- Introduction.
Panama has become a popular destination to immigrate in the region, due to its economic growth and socio-political stability which contrasts with other neighboring countries´ intricate conditions. Within the last decade, multiple infrastructure projects, as well as incentives favorable to establish and operate multinational companies have resulted in an increase of foreign nationals within the country, creating a multi-ethnic and multi-cultural society.
Nevertheless, Panama’s immigration law enacted in 2008[1] and article 17 of the Panamanian Labor Code dated 1972[2], both modified throughout the years, constitute a complex scenario to immigrants and employers willing to comply with the laws and changing policies. Separate processes to obtain (i) residency before the National Immigration Service and; (ii) a work permit before the Ministry of Labor, are one of the main aspects to be taken into account when immigrating and hiring foreign employees.
- Obtaining legal residency in Panama.
In Panama, Law Decree No. 3 of 2008, which creates the National Immigration Service and Executive Decree No. 320, which establishes the requirements and procedures applicable to obtaining temporary and permanent residency, are the core provisions regarding immigration.
As a general rule, foreigners enter as tourists for a period of 3-6 months, allowing them to do tourism, business or investment activities within the country. However, nationals from certain countries including China, India, and many other Asian and African countries, must request an entry visa that when granted is stamped at a Panamanian Consulate before traveling, and is valid for 1 month. This entry visa applies unless the person has a valid multiple entry visa from the U.S., Canada, U.K. or Australia, and has used it at least once to enter the territory that issued said visa[3], in which case the person can enter Panama without a prior authorization[4].
During this period, the foreign national that wishes to apply for a residence permit, must choose from a wide spectrum of options that were created to promote investment and to establish the rules to fill the need of skilled and non-skilled personnel. For purposes of this article, we will include the main modalities.
- Options related to the applicant’s nationality.
- Residence Permit for Nationals from Countries with Professional and Economic Ties with the Republic of Panama[5].
Foreign nationals from a list of approximately 50 countries including United States of America, France, Canada, and Spain can apply for a permanent residence permit in Panama if they prove to have a professional[6], economic or investment relationship in the country. This residence permit, also known as Friendly Nations permit, can be obtained by setting up a Panamanian corporation, or by being hired to work as an employee of a company duly established in Panama. The applicant must to prove the existence of either an economic or professional activity, as well as economic solvency by means of filing a bank certificate from a local bank showing a balance of at least 4 average figures.
Once the permanent residency is granted, if the foreigner intends to work, it is possible to apply for an indefinite term work permit that will allow the person to legally work in Panama. The challenge with this option is that if the foreigner applies for this category for work purposes, it has to obtain first the permanent residency in order to file the work permit application, therefore, there is a black out period in which legally speaking the foreigner is not allowed to work. Anticipated coordination of this category is required to minimize risks.
- Residence Permit for Nationals from Italy.
The Treaty of Friendship, Commerce and Navigation between the Republic of Panama and the Italian Republic[7], provides that the citizens of each of the contracting parties enjoy national treatment in the territory of the other, to carry out economic or professional activities. The main requirement is to prove the Italian nationality, as well as economic solvency by means of filing a bank certificate from a local bank showing a balance of at least 4 average figures.
As established in the previous Friendly Nations’ option, once the permanent residency is granted, if the foreigner intends to work, it is possible to apply for an indefinite term work permit that will allow the person to legally work in Panama. Likewise, the challenge with this category is likewise that if the foreigner applies for this residency for work purposes, it has to obtain first the permanent residency in order to file the work permit application, having a period were legally speaking the foreigner is not allowed to work legally. Advanced planning of this category is important to reduce risks.
- Options based on the Company’s Quotas.
- Ten or Fifteen Percent Quota[8].
The Panamanian Labor Code sets forth the general rules applicable to hiring foreign personnel. The code provides that 90 percent of employees must be Panamanian citizens, or foreign nationals married to a Panamanian, or foreign nationals that have resided in Panama for 10 or more years. The 10% quota is a result of this rule, and applies to both the headcount and salaries of the workforce. Additionally, the Labor Code provides that companies can hire skilled staff, managerial or technical positions not exceeding a 15% limit of the total salaries and headcount.
Foreigners hired to work for a company registered in Panama, can obtain residence permits within a 10% limit for positions that are not skilled, managerial or technical, and a 15% limited for skilled, managerial or technical positions. These options grant provisional residency for two years and later allow to apply for permanent residency in the country, provided that the foreigner receives a minimum wage of at least US$850.00 monthly[9].
