Doing Business 2018 Panama Economy Pro le of Panama Doing Business 2018 Indicators (in order of appearance in the document) Starting a business Procedures, time, cost and paid-in minimum capital to start a limited liability company Dealing with construction Procedures, time and cost to complete all formalities to build a warehouse and the quality control and permits safety mechanisms in the construction permitting system Getting electricity Procedures, time and cost to get connected to the electrical grid, the reliability of the electricity supply and the transparency of tariffs Registering property Procedures, time and cost to transfer a property and the quality of the land administration system Getting credit Movable collateral laws and credit information systems Protecting minority investors Minority shareholders’ rights in related-party transactions and in corporate governance Paying taxes Payments, time and total tax rate for a firm to comply with all tax regulations as well as post-filing processes Trading across borders Time and cost to export the product of comparative advantage and import auto parts Enforcing contracts Time and cost to resolve a commercial dispute and the quality of judicial processes Resolving insolvency Time, cost, outcome and recovery rate for a commercial insolvency and the strength of the legal framework for insolvency Labor market regulation Flexibility in employment regulation and aspects of job quality About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local rms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more e cient regulation; o ers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business o ers detailed subnational reports, which exhaustively cover business regulation and reform in di erent cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The rst Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business, also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has bene ted from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. Page 2   for insolvency Doing Business Labor market 2018 regulation Panama Flexibility in employment regulation and aspects of job quality About Doing Business The Doing Business project provides objective measures of business regulations and their enforcement across 190 economies and selected cities at the subnational and regional level. The Doing Business project, launched in 2002, looks at domestic small and medium-size companies and measures the regulations applying to them through their life cycle. Doing Business captures several important dimensions of the regulatory environment as it applies to local rms. It provides quantitative indicators on regulation for starting a business, dealing with construction permits, getting electricity, registering property, getting credit, protecting minority investors, paying taxes, trading across borders, enforcing contracts and resolving insolvency. Doing Business also measures features of labor market regulation. Although Doing Business does not present rankings of economies on the labor market regulation indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business, it does present the data for these indicators. By gathering and analyzing comprehensive quantitative data to compare business regulation environments across economies and over time, Doing Business encourages economies to compete towards more e cient regulation; o ers measurable benchmarks for reform; and serves as a resource for academics, journalists, private sector researchers and others interested in the business climate of each economy. In addition, Doing Business o ers detailed subnational reports, which exhaustively cover business regulation and reform in di erent cities and regions within a nation. These reports provide data on the ease of doing business, rank each location, and recommend reforms to improve performance in each of the indicator areas. Selected cities can compare their business regulations with other cities in the economy or region and with the 190 economies that Doing Business has ranked. The rst Doing Business report, published in 2003, covered 5 indicator sets and 133 economies. This year’s report covers 11 indicator sets and 190 economies. Most indicator sets refer to a case scenario in the largest business city of each economy, except for 11 economies that have a population of more than 100 million as of 2013 (Bangladesh, Brazil, China, India, Indonesia, Japan, Mexico, Nigeria, Pakistan, the Russian Federation and the United States) where Doing Business, also collected data for the second largest business city. The data for these 11 economies are a population-weighted average for the 2 largest business cities. The project has bene ted from feedback from governments, academics, practitioners and reviewers. The initial goal remains: to provide an objective basis for understanding and improving the regulatory environment for business around the world. The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is re ected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190. The ranking of 190 economies is determined by sorting the aggregate distance to frontier scores, rounded to two decimals. More about Doing Business (PDF, 5MB) Ease of Doing Business in Latin America & DB 2018 Rank Region 190 1 Caribbean Panama Income Category Upper middle income 79 DB 2018 Distance to Frontier (DTF) Population 4,034,119 0 100 GNI Per Capita (US$) 12,140 65.27 City Covered Panama City DB 2018 Distance to Frontier (DTF) 0 100 69.41: Colombia (Rank: 59) 69.13: Costa Rica (Rank: 61) 66.42: El Salvador (Rank: 73) 65.27: Panama (Rank: 79) 61.18: Guatemala (Rank: 97) Page 3   aggregate distance to frontier scores, rounded to two decimals. More Doingabout 2018 (PDF, Doing Business Business 5MB) Panama Ease of Doing Business in Latin America & DB 2018 Rank Region 190 1 Caribbean Panama Income Category Upper middle income 79 DB 2018 Distance to Frontier (DTF) Population 4,034,119 0 100 GNI Per Capita (US$) 12,140 65.27 City Covered Panama City DB 2018 Distance to Frontier (DTF) 0 100 69.41: Colombia (Rank: 59) 69.13: Costa Rica (Rank: 61) 66.42: El Salvador (Rank: 73) 65.27: Panama (Rank: 79) 61.18: Guatemala (Rank: 97) 58.66: Regional Average (Latin America & Caribbean) Note: The distance to frontier (DTF) measure shows the distance of each economy to the “frontier,” which represents the best performance observed on each of the indicators across all economies in the Doing Business sample since 2005. An economy’s distance to frontier is re ected on a scale from 0 to 100, where 0 represents the lowest performance and 100 represents the frontier. The ease of doing business ranking ranges from 1 to 190. Rankings on Doing Business topics - Panama 1 18 29 28 39 54 55 83 82 88 96 Rank 107 109 136 148 163 180 190 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Investors Borders Permits Distance to Frontier (DTF) on Doing Business topics - Panama 100 92.02 89.77 85.47 80 75.00 68.16 65.17 60 DTF 51.67 46.19 39.66 39.59 40 20 0 Starting Dealing Getting Registering Getting Protecting Paying Trading Enforcing Resolving a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Change:+3.10 Change:0.00 Change:0.00 Investors Change:0.00 Borders Change:0.00 Change:+9.35 Change:+0.01 Permits Change:0.00 Change:0.00 Change:+0.02 Starting a Business Page 4   a with Electricity Property Credit Minority Taxes across Contracts Insolvency Business Construction Change:+3.10 Change:0.00 Change:0.00 Investors Change:0.00 Borders Change:0.00 Change:+9.35 Change:+0.01 Permits Change:0.00 Change:0.00 Doing Business 2018 Panama Change:+0.02 Starting a Business This topic measures the paid-in minimum capital requirement, number of procedures, time and cost for a small- to medium-sized limited liability company to start up and formally operate in economy’s largest business city. To make the data comparable across 190 economies, Doing Business uses a standardized business that is 100% domestically owned, has start-up capital equivalent to 10 times income per capita, engages in general industrial or commercial activities and employs between 10 and 50 people one month after the commencement of operations, all of whom are domestic nationals. Starting a Business considers two types of local limited liability companies that are identical in all aspects, except that one company is owned by 5 married women and the other by 5 married men. The distance to frontier score for each indicator is the average of the scores obtained for each of the component indicators. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally start and operate a To make the data comparable across economies, several assumptions company (number) about the business and the procedures are used. It is assumed that any required information is readily available and that the entrepreneur will pay Pre-registration (for example, name verification no bribes. or reservation, notarization) Registration in economy’s largest business city The business: - Is a limited liability company (or its legal equivalent). If there is more than Post-registration (for example, social security one type of limited liability company in the economy, the most common registration, company seal) among domestic rms is chosen. Information on the most common form is Obtaining approval from spouse to start business obtained from incorporation lawyers or the statistical o ce. or leave home to register company - Operates in the economy’s largest business city and the entire o ce Obtaining any gender-specific permission that space is approximately 929 square meters (10,000 square feet). For 11 can impact company registration, company economies the data are also collected for the second largest business city. operations and process of getting national - Is 100% domestically owned and has ve owners, none of whom is a legal identity card entity; and has a start-up capital of 10 times income per capita and has a Time required to complete each procedure turnover of at least 100 times income per capita. (calendar days) - Performs general industrial or commercial activities, such as the production or sale of goods or services to the public. The business does Does not include time spent gathering not perform foreign trade activities and does not handle products subject information to a special tax regime, for example, liquor or tobacco. It does not use Each procedure starts on a separate day (2 heavily polluting production processes. procedures cannot start on the same day) - Leases the commercial plant or o ces and is not a proprietor of real Procedures fully completed online are recorded estate and the amount of the annual lease for the o ce space is equivalent as ½ day to 1 times income per capita. Procedure is considered completed once final - Does not qualify for investment incentives or any special bene ts. document is received - Has at least 10 and up to 50 employees one month after the commencement of operations, all of whom are domestic nationals. No prior contact with officials - Has a company deed 10 pages long. Cost required to complete each procedure (% of The owners: income per capita) - Have reached the legal age of majority. If there is no legal age of majority, Official costs only, no bribes they are assumed to be 30 years old. No professional fees unless services required by - Are sane, competent, in good health and have no criminal record. law or commonly used in practice - Are married and the marriage is monogamous and registered with the authorities. Paid-in minimum capital (% of income per capita) - Where the answer di ers according to the legal system applicable to the Funds deposited in a bank or with third party woman or man in question (as may be the case in economies where there before registration or up to 3 months after is legal plurality), the answer used will be the one that applies to the incorporation majority of the population. Standardized Company Page 5   before registration or up to 3 months after is legal plurality), the answer used will be the one that applies to the incorporation majority of the population. Doing Business 2018 Panama Standardized Company Legal form Sociedad Anónima (S.A.) - Corporation Paid-in minimum capital requirement USD 0 City Covered Panama City Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Procedure – Men (number) 5 8.4 4.9 1.00 (New Zealand) Time – Men (days) 6 31.7 8.5 0.50 (New Zealand) Cost – Men (% of income per capita) 5.7 37.5 3.1 0.00 (United Kingdom) Procedure – Women (number) 5 8.5 4.9 1.00 (New Zealand) Time – Women (days) 6 31.8 8.5 0.50 (New Zealand) Cost – Women (% of income per capita) 5.7 37.5 3.1 0.00 (United Kingdom) Paid-in min. capital (% of income per capita) 0.0 2.1 8.7 0.00 (113 Economies) Figure – Starting a Business in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 92.02: Panama (Rank: 39) 85.32: Colombia (Rank: 96) 81.65: Costa Rica (Rank: 127) 79.30: Guatemala (Rank: 139) 78.88: El Salvador (Rank: 140) 78.09: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of starting a business is determined by sorting their distance to frontier scores for starting a business. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Starting a Business in Panama – Procedure, Time and Cost Time Cost 6 3.5 3 5 ost (% of income per capita) 2.5 4 Time (days) 2 3 1.5 2 Page 6   1 starting a business. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Panama Figure – Starting a Business in Panama – Procedure, Time and Cost Time Cost 6 3.5 3 5 Cost (% of income per capita) 2.5 4 Time (days) 2 3 1.5 2 1 1 0.5 0 0 1 2 3 4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Details – Starting a Business in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Hire a registered agent to prepare the articles of association 1 day USD 200 Agency : Law rm It is necessary to hire a lawyer or law rm to serve as Registered Agent of the corporation and prepare its Articles of Association. 2 Notarize the articles of incorporation 1 day USD 75 Agency : Public Notary The articles of incorporation to be notarized must include: (a) the name and domicile of each subscriber to the articles of incorporation; (b) the domicile of the company and of the resident agent, who must be a lawyer or law rm in Panama; (c) the names and addresses of the directors and the o cers; (d) the name of the corporation, set out in such a way to distinguish it from other registered names already registered with the Public Register; (e) the company purpose or general objectives; (f) the name of at least the president, the secretary, and the treasurer, who may or may not be the same as the directors and need not to be shareholders and who may hold more than one o ce or title; (g) details about the capital and the type and number of shares into which it is divided; (h) the company duration, which may be perpetual; (i) any other provision the subscribers may wish to include. 3 Register at the Mercantile Division of the Public Registry and pay the 2 days see comments Annual Franchise Tax Page 7   Agency : Mercantile Division of the Public Registry (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Doing Business 2018 Panama Details – Starting a Business in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Hire a registered agent to prepare the articles of association 1 day USD 200 Agency : Law rm It is necessary to hire a lawyer or law rm to serve as Registered Agent of the corporation and prepare its Articles of Association. 2 Notarize the articles of incorporation 1 day USD 75 Agency : Public Notary The articles of incorporation to be notarized must include: (a) the name and domicile of each subscriber to the articles of incorporation; (b) the domicile of the company and of the resident agent, who must be a lawyer or law rm in Panama; (c) the names and addresses of the directors and the o cers; (d) the name of the corporation, set out in such a way to distinguish it from other registered names already registered with the Public Register; (e) the company purpose or general objectives; (f) the name of at least the president, the secretary, and the treasurer, who may or may not be the same as the directors and need not to be shareholders and who may hold more than one o ce or title; (g) details about the capital and the type and number of shares into which it is divided; (h) the company duration, which may be perpetual; (i) any other provision the subscribers may wish to include. 