The Corporate Immigration Review: Panama
Introduction to the immigration framework
Over the past 10 years, Panama has been one of the fastest-growing economies in Latin America. Its economy is centred on a highly developed service sector, which represents more than 75 per cent of the gross domestic product. The Panama Canal expansion started in 2007 and this economic factor helped to mitigate the negative side effects of the subsequent economic global crisis. The banking and financial services sector has also played an important part in this economic development. All these investments and projects have brought a massive influx of citizens from all over the world, looking for a better economy and a more stable political environment.
In recent years, the Panamanian government has adopted new immigration policies, resulting in the issuance of more residence permits and implementing new options for the foreign investors and professionals that come to be part of the economic growth in the country.
Under Panamanian immigration law, different kinds of visas and permits are available, according to the activity or investment to be undertaken by the person or the length of time the person will spend in the country.
i Non-resident visa
A non-resident status will be used by those entering Panama for pleasure or recreation and can be granted for a maximum of 180 days, depending on citizenship.
These short-stay visas are designed to be granted to visitors who enter the country with a specific purpose, but without the intention of residing in the country for a longer period. Whereas an ordinary tourist visa is granted for a maximum of six months, short-stay visas can be granted for a non-extendable period of up to nine months.
ii Temporary residence permit
This permit may be used by people entering Panama for employment reasons, under particular government policies, for educational, cultural, humanitarian or family unification purposes, and for those who intend to stay in the country for longer periods of time. This permit is authorised for a one-year period and may be renewed annually for a maximum of six years.
iii Permanent residence permit
This permit is granted to three types of foreign nationals: those who enter the country with the intention of settling permanently for economic and investment reasons, those who enter under particular government programmes and those who enter for demographic and family unification purposes. After a permanent residence status is requested, a two-year provisional residence permit and identification document is granted. After this provisional period, if the soliciting party fulfils the requirements, permanent residence is granted.
iv Legislation and policy
Decree Law No. 3 of 22 February 2008 regulates the immigration authority and immigration policies in Panama.
With regards to entering the territory, Panamanian immigration law has different requirements based on the citizenship of the traveller.
Citizens of certain countries (i.e., China, Cuba, India) must request a special tourist visa at a Panamanian consulate before travelling, which is valid for one month. Nationals from other countries that do not require this special tourist visa, may enter the country without any previous process or permit but must obtain a tourist card at the airline counter before they enter Panama.
A tourist visa is valid for six months and allows the holder to partake in tourism, business or investment activities in the country.
If a foreign national wishes to apply for a non-resident visa or a residence permit, immigration laws set different requirements based on different situations.
As a general rule, all employers must contract Panamanian employees, or foreign nationals married to Panamanian citizens or who have resided in the country for at least 10 years, in a proportion of at least 90 per cent of the ordinary personnel of the organisation, while 10 per cent of the ordinary personnel may be foreign nationals; however, employers may engage foreign personnel who are considered experts or technicians up to a proportion of 15 per cent of the total number of workers. In any event, the proportion of wages or remuneration together, and the category of foreign staff, cannot exceed those limits of 10 per cent and 15 per cent respectively. In some limited circumstances, a larger proportion of foreign experts or a technician is permitted for a defined period, working in a regulated sector of the economy, such as energy; however, this requires the recommendation of the relevant authorities and approval by the Ministry of Labour.
v The immigration authorities
Decree Law No. 3 of 22 February 2008 established the National Immigration Service as a public security institution under the Ministry of Public Security, with the task of coordinating, supervising and applying the immigration policies of the Republic of Panama.
The Ministry of Labour, regulates the requirements and procedures to apply for a work permit. This Ministry is also in charge of the approval of employment contracts. The Ministry has the task of supervising the application of the general rule of proportions between foreign and national employees, as discussed above (90 per cent).
The Ministry of Public Security's Security Council investigates specific cases and authorises the issuance of visas for the nationals of restricted countries.
vi Exemptions and favoured industries
There are several exemptions to the general rule of a 10 per cent limit on foreign workers.
Multinational headquarters (MHQs) are regional or global headquarters of multinational company that, while based in Panama, carry out operations or services to their main office, subsidiaries or affiliates in other countries. An MHQ can operate as a foreign company registered in Panama or as a Panamanian company, owned by the foreign multinational company. Residence permits are issued to employees at the administrative or executive level for the duration of the employment contract, up to a maximum of five years, which may be renewed for an unlimited number of five-year terms. After completing at least one five-year employment term at the MHQ, the employee has the option to become a permanent resident.
