PANAMA COMPANY FORMATION

[Panama's approach to the regulation of virtual assets]

In April 2022, the National Assembly of Panama passed Law No. 697, which specifically aims to commercialize and utilize cryptocurrency assets. This law allows individuals and companies incorporated in Panama to freely use virtual assets as a means of payment for any commercial transaction permitted under Panamanian law[1].

However, the legal landscape changed significantly when President Lorenzino Cortisos requested a ruling from the Supreme Court to invalidate the bill that would have authorized and regulated cryptocurrencies. Although the veto was exercised in June and the amendment passed in October, concerns were raised about two specific provisions of the bill. These concerns led to a request for review by the Supreme Court in early 2023[2].

Key Aspects of the Bill and the Position of the Legislature

Commercial Use of Crypto Assets: The bill emphasizes Panama's openness to the use of cryptocurrency assets in commercial transactions, providing a regulatory framework that supports the legal use of these digital assets within the country's economic activities.

Supreme Court Review: The President's request for Supreme Court review became an important turning point in Panama's cryptocurrency regulatory process. It highlighted the government's cautious approach to fully embracing such regulations without a thorough judicial review.

International Receipt and Tax Implications: Interestingly, the bill highlights the potential incentives for cryptocurrency investments, as it classifies cryptocurrency assets as foreign-sourced income under Panama's territorial taxation system, which means that no capital gains tax is imposed on such assets [3].

Conclusion

The legislative process of Bill 697 and the review by the Supreme Court of Panama illustrate the complex process of Panama balancing innovation and regulatory oversight in the burgeoning virtual asset sector. As Panama navigates these legal and regulatory waters, the results of this review will be important for market participants and observers alike, and potentially set a precedent for cryptocurrency regulation in the region.

Sources:

1. Panama: National Assembly Passes Bill Regulating Cryptocurrency

2. Panama president sends crypto law to supreme court

3. Panama's Crypto Law: No Legal Tender, but Digital Assets Exempt from Capital Gain Tax

Panama Corporation Establishment Guide

Estimated time required (incorporation):

10-15 business days after obtaining all documents.

Requirements for incorporation:

1. At least three directors/officers (representative, financial officer, secretary) are required.

2. The minimum authorized capital is USD10,000, and there is no obligation to pay it in.

Included services:

1. Incorporation and government fees (Registro Publico)

2. Preparation of the incorporation deed and articles of association (in Spanish)

3. Role of the first subscriber and declaration of the incorporation deed before a notary public

4. All notary public fees related to the incorporation

5. Submission of the notarized incorporation deed to the Commercial Registry

6. Preparation of a resolution on the appointment of directors and the resignation of the founding shareholder's rights

7. Preparation of the company's articles of association

8. Provision of a certificate of incorporation and a company extract issued by the Commercial Registry

9. Notarization of English translations of company documents

10. Preparation of minutes of the first board meeting on the allocation of shares, appointment of directors, registered agent, office and other matters

11. Register of shares

12. Share certificates

13. Certificate of Incumbency (Company Survival Confirmation)

14. Registered business address (1 year)

15. Registration of local agent (1 year)

16. Notarization and notarized copy of corporate documents

17. KYC/Due Diligence

18. International courier of corporate documents

Cost Guide:

Incorporation and related services: USD3,000 (See the price in Korean won)

Opening a local account in Panama: USD2,000

Opening a CBI account in Puerto Rico: USD3,880 Go to the account opening guide

(Starting from the second year after incorporation) Annual renewal fee: USD2,500 (See the price in Korean won)

Annual renewal includes the following:

1. Annual government franchise tax

2. Maintenance of minutes, registers and statutory records

3. Registered business address (1 year)

4. Local agent registration (1 year)

5. Certificate of Good Standing (proof of the company's good standing)

Local director registration service:

As the details of the officers can be viewed publicly at the public registry, we provide a nominee director service to fill the position of the Panama corporation if necessary. However, we recommend that the representative or all customers be listed as this may cause legal or ethical issues, and if you wish to use the nominee director service for all directors, there must be a valid reason for this.

The local director name service is available under the following conditions.

