As of that date, 134 licenses have been issued for SEM companies in Panama, according to data from the Multinational Corporation Directorate of the Ministry of Commerce and Industries, allowing these companies to carry out activities of management, accounting, spare parts logistics, finance, operations support and other activities allowed to its subsidiaries anywhere in the world.The appeal of Panama to the SEM companies has been widely discussed, especially in relation to the immigration, tax and labor benefits which the law grants; even more so because, until December 2016, the establishment of these companies represented more than US$820 million dollars in direct investment for Panama and the generation of more than 5,500 workplaces for foreign and domestic workers, according to the Multinational Corporation Headquarters Directorate.
Undoubtedly, Panama has become a magnet for multinational companies: in the past year alone 25 SEM licenses were granted, the highest annual increase in ten years. But, after one decade, how does the country prepare to remain an attractive focus for foreign investment? What challenges or opportunities does the country have regarding the development of this law?
Some peculiarities of the SEM Law which attracts these companies are that it allows them to hire foreign trustworthy personnel and executives without the need to comply with the maximum percentage of 10% -15% required for the companies established in and that operate in our country. Additionally, they shall be exempted from the payment of income tax when their wages stem from the parent company. Likewise, the multinational company itself is exempted from the payment of income tax for the services rendered under the SEM License, provided that the company provides its services abroad and does not generate taxable income in Panama. It shall also be exempted from Transfer Tax on Personal Property and Services, dividends tax and the supplementary tax payments.Read More
The legal profession has a bad reputation. This is particularly true in the startup world. Some of this is well deserved.
Many startup attorneys take a one-size-fits-all approach to their new start-up clients. They want to structure your start-up in a format that will make it easier to ship you off to the Venture Capital firms with whom the attorneys have a long term relationship.
Unfortunately, this format makes sense for only a small, a very small, fraction of start-ups.
Most startups, even very successful start-ups, do not need to rely on Venture Capital money to fund their business start-up. Most entrepreneurs who rely upon Venture Capital funding for their start-up never get funding. And if the entrepreneur does get Venture Capital funding, that entrepreneur will find out that Venture Capital funding is the most expensive money the entrepreneur will find. There are lots of other funding options available to an entrepreneur today.
Up Venture Capital Creek Not Always the Best Path
In our experience, the ride up Venture Capital Creek does not benefit most startups. It makes no sense to structure a start-up for the ride up Venture Capital Creek when that is the least likely route to successful funding for your start-up. Entrepreneurs who structure their start-up for the ride up Venture Capital Creek will always end up spending a lot more money than necessary for a business structure that does nothing to improve the probability of their success.
Every start-up is different. Every entrepreneur is different. Every business plan is different. An experienced, ethical and honest attorney will structure your start-up in a manner that will maximize the probability of your success. That attorney is the attorney that founders should be looking for when they look for an attorney to help them launch their business. An experienced, honest attorney at an ethical law firm wouldn’t send you up Venture Capital Creek unless that was the right path for your start-up, and it is not the right path for most start-ups.Read More