Chapter 13 – Foreign Direct Investment in Panama
I. Country Snapshot
II. Introduction
Panama is one of the most attractive destinations for foreign direct investment (FDI) in Latin America, offering a strategic location, economic and political stability, and a business friendly fiscal environment. The country serves as a major logistics and financial hub, enhanced by the Panama Canal and its role as a regional center for multinational companies and international organizations.
Panama operates a territorial tax system, meaning that only income generated within the country is subject to taxation. This system makes it a favorable jurisdiction for international businesses and investors seeking tax efficiency. The country also offers multiple special economic zones, such as the Colón Free Zone and Panama Pacifico, which provide tax exemptions and regulatory incentives to attract foreign investment.
This document outlines key investment structures, tax considerations, and regulatory factors for foreign investors entering the Panamanian market.
III. Ownership Structures
Foreign investors in Panama can establish a business presence through several legal entities, each offering different liability protections, regulatory requirements, and fiscal advantages.
Corporations (Sociedad Anónima – S.A.)
A Panamanian corporation (S.A.) is the most commonly used business structure for both local and international operations. It does not require a minimum capital contribution and allows 100% foreign ownership. Shareholders benefit from limited liability, protecting them from business debts. Additionally, profits earned outside of Panama are not subject to local taxes under the territorial tax system.
Panamanian corporations are widely used for international trade, asset protection, and holding companies. They are also favored for businesses operating within Panama due to their flexibility and legal protections.
Private Interest Foundations
Private interest foundations are primarily used for wealth management, estate planning, and asset protection. These foundations provide a separation between personal and business assets, ensuring financial security for investors. Unlike corporations, private interest foundations are not designed for active business operations but serve as holding structures for investments.
They offer strong confidentiality, as founder and beneficiary identities do not need to be publicly disclosed. These foundations also provide tax advantages, particularly for inheritance and estate planning.
Free Trade Zones
Panama has multiple free trade zones (FTZs) that offer significant tax and regulatory benefits. The Colón Free Zone is the largest FTZ in the Western Hemisphere and facilitates duty free imports and exports, making it ideal for trade and distribution businesses. The Panama Pacifico Special Economic Area provides income tax exemptions, labor flexibility, and customs benefits, making it an attractive location for logistics and manufacturing companies.
These zones allow foreign investors to establish cost effective operations while benefiting from reduced tax burdens and streamlined regulatory processes.
Branch Offices and Offshore Banking
Foreign corporations can establish branch offices in Panama, which operate as extensions of the parent company. Branch offices are subject to local corporate taxation and must comply with Panamanian financial reporting requirements. This structure is commonly used by companies looking to establish a presence in Panama without incorporating a separate legal entity.
Panama is also known for its robust offshore banking sector. International bank accounts allow businesses to operate globally without requiring a physical presence in the country, providing financial flexibility and access to international banking services.
Investment Funds and Bonds
Foreign investors can participate in investment funds and bonds, allowing them to acquire financial assets without directly operating a business or project. Panama’s legal system supports the creation and management of both local and international investment funds, enabling investors to diversify their portfolios and structure their assets efficiently.
IV. Suggested Structures for Real Estate and Business Investments
Real Estate Investments
- Optimal Structure: A corporation (S.A.) or private interest
- Why: A corporation provides limited liability protection and fiscal flexibility for real estate holdings. Private interest foundations are effective for separating personal and business assets, ensuring confidentiality and estate planning benefits.
- Bonus: Real estate investments in designated tourism and free trade zones may qualify for tax exemptions, including reductions in property taxes and capital gains taxes. Investors may also benefit from double taxation relief on foreign tax paid.
Business Investments
- Optimal Structure: A corporation (S.A.).
- Why: A corporation offers flexibility, privacy protections, and tax efficiency. There is no minimum capital requirement, allowing businesses to start operations quickly, and foreign investors can retain 100% ownership without requiring a local board of Panama’s territorial tax system ensures that profits generated outside the country are not subject to local taxation.
- Bonus: Holding shares of Panamanian corporations in offshore trusts can provide additional tax minimization, liability protection, and confidentiality benefits, allowing investors to optimize their international financial strategies.
V. Simplified Tax Overview
Panama operates one of the most attractive tax systems in Latin America, designed to encourage foreign investment.
- Territorial Taxation: Only income generated within Panama is subject to taxation, making it an appealing jurisdiction for international investors.
- Corporate Income Tax: Standard rate of 25% on taxable profits earned in
- Dividend Tax: No dividend tax on profits generated outside of Panama; otherwise, dividend tax rates range from 5% to 10%.
- Capital Gains Tax: Typically taxed at 10%, with exemptions available in certain real estate and free trade zones.