Temporary visas are issued to temporary employees of MHQs for periods of no more than three months while they are in the country for any activity related to the MHQ. These temporary visa holders are exempt from income tax and social security contributions provided that they receive their compensations from outside Panama.
Friendly Nations visa
Under Executive Decree 416 of 2012 and its later amendments, citizens from a particular list of nations, such as Argentina, Canada, Brazil, France, Spain, the United Kingdom and the United States, may request permanent residence on the basis of the friendly relationship between these countries and Panama. However, this residence status requires that the applicant provide evidence of ties to the Republic of Panama. These ties may be established through either economic or professional activities. In addition, the applicant must demonstrate economic solvency through a bank statement from the previous month showing a balance of at least US$5,000. For labour purposes, this permit is exempted from the percentage limitations, but it is mandatory to comply with tax and social security obligations if the applicant has a work permit.
Temporary residence permit for those hired as executives for international companies whose duties have effects abroad
This permit is issued by the National Immigration Service to foreign executives whose salaries are paid from foreign sources and who are entering the country temporarily as executives or managerial-level representatives of foreign companies operating international subsidiary offices in Panama. The company must be registered in Panama's Public Registry. Applicants who obtain this permit may not represent the international company for local activities. This permit grants the right to temporary residence in Panama for one year, renewable annually. Holders of a temporary residence permit hired as executives of international companies whose duties have effects abroad are not required to pay social security fees. Likewise, foreign workers are exempt from income tax payment if all their activities are perfected, accomplished or produce their effects abroad, and if their salaries are paid from the company headquarters. It is important to note that the holder of this permit is required to pay for education insurance tax. For this permit, the immigration authority also requires the headquarters or the subsidiary to have been incorporated for more than 10 years, that updated financial statements are filed and that the applicant has a minimum monthly salary of US$2,000.
Panama Pacifico special economic area (SEA)
In 2004, the government of Panama established the Panama Pacifico SEA to drive direct foreign investment, to provide Panamanians with better-paying jobs and to attract new growth industries to the country. Inspired by special economic areas with similar characteristics around the globe, the Panama Pacifico SEA is the most comprehensive and advantageous to date in the region (and similar in nature to a special economic zone).
The companies are permitted to hire a bigger percentage of foreign workers (up to 20 per cent of their payroll).
City of Knowledge
The City of Knowledge is a government-sponsored cluster of academic organisations, technology companies and non-governmental organisations, managed by a foundation of the same name. It is located just across the Miraflores locks of the Panama Canal, in what used to be one of the United States Southern Command headquarters in the Republic of Panama, Fort Clayton.
Today, the institution provides facilities and support to programmes in education, research, technological development and innovation, while promoting integration of institutions, business and programmes.
There are five immigration categories for this special area: researcher, teacher or professor, entrepreneur or executive, technician, and student. With the exception of the student category, all the permits give the option of a work permit. None of these categories are included in the percentage limitations for foreign personnel.
Panama Canal administration
There are special immigration permits for foreign workers hired by the Panama Canal Authority or its subcontractors. The process is filed at a special office at the National Immigration Service office, which offers an expedited service. The percentage limitation is not mandatory.
Colón Free Zone
Companies established in the Colón Free Zone may carry out any activity related to the importation, storage, packaging, manufacturing, assembly and general handling of all kinds of merchandise, products, raw materials and containers.
However, companies that operate within this zone must re-export at least 60 per cent of all imported goods and merchandise in any given year and must employ more than five local workers.
There is a minimum of five Panamanian employees that must be hired in a company in this special area, which allows the hiring of foreign workers over the percentage limit.
International treaty obligations
In general, Panama does not have any international treaties that provide immigration benefits. However, Panama is a signatory of the Marrakech Agreement, which permits foreign nationals entering the country to work for a company with fewer than 10 Panamanian workers. The company must have fewer than 10 full-time employees on the payroll earning at least the minimum wage and may have one foreign national who will reside and work temporarily in Panama. This temporary residence permit is granted for a one-year term and may be renewed for up to six consecutive years. Obtaining a prior work permit is required for approval of this residence permit. The foreign national must earn a minimum monthly salary of US$1,000.
The year in review
According to the statistics of the National Immigration Service,2 in 2019, 22,837 permits were processed, of which 19,844 were approved and 2,993 were denied.
Most of the approved permits were for temporary and permanent residence.