3 Register at the Mercantile Division of the Public Registry and pay the 2 days see comments Annual Franchise Tax Agency : Mercantile Division of the Public Registry The entry fees are the following (since July 2013): - USD 50.00 for the rst USD 10,000.00 in capital stock - 0.75 cents for each additional 1,000.00 or fraction. The Annual Registration Tax of USD 250 must also be paid. Payments can be made at the National Bank of Panama or at any cashier of the Ministry of Economy and Finance. The National Bank of Panama has a booth at the Public Registry. 4 Obtain a notice of operations (“aviso de operación”) through the 1 day USD 55 for legal “Panama Emprende” website entities Agency : Ministry of Trade & Industry A notice of operations must be obtained. Law 5 of January 11, 2007 established a new on-line system called “Panama Emprende” (www.panamaemprende.gob.pa) which facilitates the creation of companies. The new system replaces the obtainment of commercial licenses for the obtainment of a notice of operation. In addition, since April 24th 2012, the Ministry of Trade and Industry and the municipality of Panama are interconnected through the online platform Panama Emprende. As a result, it is no longer required to visit the municipality to obtain a taxpayer number. Now entrepreneurs receive automatically the municipal taxpayer number together with the operation permit through Panama Emprende. Page 8   Economy and Finance. The National Bank of Panama has a booth at the Doing Public Registry. Business 2018 Panama 4 Obtain a notice of operations (“aviso de operación”) through the 1 day USD 55 for legal “Panama Emprende” website entities Agency : Ministry of Trade & Industry A notice of operations must be obtained. Law 5 of January 11, 2007 established a new on-line system called “Panama Emprende” (www.panamaemprende.gob.pa) which facilitates the creation of companies. The new system replaces the obtainment of commercial licenses for the obtainment of a notice of operation. In addition, since April 24th 2012, the Ministry of Trade and Industry and the municipality of Panama are interconnected through the online platform Panama Emprende. As a result, it is no longer required to visit the municipality to obtain a taxpayer number. Now entrepreneurs receive automatically the municipal taxpayer number together with the operation permit through Panama Emprende. 5 Request an employers’ inscription number and register employees at the 1 day no charge Social Security Administration Agency : Social Security Institute Employers and employees must be registered with Social Security. The Social Security Administration manages insurance programs for pension, health, unemployment, and occupational accident and injury. Applies to women only. Takes place simultaneously with previous procedure. Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required noti cations, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certi cation requirements. The most recent round of data collection was completed in June 2017. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility Submitting all relevant documents and obtaining connections are used. all necessary clearances, licenses, permits and certificates The construction company (BuildCo): Submitting all required notifications and - Is a limited liability company (or its legal equivalent) and operates in the receiving all necessary inspections economy’s largest business city. For 11 economies the data are also collected for the second largest business city. Obtaining utility connections for water and - Is 100% domestically and privately owned; has ve owners, none of whom sewerage is a legal entity. Has a licensed architect and a licensed engineer, both Registering and selling the warehouse after its registered with the local association of architects or engineers. BuildCo is completion not assumed to have any other employees who are technical or licensed Time required to complete each procedure experts, such as geological or topographical experts. (calendar days) - Owns the land on which the warehouse will be built and will sell the warehouse upon its completion. Does not include time spent gathering information The warehouse: Each procedure starts on a separate day— - Will be used for general storage activities, such as storage of books or though procedures that can be fully completed Page 9   stationery. Applies to women only. Takes place simultaneously with previous procedure. Doing Business 2018 Panama Dealing with Construction Permits This topic tracks the procedures, time and cost to build a warehouse—including obtaining necessary the licenses and permits, submitting all required noti cations, requesting and receiving all necessary inspections and obtaining utility connections. In addition, the Dealing with Construction Permits indicator measures the building quality control index, evaluating the quality of building regulations, the strength of quality control and safety mechanisms, liability and insurance regimes, and professional certi cation requirements. The most recent round of data collection was completed in June 2017. See the methodology for more information What the indicators measure Case study assumptions Procedures to legally build a warehouse (number) To make the data comparable across economies, several assumptions about the construction company, the warehouse project and the utility Submitting all relevant documents and obtaining connections are used. all necessary clearances, licenses, permits and certificates The construction company (BuildCo): Submitting all required notifications and - Is a limited liability company (or its legal equivalent) and operates in the receiving all necessary inspections economy’s largest business city. For 11 economies the data are also collected for the second largest business city. Obtaining utility connections for water and - Is 100% domestically and privately owned; has ve owners, none of whom sewerage is a legal entity. Has a licensed architect and a licensed engineer, both Registering and selling the warehouse after its registered with the local association of architects or engineers. BuildCo is completion not assumed to have any other employees who are technical or licensed Time required to complete each procedure experts, such as geological or topographical experts. (calendar days) - Owns the land on which the warehouse will be built and will sell the warehouse upon its completion. Does not include time spent gathering information The warehouse: Each procedure starts on a separate day— - Will be used for general storage activities, such as storage of books or though procedures that can be fully completed stationery. online are an exception to this rule - Will have two stories, both above ground, with a total constructed area of Procedure is considered completed once final approximately 1,300.6 square meters (14,000 square feet). Each oor will document is received be 3 meters (9 feet, 10 inches) high and will be located on a land plot of No prior contact with officials approximately 929 square meters (10,000 square feet) that is 100% owned by BuildCo, and the warehouse is valued at 50 times income per capita. Cost required to complete each procedure (% of - Will have complete architectural and technical plans prepared by a warehouse value) licensed architect. If preparation of the plans requires such steps as Official costs only, no bribes obtaining further documentation or getting prior approvals from external Building quality control index (0-15) agencies, these are counted as procedures. - Will take 30 weeks to construct (excluding all delays due to administrative Sum of the scores of six component indices: and regulatory requirements). Quality of building regulations (0-2) The water and sewerage connections: Quality control before construction (0-1) - Will be 150 meters (492 feet) from the existing water source and sewer Quality control during construction (0-3) tap. If there is no water delivery infrastructure in the economy, a borehole Quality control after construction (0-3) will be dug. If there is no sewerage infrastructure, a septic tank in the smallest size available will be installed or built. Liability and insurance regimes (0-2) - Will have an average water use of 662 liters (175 gallons) a day and an Professional certifications (0-4) average wastewater ow of 568 liters (150 gallons) a day. Will have a peak water use of 1,325 liters (350 gallons) a day and a peak wastewater ow of 1,136 liters (300 gallons) a day. - Will have a constant level of water demand and wastewater ow throughout the year; will be 1 inch in diameter for the water connection and 4 inches in diameter for the sewerage connection. Standardized Warehouse Page 10   and 4 inches in diameter for the sewerage connection. Doing Business 2018 Panama Standardized Warehouse Estimated value of warehouse USD 623,563.20 City Covered Panama City Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Procedures (number) 18 15.7 12.5 7.00 (Denmark) Time (days) 105 191.8 154.6 27.5 (Korea, Rep.) Cost (% of warehouse value) 2.5 3.2 1.6 0.10 (5 Economies) Building quality control index (0-15) 9.0 8.8 11.4 15.00 (3 Economies) Figure – Dealing with Construction Permits in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 71.02: Costa Rica (Rank: 70) 68.71: Colombia (Rank: 81) 68.16: Panama (Rank: 88) 64.63: Guatemala (Rank: 116) 63.59: Regional Average (Latin America & Caribbean) 60.16: El Salvador (Rank: 139) Note: The ranking of economies on the ease of dealing with construction permits is determined by sorting their distance to frontier scores for dealing with construction permits. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Dealing with Construction Permits in Panama – Procedure, Time and Cost Time Cost 1.2 100 1 Cost (% of warehouse value) 80 0.8 Time (days) 60 0.6 40 0.4 20 0.2 0 0 1 2 *3 *4 5 6 *7 8 *9 10 11 12 * 13 * 14 15 16 17 18 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Page 11   component indicators. Doing Business 2018 Panama Figure – Dealing with Construction Permits in Panama – Procedure, Time and Cost Time Cost 1.2 100 1 Cost (% of warehouse value) 80 0.8 Time (days) 60 0.6 40 0.4 20 0.2 0 0 1 2 *3 *4 5 6 *7 8 *9 10 11 12 * 13 * 14 15 16 17 18 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Dealing with Construction Permits in Panama and comparator economies – Measure of Quality 11.5 11.0 11.0 11.0 11 10.5 10.0 Index score 10 9.5 9.0 9 8.8 8.5 8 7.5 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Dealing with Construction Permits in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Request and obtain a good standing certi cate (certi cado de paz y 2 days USD 30 salvo) Agency : Public Registry O ce (Registro Público de Panamá) For the construction of a warehouse the rst step is to obtain a good standing certi cate issued by the Public Registry O ce (Registro Público de Panamá). This certi cate is required by the Directorate of Works and Construction of the Municipality of Panama to verify who the property owner is, where the project will be developed, the property number and the lot area. In particular, construction plans, the construction permit, and the occupation permit all must include the property number. Page 12   2 Obtain results of geotechnical study / soil test 30 days USD 2,000 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Doing Business 2018 Panama Details – Dealing with Construction Permits in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Request and obtain a good standing certi cate (certi cado de paz y 2 days USD 30 salvo) Agency : Public Registry O ce (Registro Público de Panamá) For the construction of a warehouse the rst step is to obtain a good standing certi cate issued by the Public Registry O ce (Registro Público de Panamá). This certi cate is required by the Directorate of Works and Construction of the Municipality of Panama to verify who the property owner is, where the project will be developed, the property number and the lot area. In particular, construction plans, the construction permit, and the occupation permit all must include the property number. 2 Obtain results of geotechnical study / soil test 30 days USD 2,000 Agency : Private licensed company According to Article 21.4 from Acuerdo 281 adopted by the Consejo Municipal de Panama in December 2016, as well as its earlier versions, a soil test is required for all new constructions. A soil test is a necessary step for development of the project. The soil investigation helps to determine the bearing capacity of the land, which helps to determine the load capability, the type and depth of foundation, in order to make sure to select a suitable construction technique. 3 Request and obtain environmental study 23 days USD 2,500 Agency : Independent Environmental Consultant The environmental impact study must be conducted by an independent environmental consultant and certi ed by the National Environmental Authority (ANAM). In the Doing Business case, given the intended use of the warehouse, the required environmental impact study is that of Type I. The process of completing an environmental impact study may take from 15 to 30 days, but the approval by the National Environmental Authority could take approximately 45 days, depending on the category of the environmental impact study. 4 Obtain results of topographical survey 14 days USD 1,250 Agency : Private Engineer According to Article 3.02 of the Municipal Decree Nº116 of July 9, 1996, Build Co. needs to obtain the topographical survey to design the location map. 5 Notarize form to deposit the environmental study 1 day USD 3 Agency : Notary The environmental expert will issue the environmental impact study to BuildCo. BuildCo must then complete a form and both the environmental impact study and the form must be notarized. The entire le is then submitted to the Ministry of Environment for further review. 6 Request and obtain preliminary approval from the Environmental 15 days USD 350 Authority Agency : Municipal O ce (Environmental Authority) While BuildCo. submits the paper work to the Municipaity, they can pay the fee at the head o ce of the Environmental Authority. Page 13   impact study and the form must be notarized. The entire le is then Doing submitted Business to the Ministry 2018 Panamaof Environment for further review. 6 Request and obtain preliminary approval from the Environmental 15 days USD 350 Authority Agency : Municipal O ce (Environmental Authority) While BuildCo. submits the paper work to the Municipaity, they can pay the fee at the head o ce of the Environmental Authority. 7 Submit drawings (anteproyecto) to the Municipality and obtain 7 days USD 1 clearance Agency : Municipality of Panama, Works and Construction Department (Dirección de Obras y Construcciones Municipales) The architect must ll out the petition form and submit the preliminary design (anteproyecto). The Municipal O ce has created a centralized window for ling of the preliminary project design. 8 Hold consultation with the Municipality to determine approvals 6 days USD 370 Agency : Municipality of Panama, Works and Construction Department (Dirección de Obras y Construcciones Municipales) This procedure is in the process of being incorporated into the online system administered through Panama Tramita. This will allow for a parallel approval process to be completed online. Until this electronic platform is fully implemented, a public o cial from the Municipal O ce determines the government o ces that must approve the project. Representatives of the di erent o ces are located in the Municipality but in separate o ces. The company or architect must obtain approvals from those o ces directly. 9 Request and obtain signature of certi ed re specialist 2 days no charge Agency : Certi ed Fire Specialist BuildCo must receive an approval of the project drawings related to re safety from an independent and certi ed specialist. This is then submitted to the Fire Department Safety O ce for approval. 