- Value Added Tax (VAT): Standard rate of 7%, with reduced rates for specific goods and
Investment Incentives
Panama provides a range of investment incentives, including:
- Full tax exemptions for businesses in free trade zones, including the Colón Free Zone and Panama Pacifico.
- Import tax exemptions for companies operating in logistics, technology, and renewable energy sectors.
- Double taxation treaties with multiple countries, enabling foreign investors to reduce global tax exposure.
VI. Key Investment Considerations
While Panama offers a favorable investment climate, foreign investors should consider certain legal and regulatory factors. Some industries, such as financial services and telecommunications, require additional licensing and compliance with sector specific regulations.
Foreign investors and executives may apply for permanent residency under Panama’s Investor Visa programs, which provide long term stability for individuals managing business operations in the country. Businesses must also comply with Panama’s anti money laundering (AML) regulations, particularly in banking and financial services, to ensure regulatory adherence.
VII. Conclusion
Taken together, Panama offers attractive openings for well‑structured investments when investors align with local compliance requirements and leverage available incentives. With prudent structuring, effective tax rates and regulatory friction can be kept competitive, allowing foreign entrants to capture long‑term growth.
Chapter 14 – Foreign Direct Investment in Poland
I. Country Snapshot
II.Introduction
Poland is one of the most attractive destinations for foreign direct investment (FDI) in Central and Eastern Europe, offering a stable legal framework, a well-developed capital market, and an open approach to foreign investment. As a member of the European Union (EU), investors from the European Economic Area (EEA), the United States, Switzerland, and Ukraine generally receive the same treatment as Polish investors. However, investors from other countries may be subject to additional regulatory requirements or restrictions, which vary depending on the sector and nature of the investment.
Foreign investors in Poland must carefully consider legal structure selection, tax obligations, and regulatory compliance to optimize their business strategy. The country offers several corporate structures, including limited liability companies (sp. z o.o.), joint stock companies (S.A.), partnerships, and sole proprietorships, each with distinct benefits and regulatory implications. Additionally, restrictions apply to real estate acquisitions and investments in certain regulated industries.
III. Ownership Structures
Foreign investors can establish a business in Poland through various legal entities, depending on liability considerations, investment objectives, and regulatory requirements.
Sole Proprietorship
A sole proprietorship is the simplest form of business activity, requiring no initial capital investment and offering a straightforward registration process. This structure allows the investor to own all business assets directly, and for revenues below EUR 2 million, full accounting is not required. However, the main drawback is unlimited personal liability, meaning the investor is personally responsible for all obligations of the business.
Non EEA investors may face restrictions on acquiring real estate in Poland, requiring a permit from the Ministry of Internal Affairs unless an applicable international agreement provides otherwise.
Partnerships
Partnerships in Poland include general partnerships (spółka jawna), professional partnerships (spółka partnerska), limited partnerships (spółka komandytowa), and limited joint stock partnerships (spółka komandytowo akcyjna). Each type has specific rules on liability, taxation, and governance, making partnerships a common choice for family-owned businesses and tax optimization strategies.
Limited partnerships offer a combination of general partners with full liability and limited partners whose liability is restricted to their contributions. This structure is particularly useful for businesses requiring passive investors. Professional partnerships, by contrast, are reserved for licensed professions such as law, medicine, and accounting.
Limited Liability Company (sp. z o.o.)
The limited liability company (spółka z ograniczoną odpowiedzialnością – sp. z o.o.) is the most widely used corporate structure for foreign investors in Poland. It provides full liability protection, ensuring that shareholders are only responsible up to the amount of their capital contributions.
A sp. z o.o. is subject to a corporate income tax (CIT) rate of 19%, with a reduced 9% rate for small taxpayers. Foreign shareholders may also be subject to withholding tax on dividends, though Poland’s double taxation treaties can lower this rate.
Foreign investors can fully own an sp. z o.o., regardless of nationality. However, engaging in regulated industries such as finance, energy, or defense may require obtaining additional permits or licenses from Polish authorities.
Joint – Stock Company (S.A.)
A joint stock company (Spółka Akcyjna – S.A.) is designed for large scale business operations, including publicly traded companies. It offers limited liability protection for shareholders but involves greater administrative complexity and regulatory oversight compared to an sp. z o.o.
This structure is often mandatory for businesses in heavily regulated sectors, such as banking, insurance, and stock market operations. A key advantage of the S.A. structure is that shareholders can remain anonymous, making it a preferred choice for institutional and large scale investors.
Simple Joint – Stock Company (P.S.A.)
A Simple Joint Stock Company (Prosta Spółka Akcyjna – P.S.A.) is a relatively new structure designed for startups and high growth companies. It requires only PLN 1 in minimum share capital and offers a simplified incorporation and governance process. This structure allows businesses to access capital easily while maintaining flexibility in management and exit strategies.