Residence permits for labour reasons are the most common way to obtain an immigration status in Panama. The residence permit often depends on a work permit being granted.
i Work permits
An eventual worker visa and work permit entitles visitors to perform technical works in Panama, after obtaining a work permit. This permit allows the Panama-based company to hire foreign nationals or visitors who will perform, on a temporary basis, technical work for the company, or will engage in a cultural, artistic or musical show, or will participate in sport events, professional, educational or scientific activities for a specific work or project, provided both the company and the visitor meet all requirements and responsibilities regulated by the National Immigration Service and the Panamanian Ministry of Labour and Workforce Development. The visitor must earn a minimum wage of US$850 monthly. This visa category is granted for a one-year period. The work permit is valid for three months and is renewable for up to a year.
Foreign employees numbering up to 10 per cent of ordinary workers and 15 per cent of technicians and people in positions of trust
This residence permit allows a company domiciled in Panama to hire foreign nationals for the purpose of temporary work in the company as part of the staff. The permit is subject to a previous work permit issuance and the applicant must earn a minimum monthly salary of US$850. Once the provisional permit is approved it shall be valid for two years; after this term, the applicant may ask for a permanent residence permit. The number of foreign employees or the sum of all their salaries may be up to 10 or 15 per cent of the company's total payroll.
This permit allows foreign nationals entering the country to work for a company with fewer than 10 Panamanian workers. The company must have fewer than 10 full-time employees on the payroll earning at least the minimum wage and may have one foreign national who will reside and work temporarily in Panama. This temporary residence permit is granted for a one-year term and may be renewed for up to six consecutive years. Obtaining a prior work permit is required for approval of this residence permit. The foreign national must earn a minimum monthly salary of US$1,000.
Most of these permits take from 16 to 20 weeks for authorisation. If they are denied, it is possible to request a reconsideration of the decision.
ii Labour market regulation
The Panamanian Labour Code regulates all labour relationships in Panama, establishing the state's protection of employees, both local and foreign national. Foreign workers have the same rights as Panamanian workers and any discrimination is a violation of the Constitution of the Republic of Panama. However, foreign workers must have a work permit to work legally.
The Ministry of Labour is the authority responsible for ensuring compliance with the labour law. This Ministry carries out inspections of work sites and fines companies that hire foreign workers without permits.
iii Rights and duties of sponsored employees
All employees, including both locals and foreign nationals, have to pay taxes and a social security quota. There are some exemptions to these obligations, such as the MHQ visa.
Some permits allow the foreign national workers to apply for permanent residence, such as the 10 or 15 per cent permits, but these workers must renew their work permit annually for 10 years after they received their permanent residence, at which time they can apply for a permanent work permit.
The only permit that grants a permanent work permit for the first application is the Friendly Nations visa.
Other special permits, such as the MHQ permit, grant a permanent work permit after five years of residence, after the employment relationship is terminated.
Investors, skilled migrants and entrepreneurs
There are a few immigration options for those who want to invest in Panama but do not have a sponsor company as a support. These options do not have to follow the general rule of the percentage limitation.
Friendly Nations visa
As mentioned above, this visa allows nationals from a group of countries to ask for a permanent residence permit and a permanent work permit. The main requirement is to have a job offer (from a sponsor company) or to be the shareholder of at least 50 per cent of the capital of a Panamanian company. Applicants are also required to prove economic solvency, through a bank statement from a bank account in Panama with a balance of at least US$5,000. Permits obtained for labour purposes require the approval of a work permit. To apply for this permit, the applicant must have received a job offer and have registered with the Social Security Administration for the payment of income tax and social security contributions.
Foreign professional visa
Foreign nationals with an undergraduate degree may apply for this permit, as long as the university degree is not in a field that is limited by the Constitution of the Republic of Panama or law to Panamanians. These restricted fields include medicine, law, architecture, engineering, nursing and accounting. Prior to applying for the immigration permit, the graduate diploma must be revalidated by the University of Panama. A temporary permit is granted initially for a term of two years, after which time the foreign national may apply for permanent residence. The work permit is valid for a year, renewable annually.
Outlook and conclusions
Since its overhaul in 2008, Panamanian immigration law has been updated and adapted to facilitate and contribute to the economic growth of the country. There are now more options for investors and professionals who seek to establish themselves in the country, be it as entrepreneurs or as independent professionals.
There have also been improvements to the permits with percentage limits, as it is now possible to apply for permanent residence after two years as a temporary permit holder, instead of six years as was previously the case.
The National Immigration Service has also improved its services and is now faster, with a better technological platform, and with greater transparency.
1 Vivian Holness is a senior associate at Arias, Fábrega & Fábrega.