1. “Why do business in Panama?” A Survey of Certain Legal Aspects David M. Mizrachi This document is not meant to be relied upon in place of seeking independent legal advice. It is only an informal survey of certain laws, which may contain inaccuracies. ©2011, Mizrachi, Davarro & Urriola

2. The Legal System Civil Law Jurisdiction Codes (Civil, Commercial, Tax, Family, Judicial, Mining, Administrative) Special Laws (Banking, Securities, Oil & Gas, Negotiable Instruments, Corporations, Foundations, Social Security, Public Services, Gaming, Antitrust and Consumer Protection)

3. General Features Ease of incorporation Modern body of commercial laws Quality regulation of banking, insurance and securities Few restrictions on foreign investment in the services and industrial sectors Few restrictions on property ownership by foreigners

4. General Features (…/) Minimal government interference in non regulated industries Freedom to contract Individual freedoms Commercial arbitration law

5. Agencies and Distribution Based on principles of freedom of contract No special protections for local parties (no “statutory damages”) Commercial Secrets and Intellectual Property Protected Special Commercial Courts

6. “Setting up Shop” Retail Restrictions on Foreigners Branch vs. Subsidiary Type A License Industrial License Free Zone Operations Export Processing Zones City of Knowledge - Technopark Special Economic Zones - Howard

7. Intellectual Property Copyrights Patents Trademarks Trade Secrets License THINK REGION!

8. Tax Matters General Principles: Mostly territorial tax basis No taxes on interest on bank deposits No taxes for exporters who ship into Panama No taxes for re-exporting or re-invoicing out of Panama; with some exceptions No taxes on offshore type entities; with some exceptions Free Trade Agreement with the United States Membership in WTO Free Trade with Chile, El Salvador, Taiwan, Singapore.

9. Tax Issues Local Taxes: Value added (sales) tax: 7% Capital gains on land: 10% (one time) subject to a 5% withholding Capital gains on securities: 10% subject to a 5% withholding Basic income tax rate: Approximately 30% of net income Excise taxes Municipal taxes Social Security taxes Customs and import duties Money transfers for services rendered: 15% withholding

10. Multinational Licenses (Law 41, 2007) Multinational Enterprise: important productive activities in several countries Assets Places of operation and headquarters Type of commercial operations or activities Publicly traded securities Other factors Commission reviews and decides whether to grant license Benefits: tax and immigration

11. Some Sectors with Special Legal Incentives and Growth Potential Panama Canal Expansion Special Economic Zone (Howard) Free Trade Zone City of Knowledge Export Processing Zones Petroleum Free Trade Zones Tourism and Hospitality Call Centers Telecommunications Infrastructure Energy

12. Dispute Resolution Court System Arbitration - Mediation Constitutionally Sound Quick Flexible Enforceable Professional Granted full faith and credit International or Domestic

13. Recommendations Find a reliable trading partner Conduct due diligence Research the Market PUT IT IN WRITING! Include Arbitration Request guarantees (personal real and documentary) THINK REGION!

15. Calle 58 y Avenida Samuel Lewis Torre ADR Oficina 6-C Panama, Republic of Panama Tel. 011-507-263-0604 Fax 011-507-263-2581 www.mdulegal.com

16. The preceding presentation is not meant to be relied upon in place of seeking independent legal advice. It is only an informal survey of certain legal considerations, which may contain inaccuracies. The Author and his firm disclaim any responsibility for its accuracy, fairness, reliability, or contents. No representation is made as to the legal and/or tax consequences of any of the concepts herein described. The reader is specifically warned not to rely on its contents and to seek professional advice from a licensed attorney in Panama. The hiring of an attorney is an important decision which should not be based on advertising and/or publications alone. Should you be interested in learning more regarding the Author’s qualifications, you will be provided with additional information free of charge upon request. (© 2011, Mizrachi, Davarro & Urriola)