IV. Suggested Structures for Real Estate vs. Business Investments
Real Estate Investments
- Optimal Structure: A limited liability company (sp. z o.) holding the real estate assets.
- Why: Holding real estate through an z o.o. provides liability protection and allows for tax optimization upon resale. This structure is particularly beneficial for large scale real estate investments, as it enables more efficient asset management and estate planning.
- Bonus: A holding structure with a foreign parent company may offer additional tax planning advantages. Non EEA investors must obtain approval from the Ministry of Internal Affairs before purchasing certain types of real estate unless an exemption applies under an international treaty.
Business Investments
- Optimal Structure: A limited liability company (sp. z o.o.) for small and medium sized enterprises, or a joint stock company (S.A.) for large corporations.
- Why: An z o.o. offers a flexible and commonly used structure with limited liability and straightforward compliance requirements, making it suitable for most business operations. A joint stock company provides access to external financing and is ideal for businesses with large scale investment needs.
- Bonus: Investors seeking to minimize double taxation on profits should consider structuring their investments through a holding company in a jurisdiction with favorable tax treaties. Certain industries, such as financial services, healthcare, and energy, may require additional regulatory approvals before a foreign entity can operate in Poland.
V. Simplified Tax Overview
Foreign investors in Poland are subject to varying tax obligations depending on their business structure.
- Corporate income tax (CIT) is set at 19%, with a 9% reduced rate available for small
- Personal income tax (PIT) applies to sole proprietors and partnership investors, with tax rates varying depending on the chosen tax scheme.
- Withholding tax on dividends applies to foreign investors, with rates determined by Poland’s double taxation treaties.
Investment Incentives
Poland offers various investment incentives, including:
- Special tax exemptions and deductions for businesses investing in research and development (R&D).
- Grants and subsidies for companies operating in strategic sectors, such as renewable energy and advanced manufacturing.
- Access to EU funding programs supporting infrastructure, technology, and workforce
VI. Key Investment Considerations
Foreign investors should be aware of several regulatory and economic factors when entering the Polish market. While Poland is generally open to FDI, certain industries require government approvals or licensing for foreign participation. Non EEA investors must obtain approval before purchasing certain types of real estate, particularly in agriculture and strategic infrastructure. Businesses must also comply with Polish corporate governance regulations, including financial reporting and shareholder disclosure obligations.
VII. Conclusion
Taken together, Poland offers attractive openings for well‑structured investments when investors align with local compliance requirements and leverage available incentives. With prudent structuring, effective tax rates and regulatory friction can be kept competitive, allowing foreign entrants to capture long‑term growth.
Chapter 15 – Foreign Direct Investment in the Slovak Republic
I. Country Snapshot
II.Introduction
The Slovak Republic, commonly known as Slovakia, is a Central European country with a population of 5.5 million. Its economy is highly industrialized, and export driven, with the country holding a global leadership position in per capita car production. While formal business structures are prevalent in large firms, smaller enterprises tend to operate in a more informal manner.
Slovakia’s legal system is based on German civil law traditions, with laws codified through parliamentary statutes. While case law is not formally binding, lower courts generally follow the decisions of higher courts. As a member of the European Union (EU), Slovakia adheres to international treaties and agreements that provide legal stability and protection for foreign investors.
Foreign investors benefit from equal treatment under the Slovak Commercial Code, with no general restrictions on foreign ownership. However, certain industries and transactions involving critical infrastructure require government screening and approval. Investors should carefully evaluate business structure selection, tax planning, and compliance with investment regulations when entering the Slovak market.
III. Ownership Structures
Foreign investors can establish a business presence in Slovakia through various corporate structures, each offering different liability protections, tax treatments, and governance requirements.
Joint – Stock Company (a.s.)
A joint stock company (Akciová spoločnosť – a.s.) is best suited for large scale investments and businesses requiring external capital. It requires a minimum share capital of €25,000, with at least 30% paid at incorporation. Shareholders benefit from limited liability, meaning their risk is limited to the value of their shares. The governance structure includes a general meeting of shareholders and a board of directors, operating under Slovak corporate law and EU legislation.
This structure is commonly used for businesses planning expansion, stock issuance, or joint ventures. However, it involves higher financial and administrative costs compared to other business entities.
Simple Joint – Stock Company (j.s.a.)
The simple joint stock company (Jednoduchá spoločnosť na akcie – j.s.a.) is a hybrid structure that combines features of a limited liability company and a traditional joint stock company. It has a low capital requirement (as little as €1) and offers simplified governance, making it ideal for startups and innovation – driven enterprises. Given its relatively new status in Slovakia, careful drafting of corporate documents and legal counsel is advisable.
Limited Liability Company (s.r.o.)