1. The local director name service is provided for the purpose of protecting customer information disclosed on the register of local directors, and the company does not exercise management or control rights and cannot claim ownership of company assets.

2. In order to conduct financial transactions or transactions with exchanges, you must authenticate the company's UBO (Ultimate Beneficial Owner; refers to the actual owner, not the shareholder/director on the simple registration document) and Significant Controller. For this reason, local directors do not perform authentication. Therefore, you must directly authenticate the UBO and Significant Controller.

3. When accepting a business, we will go through the identity verification process for UBOs and key controllers, and we will verify the identity of the client through face-to-face or video meetings. The verification information will be kept by us as a legal record in accordance with the current AML regulations.

4. Service fee for nominee services

Local moving service (1 year): USD1,200 for 1 person / USD1,700 for 2 persons / USD2,200 for 3 persons

Service in the name of local shareholders (1 year): USD 1,300

Requirements and documents to be prepared for incorporation:

1. A copy of the shareholder/director's passport

2. Original certification of the copy of the shareholder/director's passport

- Korean passport: English passport copy certificate (issued by the district office or city hall) (View sample)

- Passport of other countries: Certified True Copy or Notarial Certificate (View sample)

3. Two types of recent (within 3 months) English address verification documents for shareholders/directors (addresses must be the same)

- Living in Korea: English certified copy of family register (resident center) + front and back of driver's license scan (View sample)

- Living in another country: Utility bill + bank statement (or equivalent official document) (View sample)

4. Expert recommendation letter (Request for expert recommendation letter)

- Those who can sign the recommendation letter: Accountant, lawyer, judicial scrivener, tax accountant, labor consultant, administrative scrivener, insurance agent, financial planner, financial advisor, doctor, professor, employer, and others (View sample)

5. Bank statement for the last three months (English or English translation)

6. English resume

7. Fill out the application for incorporation and the application for registration of members

Procedure:

1. Submit the required documents of the shareholder/director to be registered.

2. Pay the incorporation fee.

3. Confirm the availability of the corporate name and finalize it.

4. Sign and send the incorporation documents prepared by CJ.

5. After receiving the documents, a local notary will prepare the notarized company documents, including the articles of incorporation (3-4 business days).

6. Prepare company documents, including resolutions, lists, and share certificates.

7. Submit corporate documents to the registry office and wait for registration approval (5-10 business days)

8. After registration, the establishment of the corporation is complete.

* If you wish to open an account after establishment, please inquire in advance.

Application for a Panama company formation

Registration of shareholder/director (for Individual)

Establishment of a Private Interest Foundation in Panama

The Panama Private Interest Foundation (PPIF) was carefully designed by the Panamanian government as an offshore asset protection solution under Panamanian law. It offers a wide range of benefits while carrying out activities permitted within the regulations.

The PPIF offers the optimal structure for various purposes, including asset protection, estate planning, and privacy. A PPIF can isolate assets from legal risks associated with personal or business activities, which can be particularly useful in the event of a lawsuit or bankruptcy. A PPIF can be incorporated for a variety of purposes, from asset protection solutions to structuring an ICO for a virtual asset startup, and unlike a trust, a PPIF can exist independently of day-to-day business and personal financial activities.

PPIF is governed by the laws of Panama and may establish its own bylaws to govern its activities. The bylaws of the PPIF may include rules related to the operation of the foundation and may also specify how the property will be disposed of in the event of termination.

Recent developments in the regulations in Panama suggest that the country is opening up to fintech and cryptocurrency activities. In particular, virtual asset startups can use the Panama Foundation to structure ICOs. Panama is still drafting and discussing new regulations, so if new regulations are passed and implemented in the future, you may need to prepare to apply for a license or review your business plan with the advice of an expert.

Expected establishment period: 1 month

Establishment requirements:

The requirements for the four roles of the foundation must be met, and they are as follows.

1. Founder *Required:

The founder is listed and disclosed in the Panama Registry, and the founder has no influence on the operation of the foundation.

2. Foundation Council *Required:

The foundation's board of directors, and at least three or more council members must be registered.

President, Secretary, Treasurer

Council members can be natural persons or legal persons, and can also serve as founders and protectors. All council members are listed and disclosed in the Panama Registry.