10 Request and obtain preliminary approval from Ministry of Public Works 1 day USD 10 and Fire Department Safety O ce Agency : Municipal O ce (Ministry of Public Works, Fire Department Safety O ce) BuildCo must obtain a preliminary approval from the Works and Construction Department. In order to obtain the approval the project needs to comply with urban zoning regulations. The certi cation of land use is issued by the Land Management and Housing Department and requested by the Works and Construction Department only if the zoning lot does not appear in the following book "Documento grá co de zoni cación para la ciudad de Panamá- MIVI'2004", which is where the established land uses (zoning) are shown. 11 Request and obtain construction permit 15 days USD 6,236 Agency : Municipality of Panama, Works and Construction Department (Dirección de Obras y Construcciones Municipales) BuildCo must present the application to the director of the Municipal Construction and Works Authority, accompanied by two copies of the blueprints; the land use certi cation issued by the the approvals issued by the Fire Department Safety O ce, Ministry of Health, Ministry of Public Works, and Environmental Authority; the municipal good standing certi cate; and proof of registration of BuildCo with the Technical Board. Page 14   ciudad de Panamá- MIVI'2004", which is where the established land uses Doing (zoning) Business shown. Panama are 2018 11 Request and obtain construction permit 15 days USD 6,236 Agency : Municipality of Panama, Works and Construction Department (Dirección de Obras y Construcciones Municipales) BuildCo must present the application to the director of the Municipal Construction and Works Authority, accompanied by two copies of the blueprints; the land use certi cation issued by the the approvals issued by the Fire Department Safety O ce, Ministry of Health, Ministry of Public Works, and Environmental Authority; the municipal good standing certi cate; and proof of registration of BuildCo with the Technical Board. The cost is 1% of the project value. Unannounced construction permit regulation inspections may take place during construction. 12 Request and connect to water and sewerage services 14 days USD 287 Agency : Water and Sewerage Authority (Instituto de Acueductos y Alcantarillados Nacionales-IDAAN) The cost is based on the fee schedule provided in the Resolution No. 41 of July 27, 2013 from the Water and Sewerage Authority " Instituto de Acueductos y Alcantarillados Nacionales (IDAAN). The breakdown is as follows: 1. Water meter: USD 145.52 2. Installation USD 41.74 3. Metal deposit box: USD 48.14 4. Installation: USD 51.12 Receive inspection from Municipal O ce (Ministry of Public Works) 1 day no charge 13 Agency : Municipal O ce (Ministry of Public Works) While waiting for the water and sewage services, BuildCo, according to Article 64 of Building Regulations, receives an inspection by the Municipal O ce (Ministry of Public Works) in order to obtain the occupancy permit. Receive inspection from Fire Department Safety O ce 1 day no charge 14 Agency : Municipal O ce (Fire Department Safety O ce) At the same time BuildCo receives an inspection from the Fire Department so that the department can issue a permit. Inspectors come according to a schedule of visits that is de ned when the preliminary approval has been granted. 15 BuildCo. obtains the permit by Fire Department Safety O ce. 2 days USD 400 Agency : Municipal O ce (Fire Department Safety O ce) 16 Request and obtain occupancy permit 10 days USD 320 Agency : Municipal O ce (Fire Department Safety O ce) An approval must be received from the Fire Department before the occupancy permit is issued. An inspection may be carried out on the site. 17 Notary notarizes “declaration of improvement” (declaración de mejora) 2 days USD 100 Agency : Notary When the occupancy permit has been issued, BuildCo will need to notarize a Page 15   declaration, which must be drafted on an o cial form (escritura pública) An approval must be received from the Fire Department before the Businesspermit Doing occupancy 2018 is issued. Panama An inspection may be carried out on the site. 17 Notary notarizes “declaration of improvement” (declaración de mejora) 2 days USD 100 Agency : Notary When the occupancy permit has been issued, BuildCo will need to notarize a declaration, which must be drafted on an o cial form (escritura pública) 18 Register building with the Central Property Registry 7 days USD 1,871 Agency : Central Property Registry According to the fees published by the Public Registry (Resolution No. 212 of April 18, 2013 ) the "entry fee" for the constitution or transfer of ownership of real property (including improvements declaration) is USD 3 for each USD 1,000 of the property value. Takes place simultaneously with previous procedure. Details – Dealing with Construction Permits in Panama – Measure of Quality Answer Score Building quality control index (0-15) 9.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly speci ed in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 0.0 What types of inspections (if any) are required by law to be carried out during No inspections 0.0 construction? (0-2) are legally required during construction.. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not always done in practice during construction. Quality control after construction index (0-3) 3.0 Is there a nal inspection required by law to verify that the building was built in Yes, nal 2.0 accordance with the approved plans and regulations? (0-2) inspection is done by Page 16   Takes place simultaneously with previous procedure. Doing Business 2018 Panama Details – Dealing with Construction Permits in Panama – Measure of Quality Answer Score Building quality control index (0-15) 9.0 Quality of building regulations index (0-2) 2.0 How accessible are building laws and regulations in your economy? (0-1) Available online; 1.0 Free of charge. Which requirements for obtaining a building permit are clearly speci ed in the building List of required 1.0 regulations or on any accessible website, brochure or pamphlet? (0-1) documents; Fees to be paid; Required preapprovals. Quality control before construction index (0-1) 1.0 Which third-party entities are required by law to verify that the building plans are in Licensed 1.0 compliance with existing building regulations? (0-1) architect; Licensed engineer. Quality control during construction index (0-3) 0.0 What types of inspections (if any) are required by law to be carried out during No inspections 0.0 construction? (0-2) are legally required during construction.. Do legally mandated inspections occur in practice during construction? (0-1) Mandatory 0.0 inspections are not always done in practice during construction. Quality control after construction index (0-3) 3.0 Is there a nal inspection required by law to verify that the building was built in Yes, nal 2.0 accordance with the approved plans and regulations? (0-2) inspection is done by government agency. Do legally mandated nal inspections occur in practice? (0-1) Final inspection 1.0 always occurs in practice. Liability and insurance regimes index (0-2) 1.0 Which parties (if any) are held liable by law for structural aws or problems in the Architect or 1.0 building once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) engineer; Professional in charge of the supervision; Construction company. Page 17   Liability Doing 2018 regimes and insurance Business index (0-2) Panama 1.0 Which parties (if any) are held liable by law for structural aws or problems in the Architect or 1.0 building once it is in use (Latent Defect Liability or Decennial Liability)? (0-1) engineer; Professional in charge of the supervision; Construction company. Which parties (if any) are required by law to obtain an insurance policy to cover No party is 0.0 possible structural aws or problems in the building once it is in use (Latent Defect required by law Liability Insurance or Decennial Insurance)? (0-1) to obtain insurance . Professional certi cations index (0-4) 2.0 What are the quali cation requirements for the professional responsible for verifying University 1.0 that the architectural plans or drawings are in compliance with existing building degree in regulations? (0-2) architecture or engineering; Being a registered architect or engineer. What are the quali cation requirements for the professional who supervises the University 1.0 construction on the ground? (0-2) degree in engineering, construction or construction management; Being a registered architect or engineer. Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tari s index measures reliability of supply, transparency of tari s and the price of electricity. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions are (number) used. Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the receiving all necessary inspections data are also collected for the second largest business city. Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is purchasing material for these works in an area with no physical constraints. For example, the property is not Concluding any necessary supply contract and near a railway. obtaining final supply - Is a new construction and is being connected to electricity for the rst time. Page 18   Time required to complete each procedure - Has two stories with a total surface area of approximately 1,300.6 square architect or engineer. Doing Business 2018 Panama Getting Electricity This topic measures the procedures, time and cost required for a business to obtain a permanent electricity connection for a newly constructed warehouse. Additionally, the reliability of supply and transparency of tari s index measures reliability of supply, transparency of tari s and the price of electricity. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to obtain an electricity connection To make the data comparable across economies, several assumptions are (number) used. Submitting all relevant documents and obtaining The warehouse: all necessary clearances and permits - Is owned by a local entrepreneur and is used for storage of goods. Completing all required notifications and - Is located in the economy’s largest business city. For 11 economies the receiving all necessary inspections data are also collected for the second largest business city. Obtaining external installation works and possibly - Is located in an area where similar warehouses are typically located and is purchasing material for these works in an area with no physical constraints. For example, the property is not Concluding any necessary supply contract and near a railway. obtaining final supply - Is a new construction and is being connected to electricity for the rst time. Time required to complete each procedure - Has two stories with a total surface area of approximately 1,300.6 square (calendar days) meters (14,000 square feet). The plot of land on which it is built is 929 Is at least 1 calendar day square meters (10,000 square feet). Each procedure starts on a separate day Does not include time spent gathering The electricity connection: information - Is a permanent one with a three-phase, four-wire Y connection with a subscribed capacity of 140-kilo-volt-ampere (kVA) with a power factor of 1, Reflects the time spent in practice, with little when 1 kVA = 1 kilowatt (kW). follow-up and no prior contact with officials - Has a length of 150 meters. The connection is to either the low- or Cost required to complete each procedure (% of medium-voltage distribution network and is either overhead or income per capita) underground, whichever is more common in the area where the warehouse is located and requires works that involve the crossing of a 10- Official costs only, no bribes meter road (such as by excavation or overhead lines) but are all carried out Value added tax excluded on public land. There is no crossing of other owners’ private property The reliability of supply and transparency of because the warehouse has access to a road. tari s index (0-8) - Does not require work to install the internal wiring of the warehouse. This has already been completed up to and including the customer’s service Duration and frequency of power outages (0–3) panel or switchboard and the meter base. Tools to monitor power outages (0–1) Tools to restore power supply (0–1) The monthly consumption: Regulatory monitoring of utilities’ performance - It is assumed that the warehouse operates 30 days a month from 9:00 (0–1) a.m. to 5:00 p.m. (8 hours a day), with equipment utilized at 80% of capacity Financial deterrents limiting outages (0–1) on average and that there are no electricity cuts (assumed for simplicity reasons) and the monthly energy consumption is 26,880 kilowatt-hours Transparency and accessibility of tariffs (0–1) (kWh); hourly consumption is 112 kWh. Price of electricity (cents per kilowatt-hour)* - If multiple electricity suppliers exist, the warehouse is served by the Price based on monthly bill for commercial cheapest supplier. warehouse in case study - Tari s e ective in March of the current year are used for calculation of the price of electricity for the warehouse. Although March has 31 days, for * N o t e : Doing Business m e a s u r e s t h e p r i c e o f calculation purposes only 30 days are used. electricity, but it is not included in the distance to frontier score nor the ranking on the ease of getting electricity. Page 19   Standardized Connection frontier score nor the ranking on the ease of getting electricity. Doing Business 2018 Panama Standardized Connection Price of electricity (US cents per kWh) 21.2 Name of utility Gas Natural FENOSA City Covered Panama City Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Procedures (number) 5 5.5 4.7 2 (United Arab Emirates) Time (days) 35 66.0 79.1 10 (United Arab Emirates) Cost (% of income per capita) 17.2 927.4 63.0 0.00 (Japan) Reliability of supply and transparency of tariff 8 4.2 7.4 8.00 (28 Economies) index (0-8) Figure – Getting Electricity in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 89.77: Panama (Rank: 18) 88.21: Costa Rica (Rank: 21) 84.02: Guatemala (Rank: 36) 74.18: Colombia (Rank: 81) 71.40: El Salvador (Rank: 88) 70.45: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting electricity is determined by sorting their distance to frontier scores for getting electricity. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Getting Electricity in Panama – Procedure, Time and Cost Time Cost 35 16 30 14 Cost (% of income per capita) 12 25 10 Time (days) 20 8 15 6 10 4 5 Page 20   2 getting electricity. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Panama Figure – Getting Electricity in Panama – Procedure, Time and Cost Time Cost 35 16 30 14 Cost (% of income per capita) 12 25 10 Time (days) 20 8 15 6 10 4 5 2 0 0 1 *2 3 *4 5 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Getting Electricity in Panama and comparator economies – Measure of Quality 9 8 8 8 7 7 6 6 6 Index score 5 4.2 4 3 2 1 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Getting Electricity in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain electricity occupancy permit from the Fire Department 21 calendar days USD 250 Agency : The Municipality The certi cation of the internal wiring (ELEC-411 resolution) is obtained from the Fire Department in the context of the occupancy permit and certi es the internal electrical wiring installation. Safety requirements are governed by RIE (NEC + local regulations) - 1999 NESC 2007 Ministerio de Trabajo (reglamento de seguridad en la construcción) 2006. 2 Receive site visit by Fire Department for certi cation of internal wiring 7 calendar days USD 45 Agency : The Fire Department The Fire Department will visit the site to verify that the electrical installations Page 21   Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Doing Business 2018 Panama Details – Getting Electricity in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain electricity occupancy permit from the Fire Department 21 calendar days USD 250 Agency : The Municipality The certi cation of the internal wiring (ELEC-411 resolution) is obtained from the Fire Department in the context of the occupancy permit and certi es the internal electrical wiring installation. Safety requirements are governed by RIE (NEC + local regulations) - 1999 NESC 2007 Ministerio de Trabajo (reglamento de seguridad en la construcción) 2006. 