A limited liability company (Spoločnosť s ručením obmedzeným – s.r.o.) is the most widely used business structure in Slovakia, particularly for small and medium sized enterprises. It requires a minimum capital of €5,000, with each partner contributing at least €750. Shareholders enjoy limited liability, and the company is managed by one or more directors, governed by a general meeting of partners.
This structure is cost effective, easy to set up, and offers flexible governance, making it suitable for businesses with a small number of owners.
Partnerships
Slovakia recognizes two main types of partnerships. An unlimited partnership (Verejná obchodná spoločnosť – v.o.s.) requires all partners to have unlimited liability for the company’s debts. A limited partnership (Komanditná spoločnosť – k.s.) consists of at least one general partner with unlimited liability and one or more limited partners whose liability is capped at their registered capital contributions.
Partnerships are less commonly used by foreign investors due to their unlimited liability exposure but may be appropriate for certain professional or family-owned businesses.
Direct Investment and Asset Ownership
Foreign investors may acquire shares in existing Slovak businesses or purchase real estate without establishing a local company. The tax treatment for direct investment mirrors that of domestic investors, with real estate transactions subject to standard Slovak tax regulations.
IV. Investment Regulations and Restrictions
Slovakia has an open and investor friendly market, but as of March 2022, certain foreign investments are subject to mandatory screening and approval under the Foreign Investment Screening Act (FDI Screening Act, No. 497/2022). This law was introduced to align with EU regulations and to ensure national security in strategic sectors.
Foreign Investment Screening Process
Investments in critical industries require prior approval from the Ministry of Economy. The approval process typically takes 130 days but can be extended in complex cases. Investors must report their beneficial ownership and submit annual monitoring reports for three years after approval. Noncompliance with FDI screening rules can result in fines, forced divestment, or asset seizures.
Restricted Sectors
Foreign investors must obtain government approval for investments in critical sectors, including defense and national security, energy, telecommunications, and infrastructure. Cybersecurity, biotechnology, and dual use technologies also require approval, as they involve sensitive data protection. Media and content sharing platforms with an annual turnover exceeding €2 million are also subject to investment restrictions.
Foreign investors acquiring at least 10% of a company’s shares or increasing their stake to 20%, 33%, or 50% in strategic sectors must undergo regulatory approval.
V. Suggested Structures for Real Estate and Business Investments
Real Estate Investments
- Optimal Structure: A limited liability company (s.r.o.).
- Why: Holding real estate through an s.r.o. provides liability protection, facilitates simplified ownership transfer, and offers tax benefits. This structure also ensures compliance with land ownership regulations for foreign investors.
- Bonus: In certain cases, foreign investors may require government approval when acquiring large land holdings or properties near strategic infrastructure. Due diligence is recommended before purchasing real estate in sensitive locations.
Business Investments
- Optimal Structure: A limited liability company (s.r.o.) for small and medium-sized enterprises, or a joint stock company (a.s.) for larger corporations.
- Why: An s.r.o. offers a cost effective, flexible structure for small and medium-sized businesses. A joint stock company provides access to capital markets and enhanced investment opportunities, making it ideal for larger businesses and multinational
- Bonus: Investors should consider registering their entity in a tax friendly Slovak region to take advantage of regional investment incentives, which may include lower corporate tax rates or financial support for job creation.
VI. Simplified Tax Overview
Slovakia has a progressive corporate tax system, with rates varying based on business size and revenue.
- Corporate income tax (CIT) is 21% for most businesses, increasing to 24% for companies with revenues exceeding €5 million.
- A reduced CIT rate of 10% applies to companies with taxable income below €100,000, supporting startups and small businesses.
- Withholding tax on dividends is set at 7% for individual
- Value added tax (VAT) is charged at a standard rate of 23%, with reduced rates of 19% and 5% for certain goods and services.
Investment Incentives
Slovakia offers government incentives for strategic investments, including corporate tax relief for priority industries such as manufacturing, research and development (R&D), and renewable energy. Regional development grants are also available to boost employment and infrastructure, while double taxation treaties provide clarity on tax obligations and help mitigate tax liabilities.
VII. Key Investment Considerations
While Slovakia provides a stable and welcoming business environment, foreign investors should carefully consider the regulatory landscape. Investments in strategic sectors require government approval, and businesses must comply with Slovak and EU financial regulations. Certain industries, such as banking and financial services, require additional regulatory licensing before operations can commence.
Investors are advised to work closely with legal and financial professionals to ensure full compliance with local investment laws and optimize tax efficiency.
VIII. Conclusion
Taken together, Slovak Republic offers attractive openings for well‑structured investments when investors align with local compliance requirements and leverage available incentives. With prudent structuring, effective tax rates and regulatory friction can be kept competitive, allowing foreign entrants to capture long‑term growth.
