Benefits of Making Business in Panama | Buy & Sell Business

1. BENEFITS OF MAKING BUSINESS IN PANAMA WWW.MERGERSCORP.COM

2. At MergersCorp M&A International we help our clients confidentially buy and sell privately held businesses, aligning the interests of all parties for mutual success and satisfaction. It is our goal to make the process of either buying a new business or selling your current business as smooth and efficient as possible. We know how important confidentiality is to our sellers and we treat it with the utmost importance. WWW.MERGERSCORP.COM

3. BENEFITS OF MAKING BUSINESS IN PANAMA WWW.MERGERSCORP.COM

4. Country Overview Panama is a country on the isthmus linking Central and South America. The Panama Canal, a famous feat of human engineering, cuts through its center, linking the Atlantic and Pacific oceans to create an essential shipping route. In the capital, Panama City, modern skyscrapers, casinos and nightclubs contrast with colonial buildings in the Casco Viejo district and the rainforest of Natural Metropolitan Park. Nearly three-fourths of Panama’s gross domestic product is generated by the service sector a greater proportion than in any other Latin American country and services employ the majority of the workforce. Services have grown mainly because of offshore banking and canal traffic; public administration and other services are also important. Panama has a popularly elected, representative system of government with executive, legislative, and judicial branches. Universal suffrage was instituted in 1907, and Panamanians 18 years of age and older are eligible to vote.

5. Executive Summary Panama City, Spanish Panamá or Ciudad de Panamá, capital of the Republic of Panama. It is located in the east-central part of the country near the Pacific Ocean terminus of the Panama Canal, on the Gulf of Panama. When Panama declared its independence from Colombia, Panama City was chosen to serve as the capital of the new country. The city experienced accelerated growth in the 20th century following the construction of the Panama Canal. The country is divided into 10 provincias and three comarcas (indigenous sectors) Kuna Yala (San Blas), Emberá (Emberá- Wounaan), and Ngöbe Buglé (Guaymí). Panama is the southernmost country in Central America. Panama had a population of 3,661,868. Its population density is just 54 people per square mile, which ranks 128th in the world.Today in 2020, we estimate Panama to have 4.31 million people.

6. Introduction – Doing business in Panama Starting a business in Panama is becoming more and more of a lucrative idea with the abundance of entrepreneurship opportunities in the country. While it may be true that there are just as many opportunities in other parts of Latin America, Panama’s approach to both personal and corporate taxation makes this endeavor much more rewarding The process of investing in Panama is simple and straightforward, but we recommend that you always work with a good attorney. A reputable lawyer is a good place to start. 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.

7. Conducting business in Panama Hundreds of foreigners start new Panama businesses every year. Knowing Panama’s laws regulating business and commerce along with their structures is critical before starting a business in Panama. There are three types of Panama business partnerships: General, Limited and Civil, each explained more below. Once you have decided on the type of entity to own the Panama business, a unique business name must be selected. Panama’s Public Registry will contain all of the Panama corporations along with their company’s business name. The same goes for Panama partnerships.

8. Taxation in Panama An annual net income of up to 11,000 USD is tax free. A 15% income tax rate applies to all income exceeding 11,000 USD, up to 50,000 USD. On all income exceeding 50,000 USD, a 25% rate applies; the first 50,000 USD are taxed with 5,850 USD. Panama has a territorial tax system, meaning that it exempts all income earned outside Panama. Taxable net income up to PAB 11,000 is exempt from income tax. Taxable net income between PAB 11,001 and PAB 50,000 is subject to a tax rate of 15%. Taxable net income over PAB 50,000 is subject to a tax rate of 25%. The Panama Sales Tax is known as the “ITBMS”. This tax applies to imported goods, products sold or services rendered in Panama. The importer, seller, or service provider pays this tax whereby most simply add this tax to be paid by the consumer. Since July 1, 2010 the ITBMS increased from 5% to 7%.

9. Trade Panama is the 119th largest export economy in the world and the 56th most complex economy according to the Economic Complexity Index (ECI). In 2017, Panama exported $3.06B and imported $24.8B, resulting in a negative trade balance of $21.7B. In 2017 the GDP of Panama was $62.3B and its GDP per capita was $24.5k. Panama exports mainly fish and seafood products, bananas, gold, petroleum products, sugar and coffee. The country imports principally electrical and electronic equipment, crude oil, foodstuffs, chemicals, vehicles and pharmaceuticals. The country's industry includes, manufacturing of aircraft spare parts, cements, drinks, adhesives, and textiles. Additionally, some exports for Panama include bananas, shrimp, sugar, coffee, and clothing.

10. Banking in Panama Panama has a well-developed banking system and has become and international banking hub in recent years. It is extremely difficult to open a bank account in Panama. Many banks require non-residents to provide a reason for needing the account in Panama, for example, an investment in the country. Banks in Panama are for sure safe. There are many local and international banks that have been established for years. It is important to have a bank account set up to do any type of transaction here, but I would strongly advise to go with one of the big and reputable ones that have branches and ATM everywhere. Panama currently has 78 banks. Of those, 29 have international licenses; 49, including the 2 government banks, have general licenses.

11. Our M&A Process NEGOTIATION & CLOSE POST MERGER INTEGRATION (PMI) INTEGRATION (PMI) POST MERGER TARGET APPRAISAL APPROACH DUE DILIGENCE Key Areas  Target & market analysis;  Initial assessment of synergies & value drivers;  Indicative valuation;  Go or No-Go decision;  Preparation of transaction documents (NDA – Non- disclosure Agreement/LOI- Letter of Intent);  Select Transaction team;  Appoint advisors;  Consider funding ability.  Initial approach letter;  Signing of NDA;  Prepare & share initial information requests;  Formulation of LOI (Letter of Intent) & possible negotiations;  Initial meeting and Q&A;  Circulate information on the Target to the Transaction team.  Set scope of due diligence;  Set up VDR (virtual data room);  Coordinating of due diligence, further meetings and Q&A sessions;  Consider points relevant to the Post-Merger (PMI) phase;  Revisit indicative valuation & prepare detailed valuation based on due diligence findings;  SPA negotiations with the seller;  Development of final structure (share/asset deal) and final valuation;  Approvals;  Signing of SPA & Close.  Consider the extent of integration;  Development of 100 Day PMI Plan;  Consider short & long term objectives;  Estimate requirements to capture synergies;  Determine resource needs & optimal allocation. Parties Involved  CFO;  Head of M&A;  Accountants;  Corporate finance advisors;  Consultants.  Senior management;  CEO, CFO, CTO;  Strategy director;  Head of M&A;  Head of Business Development;  Consultants.  Company general counsel;  Lawyers;  Senior management.  Company general counsel;  Lawyers;  Senior management/HR. 11 © Midaxo 2018 www.midaxo.com

12. Looking to Buy or Sell a Business? CONTACT US NOW FOR A FREE BUSINESS VALUATION WWW.MERGERSCORP.COM

13. MergersCorp.com The information contained herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation. Member firms of the MergersCorp network of independent firms are affiliated with MergersCorp International. MergersCorp International provides no client services. No member firm has any authority to obligate or bind MergersCorp International or any other member firm vis-à-vis third parties, nor does MergersCorp International have any such authority to obligate or bind any member firm. Copyright © 2020 MergersCorp International. All rights reserved. 13 © Midaxo 2018 www.midaxo.com