2 Receive site visit by Fire Department for certi cation of internal wiring 7 calendar days USD 45 Agency : The Fire Department The Fire Department will visit the site to verify that the electrical installations are in accordance with the standards and approved designs. 3 Send request for connection to Gas Natural FENOSA 7 calendar days USD 1,846.32 Agency : Gas Natural FENOSA With the service application the customer must submit the following documents: • Copy of personal identi cation card or passport (or passport of the Directorate of Immigration and Naturalization), in the case of foreign natural person a copy of Certi cate of Public Registry of the Company for the legal person. • If the natural person or legal representative of the company is unable to attend personally to sign the supply contract, the following will be needed: o For individuals: original letter of authorization with copy of identity card of the grantor and of the authorized person. o For legal entity: Notarized power of attorney and copy of the identity document of the grantor and of the empowered. • For new buildings or facilities not occupied a copy of occupancy permit. • In cases of customers such as buildings, exhibitions, fairs, circuses, etc. requiring a temporary supply, they must submit the corresponding authorization to operate issued by competent authority. • Submit certi cation of good payment history or references of recent credit, i.e. not exceeding a period of 5 years from the date the request is made. In their absence, the applicant must pay the security deposit provisions established in the regulation. • Pay the connection tari according to the fee statement in force. An estimate does not have to be prepared, because there is xed installation fee of $107. In addition, a security deposit has to be paid of one month of expected future consumption. The security deposit is returned to the customer with interest after one year of service. For a detail of charges, see: http://www.asep.gob.pa/electric/tarifas.asp. If the customer's warehouse is less than 100m from power lines, the Act states that the work has to be free. Once the customer request arrives with Gas Natural FENOSA, a service order is established internally. 4 Receive external inspection by Gas Natural FENOSA's subcontractor 2 calendar days USD 0 Agency : Gas Natural FENOSA After the customer has submitted the service request a subcontractor of Gas Natural FENOSA inspects the site and determines what type of works are needed. It is not necessary for a representative of the customer to be present. Page 22   Once the customer request arrives with Gas Natural FENOSA, a service order Doing is established Business internally. 2018 Panama 4 Receive external inspection by Gas Natural FENOSA's subcontractor 2 calendar days USD 0 Agency : Gas Natural FENOSA After the customer has submitted the service request a subcontractor of Gas Natural FENOSA inspects the site and determines what type of works are needed. It is not necessary for a representative of the customer to be present. 5 Sign supply contract and await completion of external works 7 calendar days USD 0 Agency : Gas Natural FENOSA The utility, not the customer obtains the right of way from the Ministerio de Obras Publicas (MOP). The subcontractor carries out the connection works to the low voltage network. All material is provided by Gas Natural FENOSA. The customer is only responsible for the internal connection from their property to the meter box. 3 transformers of 50 kW each are installed and the connecting cables are laid out. Last, the meter is installed and the electricity starts owing. Takes place simultaneously with previous procedure. Details – Getting Electricity in Panama – Measure of Quality Answer Reliability of supply and transparency of tari index (0-8) 8 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.9 System average interruption frequency index (SAIFI) 0.9 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on Yes reliability of supply? Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face nes by the regulator (or both) if outages Yes exceed a certain cap? Communication of tari s and tari changes (0-1) 1 Are e ective tari s available online? Yes Link to the website, if available online http://www.gasnatur alfenosa.com.pa/pa/ Page 23   grandes+clientes/dis Takes place simultaneously with previous procedure. Doing Business 2018 Panama Details – Getting Electricity in Panama – Measure of Quality Answer Reliability of supply and transparency of tari index (0-8) 8 Total duration and frequency of outages per customer a year (0-3) 3 System average interruption duration index (SAIDI) 0.9 System average interruption frequency index (SAIFI) 0.9 What is the minimum outage time (in minutes) that the utility considers for the calculation of SAIDI/SAIFI 3.0 Mechanisms for monitoring outages (0-1) 1 Does the distribution utility use automated tools to monitor outages? Yes Mechanisms for restoring service (0-1) 1 Does the distribution utility use automated tools to restore service? Yes Regulatory monitoring (0-1) 1 Does a regulator—that is, an entity separate from the utility—monitor the utility’s performance on Yes reliability of supply? Financial deterrents aimed at limiting outages (0-1) 1 Does the utility either pay compensation to customers or face nes by the regulator (or both) if outages Yes exceed a certain cap? Communication of tari s and tari changes (0-1) 1 Are e ective tari s available online? Yes Link to the website, if available online http://www.gasnatur alfenosa.com.pa/pa/ grandes+clientes/dis tribucion+de+electri cidad/129710075688 7/tarifas.html Are customers noti ed of a change in tari ahead of the billing cycle? Yes Note: If the duration and frequency of outages is 100 or less, the economy is eligible to score on the Reliability of supply and transparency of tari index. If the duration and frequency of outages is not available, or is over 100, the economy is not eligible to score on the index. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has ve dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The Page 24   most recent round of data collection for the project was completed in June 2017. See the methodology for more information. If the minimum outage time considered for SAIDI/SAIFI is over 5 minutes, the economy is not eligible to score on the index. Doing Business 2018 Panama Registering Property This topic examines the steps, time and cost involved in registering property, assuming a standardized case of an entrepreneur who wants to purchase land and a building that is already registered and free of title dispute. In addition, the topic also measures the quality of the land administration system in each economy. The quality of land administration index has ve dimensions: reliability of infrastructure, transparency of information, geographic coverage, land dispute resolution, and equal access to property rights. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Procedures to legally transfer title on immovable To make the data comparable across economies, several assumptions property (number) about the parties to the transaction, the property and the procedures are used. Preregistration procedures (for example, checking for liens, notarizing sales agreement, The parties (buyer and seller): paying property transfer taxes) - Are limited liability companies (or the legal equivalent). Registration procedures in the economy's largest - Are located in the periurban area of the economy’s largest business city. business citya. For 11 economies the data are also collected for the second largest Postregistration procedures (for example, filling business city. title with municipality) - Are 100% domestically and privately owned. Time required to complete each procedure - Have 50 employees each, all of whom are nationals. (calendar days) - Perform general commercial activities. Does not include time spent gathering information The property (fully owned by the seller): - Has a value of 50 times income per capita, which equals the sale price. Each procedure starts on a separate day - though - Is fully owned by the seller. procedures that can be fully completed online - Has no mortgages attached and has been under the same ownership for are an exception to this rule the past 10 years. Procedure is considered completed once final - Is registered in the land registry or cadastre, or both, and is free of title document is received disputes. No prior contact with officials - Is located in a periurban commercial zone, and no rezoning is required. Cost required to complete each procedure (% of - Consists of land and a building. The land area is 557.4 square meters property value) (6,000 square feet). A two-story warehouse of 929 square meters (10,000 square feet) is located on the land. The warehouse is 10 years old, is in Official costs only (such as administrative fees, good condition, has no heating system and complies with all safety duties and taxes). standards, building codes and legal requirements. The property, Value Added Tax, Capital Gains Tax and illicit consisting of land and building, will be transferred in its entirety. payments are excluded - Will not be subject to renovations or additional construction following the Quality of land administration index (0-30) purchase. - Has no trees, natural water sources, natural reserves or historical Reliability of infrastructure index (0-8) monuments of any kind. Transparency of information index (0–6) - Will not be used for special purposes, and no special permits, such as for Geographic coverage index (0–8) residential use, industrial plants, waste storage or certain types of agricultural activities, are required. Land dispute resolution index (0–8) - Has no occupants, and no other party holds a legal interest in it. Equal access to property rights index (-2–0) Standard Property Transfer Property value USD 623,563.20 City Covered Panama City Page 25   Latin America & OECD high Doing Business 2018 Panama Standard Property Transfer Property value USD 623,563.20 City Covered Panama City Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Procedures (number) 7 7.2 4.6 1.00 (4 Economies) Time (days) 22.5 63.3 22.3 1.00 (3 Economies) Cost (% of property value) 2.4 5.8 4.2 0.00 (5 Economies) Quality of the land administration index (0-30) 11.0 12.0 22.7 29.00 (Singapore) Figure – Registering Property in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 74.36: Costa Rica (Rank: 49) 71.34: Colombia (Rank: 60) 67.92: El Salvador (Rank: 69) 65.17: Panama (Rank: 83) 64.44: Guatemala (Rank: 85) 55.36: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of registering property is determined by sorting their distance to frontier scores for registering property. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Registering Property in Panama – Procedure, Time and Cost Time Cost 2.5 20 2 Cost (% of property value) 15 Time (days) 1.5 10 1 5 0.5 0 0 1 *2 *3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Page 26   Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for registering property. These scores are the simple average of the distance to frontier scores for each of the component indicators. Doing Business 2018 Panama Figure – Registering Property in Panama – Procedure, Time and Cost Time Cost 2.5 20 2 Cost (% of property value) 15 Time (days) 1.5 10 1 5 0.5 0 0 1 *2 *3 4 5 6 7 Procedures (number) * This symbol is shown beside procedure numbers that take place simultaneously with the previous procedure. Note: Online procedures account for 0.5 days in the total time calculation. For economies that have a di erent procedure list for men and women, the graph shows the time for women. For more information on methodology, see the Doing Business website (http://www.doingbusiness.org/methodology). For details on the procedures re ected here, see the summary below. Figure – Registering Property in Panama and comparator economies – Measure of Quality 20 17.5 18 16.5 16 13.5 13.0 14 12.0 Index score 12 11.0 10 8 6 4 2 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Registering Property in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain a non-encumbrance certi cate at the Public Registry O ce 1-2 days USD30 Agency : Public Registry ("Registro Público de Panamá") (simultaneous with Procedures 2 & 3) Parties obtain a non-encumbrance certi cate before starting the transaction to verify if the property has any liens (e.g. mortgages, litigation). This certi cate is obtained at the Public Registry of Panamá. In many cases, it is advisable for property sales, that a surveyor is engaged to verify the correct measurements and location of the properties. 2 Obtain a certi cate of good standing online from the Autoridad Less than a day no cost online Nacional de Ingresos Públicos (online procedure Agency : Tax Agency ("Dirección General Impositiva" - DGI) and simultaneous Page 27   with procedure 1 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Doing Business 2018 Panama Details – Registering Property in Panama – Procedure, Time and Cost No. Procedure Time to Complete Associated Costs 1 Obtain a non-encumbrance certi cate at the Public Registry O ce 1-2 days USD30 Agency : Public Registry ("Registro Público de Panamá") (simultaneous with Procedures 2 & 3) Parties obtain a non-encumbrance certi cate before starting the transaction to verify if the property has any liens (e.g. mortgages, litigation). This certi cate is obtained at the Public Registry of Panamá. In many cases, it is advisable for property sales, that a surveyor is engaged to verify the correct measurements and location of the properties. 2 Obtain a certi cate of good standing online from the Autoridad Less than a day no cost online Nacional de Ingresos Públicos (online procedure Agency : Tax Agency ("Dirección General Impositiva" - DGI) and simultaneous with procedure 1 The seller must obtain a Real Estate Tax Clearance Certi cate. In order to and 3) obtain this document the property shall be registered at the Online System of the Directorate General of Revenues (DGI). This certi cate can be obtained online since 2009, and the printout must be submitted to the Public Registry. Once submitted, the Public Registry will verify it again online. This certi cate can be requested by the individual or entity which has a password to enter the DGI Online System, and must have the plot number and the page number (document number) issued by the Public Registry. Note that a land with a value under USD 30,000.00 is exempt of the Real Estate Property Tax. Owners pay this tax according to a progressive scale that ranges from 1.75% on the excess over USD 30,000.00 to 2.10%on the excess over USD 75,000.00.annually based on the cadastral value of the property. 3 Obtain a non-debt water certi cate ("certi cado de Paz y Salvo") 1 day USD1.25 Agency : Instituto de Acueductos y Alcantarillados Nacionales (I.D.A.A.N.) (simultaneous with Procedures 1 & 2) According to Law 77 of December 28, 2001, it is necessary to submit to the Public Registry a certi cate stating that no water bills are owed in order to register the sale and purchase deed. The “certi cado de Paz y Salvo” from IDAAN will be issued in 24 hours. 