are on consumption, because are the ones less distorting decisions of the economic agents and most stimulating for the production of wealth.  Also, this type of tax is one of the most efficacious manners to increase tax incomes, because it broadens the taxable basis.

Reduces Costs. Tax losses decrease due to differentials in taxes and the multiplicity of regimes and privileges.  Incentives to evade and avoid are reduced and also decreases the costs incurred by the citizens and government, ones to pay taxes and the later to recover them (collection and control).

Eliminates the dual taxes.  The income is taxed only once and the closest possible to the source.

The new Migration Provisions in Panama

By: O. Del Río

The new migration law entered in force about eight months ago, which spirit is to rule “in amore restrictive manner” the entries and departures of foreigners and their stay in the country.

However, for the practical effects of its application, most of lawyers practicing or specialized in migration affairs agree in their opinion that there is confusion even as to the interpretation of the new provisions ruling migration in our country, as from the point of view of users (lawyers, foreigners, etc.) as well as of some officers with several years of service in the institution.

In example, with the aim to provide a more clear view of the changes made by the Decree Law No. 3 of February 22 of 2008, ruled by Executive Decree No. 320 of August 8 of 2008, we find that:

The Decree Law replaces the National Directorate of Migration for the National Migration Service.

The new provision classifies the foreigners entering Panamanian territory into four categories: non resident, temporary resident, permanent resident and foreigners under protection of Panama.

The category of non resident foreigners includes tourists, seafarers, passengers and crewmembers in transit; and temporary residents are those who arrive to the Panamanian territory by reason of labor, politics, culture, humanity, religion, among others.

According to the new law, permanent residents are those entering Panama by economic or investment purposes, or due to special “politics” of the Government, and the foreigners under protection will be classified as refugees, asylees, stateless and accepted due to humanitarian reasons.

The resident permit that the country shall grant to the temporary resident will be valid for six years, “unless different validity is provided under special laws”.

For becoming a permanent resident in Panama, the new law grants a provisional resident permit valid for two years and an identity document with the same validity term that will be replaced by the permanent documents, “provided that the interested parties fulfill the requirements provided by the law and regulations”.

The new law creates the “Registry of Foreigners” (Registro de Extranjería) which shall process all the documentation of foreigners applying for “the migrant categories of temporary or permanent resident… who shall be registered with a permanent numeric identification”.

It also provides for a support unit for victims of human trafficking, who will “receive a migratory treatment of protection, until the authorities define or solve their situation”.

Migration Trust Fund is also created.  Its patrimony will consist of the resources existing in the funds and deposits of repatriation, the warranty deposits by foreigners who failed compliance of the rules for stay, and the bequests or donations received.

“The category of non resident foreigners includes tourists, seafarers, passengers and crewmembers in transit”

Overview of Corporations in Panama

By: G. Tapia Calviño

Panama is the second preferred jurisdiction and is the certified domicile for more than 400,000 corporations and foundations, after Hong Kong.

Some advantages of Panamanian corporations are the following:

• Panama does not allow tearing the corporative veil, thus the books of the corporation are kept private to a 100% according to the law.
• The client does not need to be in Panama for the incorporation.  Corporations may be constituted in one day or already existing corporations may be acquired.
• The officers, directors and shareholders may be of any nationality or residents in any country.  Only the names of directors and officers are available for the public, in the Public Registry Office. Officers or directors do not need to be shareholders.
• Directors and/or officers may be individuals or corporations.  Directors and/or officers may hold meetings in any country and may be represented by Proxy.
• Annual or Periodical meetings of Shareholders or Directors are not required.  Annual Statements of Income, nor any other type of reports are required.  The meetings of directors/shareholders may be held via fax, phone or by any other means of electronic communication.
• Shares may be issued to the bearer or to someone’s name.  The certificates of shares may be posted to someone’s name or to the Bearer (the Parties of Bearer are an anonymous form of the property), whether or not having a nominal value. Officers or directors of Panamanian Corporations do not need to be shareholders
• Total and absolute tax exemption for any business or transaction that the company performs outside Panama.  Regardless the operations they perform, Corporations pay only the annual tax of US$300.00 to the Treasury.  From Panama they may rebill merchandise being sold to a client abroad.  The profit margin does not pay taxes provided that the merchandise does not enter Panamanian Territory.
• Panamanian Corporations should have two subscribers concurring at the public registry office to incorporate it.  Said subscribers are individuals of our firm who concur before the Public Registry Office with the Articles of Incorporation to constitute the corporation.  According to the law, the subscribers must hold one (1) share.  As soon as the corporation is constituted, the subscribers execute a document waiving their rights.
• Panamanian Corporations do not require a commercial license to work abroad.
• The books, files and minutes of the corporation may be kept anywhere worldwide at directors´ decision.  There is not a required minimum or maximum capital stock.  Corporations may engage in any lawful activity in any country and may transact in any currency, as well as opening bank accounts.  The corporation may have offices in Panama or any other country and may own real estate or other assets in any country.  Full privacy and confidentiality.
• Panamanian Corporations of other jurisdictions may be “redomiciled” in Panama, and vice versa.  May people who have corporations in jurisdictions such as Bahamas and other British territories, are now “redomiciling” their corporations to other jurisdictions, more private and secure, like Panama.