3. Protector (Protector) *Not required:

The protector is essentially the person who runs and controls the foundation and has the authority to appoint and replace the members of the Council. The protector is also disclosed to the Panama Registry.

4. Beneficiaries (Beneficiaries) *Not required:

Beneficiaries can be set through the protector or the foundation's by-laws, and the Letter of Wishes and By-Laws can be kept private to protect the beneficiaries' personal information. The foundation can set the protector as the sole beneficiary until death, after which the foundation can continue for the benefit of other beneficiaries.

*Therefore, the minimum number of members for establishing a Panama private foundation is three.

[Cost Information]

Establishment of Panama Private Foundation and maintenance costs for the first year:

USD3,800 (View in KRW)

Included in the cost:

1. Drafting of Foundation Public Deed (English and Spanish)

2. Provision of the Foundation founder's name

3. Notarization of Foundation Public Deed

4. Registration of Foundation Public Deed with the Panama Registry

5. Establishment costs and related registration tax

6. Obtaining the certificate of incorporation

7. Preparing the resolution for the foundation board of directors' organization

8. Preparing the foundation resolution for the appointment of the protector

9. Preparing the foundation resolution for the appointment of the beneficiary

10. Preparing the foundation regulations

11. Translation and notarization of foundation documents

12. Certificate of Incumbency (Company Survival Certificate)

13. Registered Business Address (1 year)

14. Registered Agent and Secretary Services (1 year)

15. KYC/Due Diligence

16. International Courier of Corporate Documents

Annual maintenance fee (paid one year after establishment):

USD2,500 (View in KRW)

Annual renewal fee includes:

Registered business site service for one year

Registered agent and secretary service for one year

Annual government registration tax

Other expenses:

Opening a local account in Panama: USD2,000

Opening a CBI account in Puerto Rico: USD3,880 Go to the account opening guide

Local Director Registration Service:

The details of the officers are publicly available at the Public Registry, so we provide nominee director services to fulfill the role of a Panamanian corporation if necessary. However, we recommend that the representative or all customers be listed as there may be legal or ethical issues, and if you wish to use the nominee director service for all directors, there must be a valid reason.

The local director name service is available under the following conditions.

3. When accepting a business, we will go through the identity verification process for UBOs and key controllers, and we will verify the identity of the client through a face-to-face or video meeting. The verification information will be kept by us as a legal record in accordance with the current AML regulations.

4. Service fee for the name of the service
Local moving service (1 year): USD1,200 for 1 person / USD1,700 for 2 persons / USD2,200 for 3 persons
Local shareholder service (1 year): USD1,300

Required documents for establishment:

1. Copy of the passport of the member/director

2. Original fact certification of the copy of the passport of the member/director

- Korean passport: English passport copy certificate (issued by the district office or city hall) (View sample)

- Passport of other countries: Certified True Copy or Notarial Certificate (View sample)

3. Two types of recent (within the last three months) proof of address in English for members/directors

- Living in Korea: English certified copy or abridged copy (resident center) + front and back scans of driver's license (View sample)

- Living in another country: Utility bill + bank statement (or equivalent official document) (View sample)

4. Expert recommendation letter (Request for expert recommendation letter)

- Those who can sign the recommendation letter: Accountants, lawyers, judicial scriveners, tax accountants, labor consultants, administrative scriveners, insurance agents, financial planners, financial professionals, doctors, professors, employers, and others (View sample)

5. Bank statements for the last three months (in English or English translation)

6. English resume

7. Foundation establishment application and member registration application

Procedure:

1. Submit the required documents of the foundation members to be registered.

2. Pay the establishment fee.

3. Confirm the availability of the foundation name and finalize it.

4. Sign and send the foundation establishment documents prepared by CJ.

5. After receiving the documents, a local notary will prepare the notarized documents of the foundation, including the articles of incorporation (3-4 business days).

6. Prepare foundation documents, including resolutions and lists.

7. Submit corporate documents to the registry office and wait for registration approval (5-10 business days)

8. After registration processing, the establishment of the corporation is complete

Application for Panama Private Interest Foundation

Registration for members/directors

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