In this case, once the provisional residency is filed before the National Immigration Service, it is possible to apply for a definite term work permit valid for 1 year, renewable for equal terms, that once approved allows the person to legally work in Panama.
The challenge with this option is that the high number of foreigners in Panamanian payrolls, makes it difficult to comply with the quotas. Additionally, labor policies determining how other immigration categories and work permits count in payroll have had constant changes and affect the counting of these quotas, therefore the filing and approval of these work permits.
- Multinational Headquarters.
The multinational headquarters special regime established by means of Law 41 of 2007[10], applies to regional or headquarters offices of companies that from Panama carry out operations or services to their main offices or subsidiaries in other countries. These companies must be granted with a Multinational Headquarters’ License or “SEM” License for its acronym in Spanish[11]. The main advantage of this option in regards to the hiring of foreign managerial personnel, is that these companies do not comply with the quotas established in the Labor Code, therefore is possible to hire an unlimited number of foreign workforce.
Foreign employees working for a SEM company can apply for a residence permit for Permanent Personnel valid for 5 years, renewable for equal terms. With this residence permit, there is no need to request a work permit before the Ministry of Labor since Law 41 provides that holders of this residence permit do not require a further authorization to legally work in Panama. This category also has the advantage that there is no income tax in the foreign employee’s salary in Panama, when receiving the salary from a foreign source.
- Options based on the applicants’ investment.
Panama’s immigration law provides the option to obtain permanent residency when investing in the country a minimum of US$300,000.00. There are 3 options to apply for this residence permit (i) a time deposit bank account for at least 3 years in a Panamanian bank,, issued on behalf of the applicant; (ii) a US$300,000.00 real estate property located in Panama, free of liens. The real estate property can either be in the personal name of the applicant, in the name of a Panamanian Private Interest Foundation or a corporation; as long as the main applicant is both the Founder and main Beneficiary in the foundation’s case and that the shares are on the applicant’s name in the corporation’s case; and (iii) a mix of real estate property and time deposit bank account for US$300,000.00.
In this case, the provisional residency is granted for two years and later allows to apply for permanent residency in the country.
III. Recent Modifications.
The National Immigration Service and the Ministry of Labor have been tightening their policies due to the influx of foreigners, in order to verify and control that foreigners stay legal in the country and that companies comply with regulations.
The Government of Panama recently announced certain measures reducing the stay as tourists for nationals fro, certain Latin American countries, in order to force a prompt legalization of those that decide to have a residency in the country. Thus, the government established that nationals from Venezuela, Colombia, and Nicaragua, previously granted with a 6-month period stay as tourists are now allowed a 3-month period[12].
Moreover, the Ministry of Labor proposed a new bill concerning the hiring of foreign workforce without work permit. Bill No. 475, filed on March 20th, 2017, and pending only of the Executive’s approval to become law, pursues to increase fines and sanctions to companies that hire foreign employees without a valid work authorization issued by said Ministry. Fines that are currently established in US$50.00 to US$500.00 for having foreign employees without a valid work permit will increase significantly due to this bill, including (i) a US$500.00 sanction per foreign employee without a valid work permit the first time is inspected by the authorities; (ii) a US$1,000.00 fine for each foreign employee without a work permit, the second time is inspected; (iii) a US$10,000.00 fine without considering the number of foreign employees plus the suspension of the company’s commercial license, the third time is inspected; and (iv) the cancellation of the commercial license for the fourth time.
Furthermore, said bill provides that fines to companies having 10 or more foreign employees without a valid work permit, will be doubled. The names of the companies that are subject to this sanction will be listed in the Ministry of Labor’s website.
- Conclusions.
Panama’s immigration and work permit laws and policies provide a wide range of options to immigrate and work in the country. The large number of foreigners that have arrived within the last years has resulted in stricter policies and regulations, however, certain options still remain flexibles. By understanding and keeping up to date with the modifications in the regulations and policies, foreigners and companies can duly coordinate an anticipate applicable options and requirements, therefore reducing labor and immigration risks.
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*Albalira Montufar specializes in Immigration Law and is a partner at Morgan & Morgan, Republic of Panama. Ms. Montúfar can be contacted at [email protected]
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