There are practically no limits for Panamanian corporations (off-shore).  In case that the corporation decides to engage in business in Panama, then it needs to pay taxes for their local activities.

HOW TO ACQUIRE A PANAMANIAN CORPORATION:

• Pre-Consituted Corporations (Shelf): we keep some already constituted corporations in spare for being sold to clients who request them urgently. These corporations have not been used before, they are clean and ready for being used by whom acquired them.  Shall the client request for a corporation constituted more than one year ago, its cost shall be higher than one recently constituted.  Depending on the date on which said corporation was registered, the client shall settle the Annual Tax.
• New Corporations: In order to constitute its own corporation, the client needs to provide the following information via fax o e-mail:

1. Name of the corporation:

The client shall provide at least three suggestions to name the corporation, in case that the first proposed name is not available.

The name may be in any language and shall end with any of the following words: "Corporation", "Incorporated", "Société Anonymé", "Sociedad Anónima", or the abbreviations: "Corp.". "Inc.", o "S.A.".

Words such as: "Aseguradora", "Assurance", "Bank", "Banco", "Trust", "Fideicomiso" or any Word of alike meaning, may not be used to constitute an off-shore corporation.  Special permissions are required to use any of these names.  Names similar to an existing corporation may not be used either.

2. Directors / Officers:

The client shall provide the names of directors and their address.  Directors must be no less than three, whose offices are usually of President, Secretary and Treasurer.

3. General Power.

In the Articles of Incorporation you may select to authorize the President or any other officer to bind the corporation with its sole signature in any transaction. We must be informed if you prefer this option.

4. Other notes:

With the instructions above described, we constitute the corporation using our Standard Articles of Incorporation, which allows to perform any kind of of business.

The Public Registry reviews the Articles of Incorporation and approves the registration of the corporation within the following two days.

Total and absolute tax exemption is provided for any business or transaction that the company performs outside Panama.

Private Interest Foundations, an Effective manner to protect your wealth.

By: G. Tapia Calviño

Act 25 of June 12 of 1995 created a juridical institution, a hybrid of the corporation, a donation and a trust, and works as an effective mean to protect one’s wealth and assets; this is the “Private Interest Foundation”.  Some characteristics of this juridical institution are:

Definition of a Private Interest Foundation: This is a juridical entity created according to Panamanian Law, as non profit organization though it may from time to time engage in commercial activities and may also exert those rights resulting from titles representative of corporations capital stock, provided that these titles belong to the Foundation.  The assets of the Foundation are devoted exclusively for the objectives stated in its constitutive document and, once formed, sell and execute contracts, as any other corporation or juridical entity.

Constituting a Foundation: one or more persons may form a foundation, whether directly or through another person.

Essential requirements to constitute a Foundation:

• A name in any language in Latin alphabet.  The name is to include “fundación” or “foundation”
• Initial capital stock, which shall be no less than US$ 10,000.00.
• Name and address of the juridical entity (another foundation, corporation or association) that will act as Foundational Board, or of the three individuals in which said board shall consist.
• Address of the Foundation.
• Objectives of the Foundation.
• How the beneficiaries shall be selected.

Beneficiaries of the Foundation: Different from corporations, where the beneficiary is the shareholder, in a Foundation the beneficiary is the individual or corporation designated by the founder, and it may be the founder itself.

Administrative body of the Foundation: Making a comparison, we may indicate that, different from the corporations where there is a Board of Directors, the Foundation has a Council, named “Foundational Board”, which may consist only by another corporation, or by at least three individuals.

This Board may likewise grant a general power to an individual or a corporation to manage the Foundation.

Assets transferred to the Foundation: These constitute the patrimony that may not be seized or impounded by reason of claims not related to operations of the Foundation.  Creditors of the founder have a term of three years since the Foundation is constituted to claim that assets have been transferred to the foundation in fraud against its rights.  Any transfer of assets, from the Foundation to the spouse, sons, daughters or any of the parents of the Founder, is exempted from transfer taxes.  The Foundation and the assets transferred to it, may be revoked only if so provided in the document constituting the Foundation.

Taxes and Annual Fees: Because a Foundation does not engage in commercial activities regularly, there are no payable taxes for its operation.  The annual fees will be alike those for a corporation: US$300.00 as annual fees, US$150.00 of resident agent and US$100.00 per each member of the Board appointed by our Firm,

“Post Mortem” effects: Panamanian law allows constituting a foundation to have effects from the date it is created or post mortem.  For Foundations constituted to have effect post mortem, the presumption if that the Foundation has existed prior to its founder’s decease.