4 A lawyer prepares the sale agreement 2 days USD 200 (lawyer’s Agency : Lawyer's o ce fees) A lawyer usually prepares the sale agreement (it can also be prepared by a real estate broker or a bank). In any case, the sale agreement -called the Minuta- needs to be stamped by a Panamanian lawyer prior to being executed in a public deed. The sale agreement should mention that there are no mortgages or limitations on the property. The documentation shall include: (i) Non-encumbrance certi cate (obtained in Procedure 1) 5 Payment of the Transfer and Capital Gains Taxes 2 days 2% of property value Agency : Autoridad Nacional de Ingresos Públicos (ANIP) (transfer tax) + 3% of property value Prior to ling and recording the public deed at the Public Registry, the (capital gains tax, not Property Transfer Tax should be paid (if it is not in one of the cases included in the cost exempted by law) at the Ministry of Economics and Finance, by the seller. The calculation) transfer tax rate is 2% of the price of the transaction or the cadastral value, whichever is higher. There is no VAT in Panama for transfers of property (Law No.49 of 17th September 2009, which amends the Fiscal Code and adopts other scal measure, sets forth the obligation for sellers to pay a sum equivalent to 3% of the total value of the sale or of the cadastral value of Page 28   the property, whichever is higher, as an advance payment of the Income Tax are no mortgages or limitations on the property. The documentation shall Doing include: Business(i) Non-encumbrance 2018 Panama certi cate (obtained in Procedure 1) 5 Payment of the Transfer and Capital Gains Taxes 2 days 2% of property value Agency : Autoridad Nacional de Ingresos Públicos (ANIP) (transfer tax) + 3% of property value Prior to ling and recording the public deed at the Public Registry, the (capital gains tax, not Property Transfer Tax should be paid (if it is not in one of the cases included in the cost exempted by law) at the Ministry of Economics and Finance, by the seller. The calculation) transfer tax rate is 2% of the price of the transaction or the cadastral value, whichever is higher. There is no VAT in Panama for transfers of property (Law No.49 of 17th September 2009, which amends the Fiscal Code and adopts other scal measure, sets forth the obligation for sellers to pay a sum equivalent to 3% of the total value of the sale or of the cadastral value of the property, whichever is higher, as an advance payment of the Income Tax applicable to any pro t resulting from the sale operation. In such cases, the taxpayer may opt to consider such 3% as the de nitive Income Tax to be paid for pro ts earned. However, where such 3% advance payment exceeds the amount resulting from application of the nominal rate of such tax, which is 10% of the di erence between the real value of the sale and the sum of the cost to acquire the property plus the expenses required to carry out the operation, the seller taxpayer may ask the General Income Directorate for reimbursement of the sums paid in excess, whether in cash or by means of a scal credit that can be used to pay other taxes). Previously and since July 2006, the 10% of capital gains tax was calculated and paid at the moment of the sale as well as mentioned in the sale act by the notary; the gain was calculated as sales minus buying cost, minus expenses (lawyers, notary fees). 6 Notarization of the sale agreement and preparation of the public deed 2 days USD 100 Agency : Notary The notary notarizes the sale agreement. All transfers of property must be notarized before submitting them to the Public Registry for registration. The documentation shall include: (i) Sale agreement (prepared in Procedure 4); (ii) Receipt of payment of the property transfer tax (obtained in Procedure 5); (iii) Certi cate of good standing with the Real Estate tax (obtained in Procedure 2); (iv) Good standing certi cate with water utility services (obtained in Procedure 3) 7 The public deed is led and recorded at the Public Registry O ce under 2 weeks 0.3% of property the name of the buyer price (registration Agency : Public Registry ("Registro Público de Panamá") fee) + USD 5 for filing + USD 10 for The public deed is led and recorded at the Public Registry under the name analyzing the of the buyer. The registration fee is paid at the National Bank in favor of the document Public Registry O ce. The bank has a branch inside the registry o ce. Since 1999, there has been an optional expedited procedure in which one can obtain registration within 24 hours, at an additional cost of $250 though not many people choose it because it is rather expensive. The documentation shall include: the notarized public deed (obtained in Procedure 6). In May, 2013 an automated system between the Cadastre and the Land Registry was implemented. The system is responsible to share the information involving the registration with the cadastre once the application is lled. The cadastre then records the new buyer for tax purposes as the new person responsible for the payment of the property tax. The Public Registry is implementing an online system which would allow lawyers to submit all the documents required to register the transfer of an immovable property. Page 29   Procedure 2); (iv) Good standing certi cate with water utility services Doing (obtained Business Procedure in 2018 3) Panama 7 The public deed is led and recorded at the Public Registry O ce under 2 weeks 0.3% of property the name of the buyer price (registration Agency : Public Registry ("Registro Público de Panamá") fee) + USD 5 for filing + USD 10 for The public deed is led and recorded at the Public Registry under the name analyzing the of the buyer. The registration fee is paid at the National Bank in favor of the document Public Registry O ce. The bank has a branch inside the registry o ce. Since 1999, there has been an optional expedited procedure in which one can obtain registration within 24 hours, at an additional cost of $250 though not many people choose it because it is rather expensive. The documentation shall include: the notarized public deed (obtained in Procedure 6). In May, 2013 an automated system between the Cadastre and the Land Registry was implemented. The system is responsible to share the information involving the registration with the cadastre once the application is lled. The cadastre then records the new buyer for tax purposes as the new person responsible for the payment of the property tax. The Public Registry is implementing an online system which would allow lawyers to submit all the documents required to register the transfer of an immovable property. Takes place simultaneously with previous procedure. Details – Registering Property in Panama – Measure of Quality Answer Score Quality of the land administration index (0-30) 11.0 Reliability of infrastructure index (0-8) 3.0 What is the institution in charge of immovable property registration? Registro Público de Panamá In what format are the majority of title or deed records kept in the largest business city Computer/Scann 1.0 —in a paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Autoridad Nacional de Administración de Tierras In what format are the majority of maps of land plots kept in the largest business city— Paper 0.0 in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing No 0.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the Separate 0.0 cadastral or mapping agency kept in a single database, in di erent but linked databases databases or in separate databases? Page 30   Do the immovable property registration agency and cadastral or mapping agency use Yes 1.0 Takes place simultaneously with previous procedure. Doing Business 2018 Panama Details – Registering Property in Panama – Measure of Quality Answer Score Quality of the land administration index (0-30) 11.0 Reliability of infrastructure index (0-8) 3.0 What is the institution in charge of immovable property registration? Registro Público de Panamá In what format are the majority of title or deed records kept in the largest business city Computer/Scann 1.0 —in a paper format or in a computerized format (scanned or fully digital)? ed Is there an electronic database for checking for encumbrances (liens, mortgages, Yes 1.0 restrictions and the like)? Institution in charge of the plans showing legal boundaries in the largest business city: Autoridad Nacional de Administración de Tierras In what format are the majority of maps of land plots kept in the largest business city— Paper 0.0 in a paper format or in a computerized format (scanned or fully digital)? Is there an electronic database for recording boundaries, checking plans and providing No 0.0 cadastral information (geographic information system)? Is the information recorded by the immovable property registration agency and the Separate 0.0 cadastral or mapping agency kept in a single database, in di erent but linked databases databases or in separate databases? Do the immovable property registration agency and cadastral or mapping agency use Yes 1.0 the same identi cation number for properties? Transparency of information index (0–6) 3.0 Who is able to obtain information on land ownership at the agency in charge of Freely accessible 1.0 immovable property registration in the largest business city? by anyone Is the list of documents that are required to complete any type of property transaction Yes, online 0.5 made publicly available–and if so, how? Link for online access: http://www.pana matramita.gob.p a/tramite/inscrip ci%C3%B3n-de- propiedad#Parti cular Is the applicable fee schedule for any property transaction at the agency in charge of Yes, online 0.5 immovable property registration in the largest business city made publicly available– and if so, how? Link for online access: https://www.regi stro- publico.gob.pa/i ndex.php/2016- 03-18-19-39- Page 31   36/servicios-web- immovable property registration in the largest business city made publicly available– and if Doing so, how? 2018 Business Panama Link for online access: https://www.regi stro- publico.gob.pa/i ndex.php/2016- 03-18-19-39- 36/servicios-web- sir/calculadora- registral Does the agency in charge of immovable property registration commit to delivering a No 0.0 legally binding document that proves property ownership within a speci c time frame– and if so, how does it communicate the service standard? Link for online access: Is there a speci c and separate mechanism for ling complaints about a problem that No 0.0 occurred at the agency in charge of immovable property registration? Contact information: Are there publicly available o cial statistics tracking the number of transactions at the Yes 0.5 immovable property registration agency? Number of property transfers in the largest business city in 2015: 36745.0 Who is able to consult maps of land plots in the largest business city? Anyone who 0.5 pays the o cial fee Is the applicable fee schedule for accessing maps of land plots made publicly available Yes, in person 0.0 —and if so, how? Link for online access: Does the cadastral or mapping agency commit to delivering an updated map within a No 0.0 speci c time frame—and if so, how does it communicate the service standard? Link for online access: Is there a speci c and separate mechanism for ling complaints about a problem that No 0.0 occurred at the cadastral or mapping agency? Contact information: Geographic coverage index (0–8) 0.0 Are all privately held land plots in the economy formally registered at the immovable No 0.0 property registry? Are all privately held land plots in the largest business city formally registered at the No 0.0 immovable property registry? Are all privately held land plots in the economy mapped? No 0.0 Are all privately held land plots in the largest business city mapped? No 0.0 Land dispute resolution index (0–8) 5.0 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Page 32   Land dispute Doing 2018 index resolution Business (0–8) Panama 5.0 Does the law require that all property sale transactions be registered at the immovable Yes 1.5 property registry to make them opposable to third parties? Is the system of immovable property registration subject to a state or private Yes 0.5 guarantee? Is there a speci c compensation mechanism to cover for losses incurred by parties who No 0.0 engaged in good faith in a property transaction based on erroneous information certi ed by the immovable property registry? Does the legal system require a control of legality of the documents necessary for a Yes 0.5 property transaction (e.g., checking the compliance of contracts with requirements of the law)? If yes, who is responsible for checking the legality of the documents? Registrar; Notary. Does the legal system require veri cation of the identity of the parties to a property Yes 0.5 transaction? If yes, who is responsible for verifying the identity of the parties? Registrar; Notary. Is there a national database to verify the accuracy of identity documents? Yes 1.0 For a standard land dispute between two local businesses over tenure rights of a Cuarto de lo Civil property worth 50 times gross national income (GNI) per capita and located in the del Primer largest business city, what court would be in charge of the case in the rst instance? Circuito Judicial de Panamá (Civil section of the rst instance court of Panama) How long does it take on average to obtain a decision from the rst-instance court for Between 2 and 3 1.0 such a case (without appeal)? years Are there any statistics on the number of land disputes in the rst instance? No 0.0 Number of land disputes in the largest business city in 2015: Equal access to property rights index (-2–0) 0.0 Do unmarried men and unmarried women have equal ownership rights to property? Yes 0.0 Do married men and married women have equal ownership rights to property? Yes 0.0 Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the e ectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions Rights of borrowers and lenders through through 2 sets of indicators. The depth of credit information index collateral laws (0-10) Page 33   measures rules and practices a ecting the coverage, scope and Do married men and married women have equal ownership rights to property? Yes 0.0 Doing Business 2018 Panama Getting Credit This topic explores two sets of issues—the strength of credit reporting systems and the e ectiveness of collateral and bankruptcy laws in facilitating lending. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Strength of legal rights index (0–12) Doing Business assesses the sharing of credit information and the legal rights of borrowers and lenders with respect to secured transactions Rights of borrowers and lenders through through 2 sets of indicators. The depth of credit information index collateral laws (0-10) measures rules and practices a ecting the coverage, scope and Protection of secured creditors’ rights through accessibility of credit information available through a credit registry or a bankruptcy laws (0-2) credit bureau. The strength of legal rights index measures the degree to Depth of credit information index (0–8) which collateral and bankruptcy laws protect the rights of borrowers and lenders and thus facilitate lending. For each economy it is first determined Scope and accessibility of credit information whether a unitary secured transactions system exists. Then two case distributed by credit bureaus and credit scenarios, case A and case B, are used to determine how a nonpossessory registries (0-8) security interest is created, publicized and enforced according to the law. Credit bureau coverage (% of adults) Special emphasis is given to how the collateral registry operates (if Number of individuals and firms listed in largest registration of security interests is possible). The case scenarios involve a credit bureau as a percentage of adult population secured borrower, company ABC, and a secured lender, BizBank. Credit registry coverage (% of adults) In some economies the legal framework for secured transactions will allow Number of individuals and firms listed in credit only case A or case B (not both) to apply. Both cases examine the same set registry as a percentage of adult population of legal provisions relating to the use of movable collateral. Several assumptions about the secured borrower (ABC) and lender (BizBank) are used: - ABC is a domestic limited liability company (or its legal equivalent). - ABC has up to 50 employees. - ABC has its headquarters and only base of operations in the economy’s largest business city. For 11 economies the data are also collected for the second largest business city. - Both ABC and BizBank are 100% domestically owned. The case scenarios also involve assumptions. In case A, as collateral for the loan, ABC grants BizBank a nonpossessory security interest in one category of movable assets, for example, its machinery or its inventory. ABC wants to keep both possession and ownership of the collateral. In economies where the law does not allow nonpossessory security interests in movable property, ABC and BizBank use a fiduciary transfer-of-title arrangement (or a similar substitute for nonpossessory security interests). In case B, ABC grants BizBank a business charge, enterprise charge, floating charge or any charge that gives BizBank a security interest over ABC’s combined movable assets (or as much of ABC’s movable assets as possible). ABC keeps ownership and possession of the assets. Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Strength of legal rights index (0-12) 7 5.3 6.0 12.00 (4 Economies) Depth of credit information index (0-8) 8 4.8 6.6 8.00 (34 Economies) Page 34   Credit registry coverage (% of adults) 0.0 14.0 18.3 100.00 (3 Economies) possible). ABC keeps ownership and possession of the assets. Doing Business 2018 Panama Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Strength of legal rights index (0-12) 7 5.3 6.0 12.00 (4 Economies) Depth of credit information index (0-8) 8 4.8 6.6 8.00 (34 Economies) Credit registry coverage (% of adults) 0.0 14.0 18.3 100.00 (3 Economies) Credit bureau coverage (% of adults) 66.8 43.1 63.7 100.00 (23 Economies) Figure – Getting Credit in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 95.00: Colombia (Rank: 2) 85.00: Costa Rica (Rank: 12) 80.00: Guatemala (Rank: 20) 80.00: El Salvador (Rank: 20) 75.00: Panama (Rank: 29) 50.94: Regional Average (Latin America & Caribbean) Note: The ranking of economies on the ease of getting credit is determined by sorting their distance to frontier scores for getting credit. These scores are the distance to frontier score for the sum of the strength of legal rights index and the depth of credit information index. Figure – Legal Rights in Panama and comparator economies 14 12 12 10 10 9 9 Index score 8 7 6 5.3 4 2 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Legal Rights in Panama Strength of legal rights index (0-12) 7 Does an integrated or uni ed legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without Yes requiring a speci c description of collateral? Page 35   Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Doing Business 2018 Panama Details – Legal Rights in Panama Strength of legal rights index (0-12) 7 Does an integrated or uni ed legal framework for secured transactions that extends to the creation, publicity and No enforcement of functional equivalents to security interests in movable assets exist in the economy? Does the law allow businesses to grant a non possessory security right in a single category of movable assets, without Yes requiring a speci c description of collateral? Does the law allow businesses to grant a non possessory security right in substantially all of its assets, without requiring Yes a speci c description of collateral? May a security right extend to future or after-acquired assets, and does it extend automatically to the products, proceeds No or replacements of the original assets? Is a general description of debts and obligations permitted in collateral agreements; can all types of debts and Yes obligations be secured between parties; and can the collateral agreement include a maximum amount for which the assets are encumbered? Is a collateral registry in operation for both incorporated and non-incorporated entities, that is uni ed geographically Yes and by asset type, with an electronic database indexed by debtor's name? Does a notice-based collateral registry exist in which all functional equivalents can be registered? No Does a modern collateral registry exist in which registrations, amendments, cancellations and searches can be No performed online by any interested third party? Are secured creditors paid rst (i.e. before tax claims and employee claims) when a debtor defaults outside an insolvency Yes procedure? Are secured creditors paid rst (i.e. before tax claims and employee claims) when a business is liquidated? Yes Are secured creditors subject to an automatic stay on enforcement when a debtor enters a court-supervised No reorganization procedure? Does the law protect secured creditors’ rights by providing clear grounds for relief from the stay and/or sets a time limit for it? Does the law allow parties to agree on out of court enforcement at the time a security interest is created? Does the law Yes allow the secured creditor to sell the collateral through public auction or private tender, as well as, for the secured creditor to keep the asset in satisfaction of the debt? Figure – Credit Information in Panama and comparator economies 10 8 8 7 7 7 7 Index score 6 4.8 4 2 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Credit Information in Panama Page 36   0 Panama Doing Business 2018 Colombia Panama Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Credit Information in Panama Credit Credit Depth of credit information index (0-8) bureau registry Score Are data on both firms and individuals distributed? Yes No 1 Are both positive and negative credit data distributed? Yes No 1 Are data from retailers or utility companies - in addition to data from banks and financial institutions - Yes No 1 distributed? Are at least 2 years of historical data distributed? (Credit bureaus and registries that distribute more Yes No 1 than 10 years of negative data or erase data on defaults as soon as they are repaid obtain a score of 0 for this component.) Are data on loan amounts below 1% of income per capita distributed? Yes No 1 By law, do borrowers have the right to access their data in the credit bureau or credit registry? Yes No 1 Can banks and financial institutions access borrowers’ credit information online (for example, Yes No 1 through an online platform, a system-to-system connection or both)? Are bureau or registry credit scores offered as a value-added service to help banks and financial Yes No 1 institutions assess the creditworthiness of borrowers? Score ("yes" to either public bureau or private registry) 8 Note: An economy receives a score of 1 if there is a "yes" to either bureau or registry. If the credit bureau or registry is not operational or covers less than 5% of the adult population, the total score on the depth of credit information index is 0. Coverage Credit bureau Credit registry Number of individuals 1,678,060 0 Number of firms 80,793 0 Total 1,758,853 0 Percentage of adult population 66.8 0.0 Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related-party transactions The business (Buyer): Extent of director liability index (0–10): Ability of - Is a publicly traded corporation listed on the economy’s most important minority shareholders to sue and hold interested stock exchange. If the number of publicly traded companies listed on that directors liable for prejudicial related-party exchange is less than 10, or if there is no stock exchange in the economy, it is assumed that Buyer is a large private company with multiple Page 37   transactions; Available legal remedies (damages, Percentage of adult population 66.8 0.0 Doing Business 2018 Panama Protecting Minority Investors This topic measures the strength of minority shareholder protections against misuse of corporate assets by directors for their personal gain as well as shareholder rights, governance safeguards and corporate transparency requirements that reduce the risk of abuse. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Extent of disclosure index (0–10): Review and To make the data comparable across economies, a case study uses several approval requirements for related-party assumptions about the business and the transaction. transactions; Disclosure requirements for related-party transactions The business (Buyer): Extent of director liability index (0–10): Ability of - Is a publicly traded corporation listed on the economy’s most important minority shareholders to sue and hold interested stock exchange. If the number of publicly traded companies listed on that directors liable for prejudicial related-party exchange is less than 10, or if there is no stock exchange in the economy, it transactions; Available legal remedies (damages, is assumed that Buyer is a large private company with multiple disgorgement of profits, fines, imprisonment, shareholders. rescission of the transaction) - Has a board of directors and a chief executive o cer (CEO) who may legally act on behalf of Buyer where permitted, even if this is not speci cally Ease of shareholder suits index (0–10): Access to required by law. internal corporate documents; Evidence - Has a supervisory board (applicable to economies with a two-tier board obtainable during trial and allocation of legal system) on which 60% of the shareholder-elected members have been expenses appointed by Mr. James, who is Buyer’s controlling shareholder and a Extent of conflict of interest regulation index member of Buyer’s board of directors. (0–10): Simple average of the extent of disclosure, - Has not adopted any bylaws or articles of association that di er from extent of director liability and ease of default minimum standards and does not follow any nonmandatory codes, shareholder indices principles, recommendations or guidelines relating to corporate Extent of shareholder rights index (0-10): governance. Shareholders’ rights and role in major corporate - Is a manufacturing company with its own distribution network. decisions Extent of ownership and control index (0-10): The transaction involves the following details: Governance safeguards protecting shareholders - Mr. James owns 60% of Buyer and elected two directors to Buyer’s ve- from undue board control and entrenchment member board. Extent of corporate transparency index (0-10): - Mr. James also owns 90% of Seller, a company that operates a chain of Corporate transparency on ownership stakes, retail hardware stores. Seller recently closed a large number of its stores. compensation, audits and financial prospects - Mr. James proposes that Buyer purchase Seller’s unused eet of trucks to expand Buyer’s distribution of its food products, a proposal to which Buyer Extent of shareholder governance index (0–10): agrees. The price is equal to 10% of Buyer’s assets and is higher than the Simple average of the extent of shareholders market value. rights, extent of ownership and control and - The proposed transaction is part of the company’s ordinary course of extent of corporate transparency indices business and is not outside the authority of the company. Strength of minority investor protection index - Buyer enters into the transaction. All required approvals are obtained, (0–10): Simple average of the extent of conflict of and all required disclosures made (that is, the transaction is not interest regulation and extent of shareholder fraudulent). governance indices - The transaction causes damages to Buyer. Shareholders sue Mr. James and the other parties that approved the transaction. Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Extent of conflict of interest regulation index (0- 5.3 5.3 6.4 9.3 (New Zealand) 10) Extent of shareholder governance index (0-10) 5 4.1 6.4 Page 38   9.00 (Kazakhstan) and the other parties that approved the transaction. Doing Business 2018 Panama Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Extent of conflict of interest regulation index (0- 5.3 5.3 6.4 9.3 (New Zealand) 10) Extent of shareholder governance index (0-10) 5 4.1 6.4 9.00 (Kazakhstan) Figure – Protecting Minority Investors in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 73.33: Colombia (Rank: 16) 51.67: Panama (Rank: 96) 48.33: Costa Rica (Rank: 119) 47.24: Regional Average (Latin America & Caribbean) 38.33: El Salvador (Rank: 160) 31.67: Guatemala (Rank: 172) Note: The ranking of economies on the strength of minority investor protections is determined by sorting their distance to frontier scores for protecting minority investors. These scores are the simple average of the distance to frontier scores for the extent of con ict of interest regulation index and the extent of shareholder governance index. Figure – Protecting Minority Investors in Panama and comparator economies – Measure of Quality Panama 6 4 4 1 8 8 Colombia 6 7 9 8 6 8 Costa Rica 3 5 5 4 4 8 El Salvador 6 0 3 1 6 7 Guatemala 3 2 3 1 5 5 OECD high income 7.3 5.6 6.5 5.2 6.3 7.4 Latin America & Caribbean 4.1 5.4 4.4 3.4 5.6 6.5 0 5 10 15 20 25 30 35 40 45 50 Sub-Indicator Score Extent of corporate transparency index (0­10) Extent of director liability index (0­10) Extent of disclosure index (0­10) Extent of ownership and control index (0­10) Extent of shareholder rights index (0­10) Ease of shareholder suits index (0­10) Details – Protecting Minority Investors in Panama – Measure of Quality Answer Score Page 39   Extent of ownership and control index (0­10) Extent of shareholder rights index (0­10) Ease of shareholder suits index (0­10) Doing Business 2018 Panama Details – Protecting Minority Investors in Panama – Measure of Quality Answer Score Extent of con ict of interest regulation index (0-10) 5.3 Extent of disclosure index (0-10) 4 Which corporate body is legally su cient to approve the Buyer-Seller transaction? (0-3) Shareholders or 1.0 board of directors including interested parties Must an external body review the terms of the transaction before it takes place? (0-1) No 0.0 Must Mr. James disclose his con ict of interest to the board of directors? (0-2) No disclosure 0.0 obligation Must Buyer disclose the transaction in published periodic lings (annual reports)? (0-2) Disclosure on 2.0 the transaction and on the con ict of interest Must Buyer immediately disclose the transaction to the public and/or shareholders? (0- Disclosure on 1.0 2) the transaction only Extent of director liability index (0-10) 4 Can shareholders representing 10% of Buyer's share capital sue directly or derivatively Yes 1.0 for the damage the transaction caused to Buyer? (0-1) Can shareholders hold the interested director liable for the damage the transaction Liable if negligent 1.0 caused to Buyer? (0-2) Can shareholders hold the other directors liable for the damage the transaction caused Liable if negligent 1.0 to Buyer (0-2) Must Mr. James pay damages for the harm caused to Buyer upon a successful claim by Yes 1.0 shareholders? (0-1) Must Mr. James repay pro ts made from the transaction upon a successful claim by No 0.0 shareholders? (0-1) Is Mr. James disquali ed or ned and imprisoned upon a successful claim by No 0.0 shareholders? (0-1) Can a court void the transaction upon a successful claim by shareholders? (0-2) Only in case of 0.0 fraud or bad faith Ease of shareholder suits index (0-10) 8 Before suing can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plainti obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 Page 40   shareholder Ease ofBusiness Doing suits index 2018 (0-10) Panama 8 Before suing can shareholders representing 10% of Buyer's share capital inspect the Yes 1.0 transaction documents? (0-1) Can the plainti obtain any documents from the defendant and witnesses at trial? (0-3) Any relevant 3.0 document Can the plainti request categories of documents from the defendant without Yes 1.0 identifying speci c ones? (0-1) Can the plainti directly question the defendant and witnesses at trial? (0-2) Yes 2.0 Is the level of proof required for civil suits lower than that of criminal cases? (0-1) No 0.0 Can shareholder plainti s recover their legal expenses from the company? (0-2) Yes if successful 1.0 Extent of shareholder governance index (0-10) 5 Extent of shareholder rights index (0-10) 8 Does the sale of 51% of Buyer's assets require shareholder approval? Yes 1.0 Can shareholders representing 10% of Buyer's share capital call for a meeting of Yes 1.0 shareholders? Must Buyer obtain its shareholders’ approval every time it issues new shares? Yes 1.0 Do shareholders automatically receive preemption rights every time Buyer issues new Yes 1.0 shares? Must shareholders approve the election and dismissal of the external auditor? Yes 1.0 Are changes to the rights of a class of shares only possible if the holders of the a ected Yes 1.0 shares approve? Assuming that Buyer is a limited company, does the sale of 51% of its assets require Yes 1.0 member approval? Assuming that Buyer is a limited company, can members representing 10% call for a Yes 1.0 meeting of members? Assuming that Buyer is a limited company, must all members consent to add a new No 0.0 member? Assuming that Buyer is a limited company, must a member rst o er to sell their No 0.0 interest to the existing members before they can sell to non-members? Extent of ownership and control index (0-10) 1 Is it forbidden to appoint the same individual as CEO and chair of the board of No 0.0 directors? Must the board of directors include independent and nonexecutive board members? No 0.0 Can shareholders remove members of the board of directors without cause before the Yes 1.0 end of their term? Must the board of directors include a separate audit committee exclusively comprising No 0.0 board members? Must a potential acquirer make a tender o er to all shareholders upon acquiring 50% No 0.0 Page 41   of Buyer? Must the board of directors include a separate audit committee exclusively comprising No 0.0 board Doing members? Business 2018 Panama Must a potential acquirer make a tender o er to all shareholders upon acquiring 50% No 0.0 of Buyer? Must Buyer pay declared dividends within a maximum period set by law? No 0.0 Is a subsidiary prohibited from acquiring shares issued by its parent company? No 0.0 Assuming that Buyer is a limited company, must Buyer have a mechanism to resolve No 0.0 disagreements among members? Assuming that Buyer is a limited company, must a potential acquirer make a tender No 0.0 o er to all shareholders upon acquiring 50% of Buyer? Assuming that Buyer is a limited company, must Buyer distribute pro ts within a No 0.0 maximum period set by law? Extent of corporate transparency index (0-10) 6 Must Buyer disclose direct and indirect bene cial ownership stakes representing 5%? No 0.0 Must Buyer disclose information about board members’ primary employment and Yes 1.0 directorships in other companies? Must Buyer disclose the compensation of individual managers? Yes 1.0 Must a detailed notice of general meeting be sent 21 days before the meeting? No 0.0 Can shareholders representing 5% of Buyer’s share capital put items on the general Yes 1.0 meeting agenda? Must Buyer's annual nancial statements be audited by an external auditor? Yes 1.0 Must Buyer disclose its audit reports to the public? Yes 1.0 Assuming that Buyer is a limited company, must members meet at least once a year? No 0.0 Assuming that Buyer is a limited company, can members representing 5% put items on Yes 1.0 the meeting agenda? Assuming that Buyer is a limited company, must Buyer's annual nancial statements be No 0.0 audited by an external auditor? Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures the administrative burden in paying taxes and contributions. The most recent round of data collection for the project was completed on June 30, 2017 covering for the Paying Taxes indicator calendar year 2016 (January 1, 2016 – December 31, 2016). Last year (Doing Business 2017) the scope of data collection was expanded to better understand the overall tax environment in an economy. The questionnaire was expanded to include new questions on post- ling processes: VAT refund and tax audit. The data shows where post ling processes and practices work e ciently and what drives the di erences in the overall tax compliance cost across economies. The new section covers both the legal framework and the administrative burden on businesses to comply with post ling processes. See the methodology for more information. What the indicators measure Case study assumptions Page 42   Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory Assuming that Buyer is a limited company, must Buyer's annual nancial statements be No 0.0 audited by an external auditor? Doing Business 2018 Panama Paying Taxes This topic records the taxes and mandatory contributions that a medium-size company must pay or withhold in a given year, as well as measures the administrative burden in paying taxes and contributions. The most recent round of data collection for the project was completed on June 30, 2017 covering for the Paying Taxes indicator calendar year 2016 (January 1, 2016 – December 31, 2016). Last year (Doing Business 2017) the scope of data collection was expanded to better understand the overall tax environment in an economy. The questionnaire was expanded to include new questions on post- ling processes: VAT refund and tax audit. The data shows where post ling processes and practices work e ciently and what drives the di erences in the overall tax compliance cost across economies. The new section covers both the legal framework and the administrative burden on businesses to comply with post ling processes. See the methodology for more information. What the indicators measure Case study assumptions Tax payments for a manufacturing company in Using a case scenario, Doing Business records taxes and mandatory 2016 (number per year adjusted for electronic and contributions a medium size company must pay in a year, and measures joint ling and payment) the administrative burden of paying taxes, contributions and dealing with post ling processes. Information is also compiled on frequency of ling Total number of taxes and contributions paid, and payments, time taken to comply with tax laws, time taken to comply including consumption taxes (value added tax, with the requirements of post ling processes and time waiting. sales tax or goods and service tax) Method and frequency of filing and payment To make data comparable across economies, several assumptions are used: Time required to comply with 3 major taxes - TaxpayerCo is a medium-size business that started operations on January (hours per year) 1, 2015. It produces ceramic flowerpots and sells them at retail. All taxes Collecting information, computing tax payable and contributions recorded are paid in the second year of operation Completing tax return, filing with agencies (calendar year 2016). Taxes and mandatory contributions are measured at all levels of government. Arranging payment or withholding Preparing separate tax accounting books, if The VAT refund process: required - In June 2016, TaxpayerCo. makes a large capital purchase: the value of the Total tax and contribution rate (% of pro t before machine is 65 times income per capita of the economy. Sales are equally all taxes) spread per month (1,050 times income per capita divided by 12) and cost of goods sold are equally expensed per month (875 times income per Profit or corporate income tax capita divided by 12). The machinery seller is registered for VAT and excess Social contributions, labor taxes paid by input VAT incurred in June will be fully recovered after four consecutive employer months if the VAT rate is the same for inputs, sales and the machine and Property and property transfer taxes the tax reporting period is every month. Input VAT will exceed Output VAT Dividend, capital gains, financial transactions in June 2016. taxes The corporate income tax audit process: Waste collection, vehicle, road and other taxes - An error in calculation of income tax liability (for example, use of incorrect Post ling Index tax depreciation rates, or incorrectly treating an expense as tax deductible) leads to an incorrect income tax return and a corporate income Time to comply with a VAT refund tax underpayment. TaxpayerCo. discovered the error and voluntarily Time to receive a VAT refund noti ed the tax authority. The value of the underpaid income tax liability is Time to comply with a corporate income tax audit 5% of the corporate income tax liability due. TaxpayerCo. submits corrected information after the deadline for submitting the annual tax Time to complete a corporate income tax audit return, but within the tax assessment period. Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Payments (number per year) 52 28.0 10.9 3 (Hong Kong SAR, China) Page 43   return, but within the tax assessment period. Doing Business 2018 Panama Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Payments (number per year) 52 28.0 10.9 3 (Hong Kong SAR, China) Time (hours per year) 417 332.1 160.7 55 (Luxembourg) Total tax and contribution rate (% of profit) 37.2 46.6 40.1 18.47% (32 Economies) Postfiling index (0-100) 12.84 47.50 83.45 99.38 (Estonia) Figure – Paying Taxes in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 77.46: Costa Rica (Rank: 60) 77.35: El Salvador (Rank: 61) 70.30: Guatemala (Rank: 100) 60.16: Regional Average (Latin America & Caribbean) 59.08: Colombia (Rank: 142) 39.66: Panama (Rank: 180) Note: The ranking of economies on the ease of paying taxes is determined by sorting their distance to frontier scores on the ease of paying taxes. These scores are the simple average of the distance to frontier scores for each of the four component indicators – number of tax payments. time, total tax rate and post ling index – with a threshold and a nonlinear transformation applied to one of the component indicators, the total tax rate. The nonlinear distance to frontier for the total tax rate is equal to the distance to frontier for the total tax rate to the power of 0.8. The threshold is de ned as the total tax rate at the 15th percentile of the overall distribution for all years included in the analysis up to and including Doing Business 2015, which is 26.1%. All economies with a total tax rate below this threshold receive the same score as the economy at the threshold. Figure – Paying Taxes in Panama and comparator economies – Measure of Quality 90 85.06 80 70 60 Index score 48.17 49.54 47.50 50 40 33.04 30 20 12.84 10 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Paying Taxes in Panama Total tax and Tax or mandatory Payments Notes on Time Statutory tax contribution rate (% of Notes contribution (number) Payments (hours) rate Tax base profit) on TTR Page 44   Employer paid - Social 12 jointly 144 12.25% gross 13.82 Doing Business 2018 Panama Figure – Paying Taxes in Panama and comparator economies – Measure of Quality 90 85.06 80 70 60 Index score 48.17 49.54 47.50 50 40 33.04 30 20 12.84 10 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Paying Taxes in Panama Total tax and Tax or mandatory Payments Notes on Time Statutory tax contribution rate (% of Notes contribution (number) Payments (hours) rate Tax base profit) on TTR Employer paid - Social 12 jointly 144 12.25% gross 13.82 security contributions salaries Corporate income tax 4 83 25% taxable 11.89 profit Employer paid - 0 jointly 2.1% gross 2.37 Professional risk salaries insurance Employer paid - Workers' 4 1.92% gross 2.17 severance payments salaries Employer paid - 0 jointly 1.5% gross 1.69 Education contribution salaries Commercial license tax 0 jointly 2% net worth 1.59 Real estate tax 3 0% to 2.1% real 1.24 estate value Transfer tax 1 various rates sales 1.21 price Municipal Business Tax 12 375 per fixed fee 0.67 month Capital gains tax 1 various rates capital 0.51 gains Advertising tax 0 jointly USD15 per ad 0.03 per month Vehicle tax 1 fixed fee 0.02 Value added tax (VAT) 12 190 7% value 0.00 not added Page 45   included tax Vehicle Business Doing 2018 1 Panama fixed fee 0.02 Value added tax (VAT) 12 190 7% value 0.00 not added included Stamp tax on check 1 10 cents per number 0.00 transactions check of checks Employee paid - 0 jointly 1.25% gross 0.00 withheld Education contribution salaries Employee paid - Social 0 jointly 9.75% gross 0.00 withheld security contributions salaries Fuel tax 1 0.25 per 0.00 gallon Totals 52 417 37.2 Details – Paying Taxes in Panama – Tax by Type Taxes by type Answer Profit tax (% of profit) 12.4 Labor tax and contributions (% of profit) 20.0 Other taxes (% of profit) 4.8 Details – Paying Taxes in Panama – Measure of Quality Answer Score Post ling index (0-100) 12.84 VAT refunds Does VAT exist? Yes Does a VAT refund process exist per the case study? No Restrictions on VAT refund process Restricted to international traders and others Percentage of cases exposed to a VAT audit (%) Not applicable Is there a mandatory carry forward period? No Time to comply with VAT refund (hours) No VAT refund 0 per case study scenario Time to obtain a VAT refund (weeks) No VAT refund 0 per case study scenario Page 46   Corporate income tax audits per case study Doing Business 2018 Panama scenario Time to obtain a VAT refund (weeks) No VAT refund 0 per case study scenario Corporate income tax audits Does corporate income tax exist? Yes Percentage of cases exposed to a corporate income tax audit (%) 25% - 49% Time to comply with a corporate income tax audit (hours) 28.0 51.38 Time to complete a corporate income tax audit (weeks) 99.3 0 Notes: Names of taxes have been standardized. For instance income tax, pro t tax, tax on company's income are all named corporate income tax in this table. The hours for VAT include all the VAT and sales taxes applicable. The hours for Social Security include all the hours for labor taxes and mandatory contributions in general. The post ling index is the average of the scores on time to comply with VAT refund, time to obtain a VAT refund, time to comply with a corporate income tax audit and time to complete a corporate income tax audit. N/A = Not applicable. Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tari s) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. Given the importance of trade digitalization, in Doing Business 2018, the Trading across Borders questionnaire included research questions on the availability and status of implementation of Electronic Data Interchange (EDI) and Single Window (SW) systems. With this information, Doing Business built a comprehensive dataset on the adoption and level of sophistication of electronic platforms in 190 economies. These data are not used to compute the distance to frontier score or ranking of the ease of doing business. The new dataset on EDI and SW systems is available here. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 or border handling in origin economy days are recorded as 22×24=528 hours). If customs clearance takes 7.5 Obtaining, preparing and submitting documents hours, the data are recorded as is. Alternatively, suppose documents are required by destination economy and any transit submitted to a customs agency at 8:00a.m., are processed overnight and economies can be picked up at 8:00a.m. the next day. The time for customs clearance Covers all documents required by law and in would be recorded as 24 hours because the actual procedure took 24 practice, including electronic submissions of hours. information Border compliance Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Customs clearance and inspections Contributors are asked to convert local currency into U.S. dollars based on Inspections by other agencies (if applied to more the exchange rate prevailing on the day they answer the questionnaire. than 20% of shipments) Contributors are private sector experts in international trade logistics and Handling and inspections that take place at the are informed about exchange rates. economy’s port or border Assumptions of the case study: - For all 190 economies covered by Doing Domestic transport Page 47   Business, it is assumed a shipment is in a warehouse in the largest a corporate income tax audit and time to complete a corporate income tax audit. N/A = Not applicable. Doing Business 2018 Panama Trading across Borders Doing Business records the time and cost associated with the logistical process of exporting and importing goods. Doing Business measures the time and cost (excluding tari s) associated with three sets of procedures—documentary compliance, border compliance and domestic transport—within the overall process of exporting or importing a shipment of goods. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. Given the importance of trade digitalization, in Doing Business 2018, the Trading across Borders questionnaire included research questions on the availability and status of implementation of Electronic Data Interchange (EDI) and Single Window (SW) systems. With this information, Doing Business built a comprehensive dataset on the adoption and level of sophistication of electronic platforms in 190 economies. These data are not used to compute the distance to frontier score or ranking of the ease of doing business. The new dataset on EDI and SW systems is available here. What the indicators measure Case study assumptions Documentary compliance To make the data comparable across economies, a few assumptions are made about the traded goods and the transactions: Obtaining, preparing and submitting documents during transport, clearance, inspections and port Time: Time is measured in hours, and 1 day is 24 hours (for example, 22 or border handling in origin economy days are recorded as 22×24=528 hours). If customs clearance takes 7.5 Obtaining, preparing and submitting documents hours, the data are recorded as is. Alternatively, suppose documents are required by destination economy and any transit submitted to a customs agency at 8:00a.m., are processed overnight and economies can be picked up at 8:00a.m. the next day. The time for customs clearance Covers all documents required by law and in would be recorded as 24 hours because the actual procedure took 24 practice, including electronic submissions of hours. information Border compliance Cost: Insurance cost and informal payments for which no receipt is issued are excluded from the costs recorded. Costs are reported in U.S. dollars. Customs clearance and inspections Contributors are asked to convert local currency into U.S. dollars based on Inspections by other agencies (if applied to more the exchange rate prevailing on the day they answer the questionnaire. than 20% of shipments) Contributors are private sector experts in international trade logistics and Handling and inspections that take place at the are informed about exchange rates. economy’s port or border Assumptions of the case study: - For all 190 economies covered by Doing Domestic transport Business, it is assumed a shipment is in a warehouse in the largest Loading or unloading of the shipment at the business city of the exporting economy and travels to a warehouse in the warehouse or port/border largest business city of the importing economy. - It is assumed each Transport between warehouse and port/border economy imports 15 metric tons of containerized auto parts (HS 8708) from its natural import partner—the economy from which it imports the Traffic delays and road police checks while shipment is en route largest value (price times quantity) of auto parts. It is assumed each economy exports the product of its comparative advantage (de ned by the largest export value) to its natural export partner—the economy that is the largest purchaser of this product. Shipment value is assumed to be $50,000. - The mode of transport is the one most widely used for the chosen export or import product and the trading partner, as is the seaport, or land border crossing. - All electronic information submissions requested by any government agency in connection with the shipment are considered to be documents obtained, prepared and submitted during the export or import process. - A port or border is a place (seaport, airport or land border crossing) where merchandise can enter or leave an economy. - Relevant government agencies include customs, port authorities, road police, border guards, standardization agencies, ministries or departments of agriculture or industry, national security agencies and any other government authorities. Page 48   of agriculture or industry, national security agencies and any other Doing Business 2018 Panama government authorities. Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Time to export: Border compliance (hours) 24 62.5 12.7 0 (17 Economies) Cost to export: Border compliance (USD) 270 526.5 149.9 0.00 (19 Economies) Time to export: Documentary compliance 6 53.3 2.4 1.0 (25 Economies) (hours) Cost to export: Documentary compliance (USD) 60 110.4 35.4 0.00 (19 Economies) Time to import: Border compliance (hours) 24 64.4 8.7 0.00 (21 Economies) Cost to import: Border compliance (USD) 490 684.0 111.6 0.00 (27 Economies) Time to import: Documentary compliance 6 79.9 3.5 1.0 (30 Economies) (hours) Cost to import: Documentary compliance (USD) 50 119.5 25.6 0.00 (30 Economies) Figure – Trading across Borders in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 89.29: El Salvador (Rank: 43) 85.47: Panama (Rank: 54) 79.32: Costa Rica (Rank: 73) 75.31: Guatemala (Rank: 79) 68.71: Regional Average (Latin America & Caribbean) 62.83: Colombia (Rank: 125) Note: The ranking of economies on the ease of trading across borders is determined by sorting their distance to frontier scores for trading across borders. These scores are the simple average of the distance to frontier scores for the time and cost for documentary compliance and border compliance to export and import (domestic transport is not used for calculating the ranking). Figure – Trading across Borders in Panama – Time and Cost Time Cost 30 600 24 24 490 25 500 20 400 Time (hours) Cost (USD) 15 270 300 10 200 6 6 5 60 50 100 0 0 Export - Border Compliance Export - Documentary Compliance Import - Border Compliance Import - Documentary CompliancePage 49   Doing Business 2018 Panama Figure – Trading across Borders in Panama – Time and Cost Time Cost 30 600 24 24 490 25 500 20 400 Time (hours) Cost (USD) 15 270 300 10 200 6 6 5 60 50 100 0 0 Export - Border Compliance Export - Documentary Compliance Import - Border Compliance Import - Documentary Compliance Details – Trading across Borders in Panama Characteristics Export Import Product HS 29 : Organic chemicals HS 8708: Parts and accessories of motor vehicles Trade partner United States China Border Manzanillo port Manzanillo port Distance (km) 88 88 Domestic transport time (hours) 1 1 Domestic transport cost (USD) 390 390 Details – Trading across Borders in Panama – Components of Border Compliance Time to Complete Associated Costs (hours) (USD) Export: Clearance and inspections required by customs authorities 4.0 50.0 Export: Clearance and inspections required by agencies other than customs 0.0 0.0 Export: Port or border handling 24.0 220.0 Import: Clearance and inspections required by customs authorities 5.5 225.0 Import: Clearance and inspections required by agencies other than customs 0.0 0.0 Import: Port or border handling 24.0 265.0 Details – Trading across Borders in Panama – Trade Documents Export Import Customs Export Declaration Customs import declaration Bill of lading Bill of lading Page 50   Domestic transport cost (USD) 390 390 Doing Business 2018 Panama Details – Trading across Borders in Panama – Components of Border Compliance Time to Complete Associated Costs (hours) (USD) Export: Clearance and inspections required by customs authorities 4.0 50.0 Export: Clearance and inspections required by agencies other than customs 0.0 0.0 Export: Port or border handling 24.0 220.0 Import: Clearance and inspections required by customs authorities 5.5 225.0 Import: Clearance and inspections required by agencies other than customs 0.0 0.0 Import: Port or border handling 24.0 265.0 Details – Trading across Borders in Panama – Trade Documents Export Import Customs Export Declaration Customs import declaration Bill of lading Bill of lading Commercial invoice Commercial invoice Certificate of origin SOLAS certificate SOLAS certificate Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local rst-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and e ciency in the court system. The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract courts (calendar days) between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes Time to file and serve the case the case from simple debt enforcement. Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses Time to enforce the judgment several assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller courts (% of claim) and Buyer), both located in the economy’s largest business city. For 11 Attorney fees economies the data are also collected for the second largest business city. - The buyer orders custom-made goods, then fails to pay. Court fees - The value of the dispute is 200% of the income per capita or the Enforcement fees equivalent in local currency of USD 5,000, whichever is greater. Quality of judicial processes index (0-18) - The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Court structure and proceedings (-1-5) Page 51   - The seller requests a pretrial attachment to secure the claim. Case management (0-6) SOLAS certificate Doing Business 2018 Panama Enforcing Contracts The enforcing contracts indicator measures the time and cost for resolving a commercial dispute through a local rst-instance court, and the quality of judicial processes index, evaluating whether each economy has adopted a series of good practices that promote quality and e ciency in the court system. The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to enforce a contract through the The dispute in the case study involves the breach of a sales contract courts (calendar days) between 2 domestic businesses. The case study assumes that the court hears an expert on the quality of the goods in dispute. This distinguishes Time to file and serve the case the case from simple debt enforcement. Time for trial and to obtain the judgment To make the data comparable across economies, Doing Business uses Time to enforce the judgment several assumptions about the case: Cost required to enforce a contract through the - The dispute concerns a lawful transaction between two businesses (Seller courts (% of claim) and Buyer), both located in the economy’s largest business city. For 11 Attorney fees economies the data are also collected for the second largest business city. - The buyer orders custom-made goods, then fails to pay. Court fees - The value of the dispute is 200% of the income per capita or the Enforcement fees equivalent in local currency of USD 5,000, whichever is greater. Quality of judicial processes index (0-18) - The seller sues the buyer before the court with jurisdiction over commercial cases worth 200% of income per capita or $5,000. Court structure and proceedings (-1-5) - The seller requests a pretrial attachment to secure the claim. Case management (0-6) - The dispute on the quality of the goods requires an expert opinion. Court automation (0-4) - The judge decides in favor of the seller; there is no appeal. Alternative dispute resolution (0-3) - The seller enforces the judgment through a public sale of the buyer’s movable assets. Standardized Case Claim value USD 24,763.00 Court name Panama Civil Circuit Court, First Judicial Circuit City Covered Panama City Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Time (days) 790 767.1 577.8 164.00 (Singapore) Cost (% of claim value) 38.0 31.4 21.5 9.00 (Iceland) Quality of judicial processes index (0-18) 6.5 8.4 11.0 15.50 (Australia) Figure – Enforcing Contracts in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 55.20: El Salvador (Rank: 105) 53.13: Regional Average (Latin America & Caribbean) 51.48: Costa Rica (Rank: 129) Page 52   of judicial processes Quality Business Doing index (0-18) 2018 Panama 6.5 8.4 11.0 15.50 (Australia) Figure – Enforcing Contracts in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 55.20: El Salvador (Rank: 105) 53.13: Regional Average (Latin America & Caribbean) 51.48: Costa Rica (Rank: 129) 46.19: Panama (Rank: 148) 34.55: Guatemala (Rank: 176) 34.29: Colombia (Rank: 177) Note: The ranking of economies on the ease of enforcing contracts is determined by sorting their distance to frontier scores for enforcing contracts. These scores are the simple average of the distance to frontier scores for each of the component indicators. Figure – Enforcing Contracts in Panama – Time and Cost Time Cost 1600 45.8 50 1402 1400 1288 Cost (% of claim value) 38.0 40 1200 31.4 Time (days) 1000 852 26.5 30 24.3 786 767.1 790 800 21.5 19.2 577.8 600 20 400 10 200 0 0 Colombia Costa Rica El Salvador Guatemala Latin America & OECD high income Panama Caribbean Figure – Enforcing Contracts in Panama and comparator economies – Measure of Quality Panama 2.5 1 0 3 Colombia 2.5 1.5 1.5 3.5 Costa Rica 2.5 1.5 1 2.5 El Salvador 2.5 2 0.5 2.5 Guatemala 2 0.5 0.5 3 OECD high income 2.5 2.9 2 3.6 Latin America & Caribbean 2.4 2 0.9 3.5 0 2 4 6 8 10 Page 53   12 Colombia Costa Rica El Salvador Guatemala Latin America & OECD high income Panama Caribbean Doing Business 2018 Panama Figure – Enforcing Contracts in Panama and comparator economies – Measure of Quality Panama 2.5 1 0 3 Colombia 2.5 1.5 1.5 3.5 Costa Rica 2.5 1.5 1 2.5 El Salvador 2.5 2 0.5 2.5 Guatemala 2 0.5 0.5 3 OECD high income 2.5 2.9 2 3.6 Latin America & Caribbean 2.4 2 0.9 3.5 0 2 4 6 8 10 12 Sub-Indicator Score Alternative dispute resolution (0­3) Case management (0­6) Court automation (0­4) Court structure and proceedings (­1­5) Details – Enforcing Contracts in Panama Indicator Time (days) 790 Filing and service 60 Trial and judgment 365 Enforcement of judgment 365 Cost (% of claim value) 38.0 Attorney fees 24.8 Court fees 13 Enforcement fees 0.2 Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 Case management (0-6) 1.0 Court automation (0-4) 0.0 Alternative dispute resolution (0-3) 2.5 Details – Enforcing Contracts in Panama – Measure of Quality Page 54   Alternative dispute resolution (0-3) 2.5 Doing Business 2018 Panama Details – Enforcing Contracts in Panama – Measure of Quality Answer Score Quality of judicial processes index (0-18) 6.5 Court structure and proceedings (-1-5) 3.0 1. Is there a court or division of a court dedicated solely to hearing commercial cases? No 0.0 2. Small claims court 1.0 2.a. Is there a small claims court or a fast-track procedure for small claims? Yes 2.b. If yes, is self-representation allowed? No 3. Is pretrial attachment available? Yes 1.0 4. Are new cases assigned randomly to judges? Yes, automatic 1.0 5. Does a woman's testimony carry the same evidentiary weight in court as a man's? Yes 0.0 Case management (0-6) 1.0 1. Time standards 1.0 1.a. Are there laws setting overall time standards for key court events in a civil case? Yes 1.b. If yes, are the time standards set for at least three court events? Yes 1.c. Are these time standards respected in more than 50% of cases? Yes 2. Adjournments 0.0 2.a. Does the law regulate the maximum number of adjournments that can be No granted? 2.b. Are adjournments limited to unforeseen and exceptional circumstances? No 2.c. If rules on adjournments exist, are they respected in more than 50% of cases? n.a. 3. Can two of the following four reports be generated about the competent court: (i) No 0.0 time to disposition report; (ii) clearance rate report; (iii) age of pending cases report; and (iv) single case progress report? 4. Is a pretrial conference among the case management techniques used before the No 0.0 competent court? 5. Are there any electronic case management tools in place within the competent court No 0.0 for use by judges? 6. Are there any electronic case management tools in place within the competent court No 0.0 for use by lawyers? Court automation (0-4) 0.0 1. Can the initial complaint be led electronically through a dedicated platform within No 0.0 the competent court? 2. Is it possible to carry out service of process electronically for claims led before the No 0.0 competent court? Page 55   1. Can the initial complaint be led electronically through a dedicated platform within No 0.0 Businesscourt? the competent Doing 2018 Panama 2. Is it possible to carry out service of process electronically for claims led before the No 0.0 competent court? 3. Can court fees be paid electronically within the competent court? No 0.0 4. Publication of judgments 0.0 4.a Are judgments rendered in commercial cases at all levels made available to the No general public through publication in o cial gazettes, in newspapers or on the internet or court website? 4.b. Are judgments rendered in commercial cases at the appellate and supreme No court level made available to the general public through publication in o cial gazettes, in newspapers or on the internet or court website? Alternative dispute resolution (0-3) 2.5 1. Arbitration 1.5 1.a. Is domestic commercial arbitration governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all its aspects? 1.b. Are there any commercial disputes—aside from those that deal with public No order or public policy—that cannot be submitted to arbitration? 1.c. Are valid arbitration clauses or agreements usually enforced by the courts? Yes 2. Mediation/Conciliation 1.0 2.a. Is voluntary mediation or conciliation available? Yes 2.b. Are mediation, conciliation or both governed by a consolidated law or Yes consolidated chapter or section of the applicable code of civil procedure encompassing substantially all their aspects? 2.c. Are there nancial incentives for parties to attempt mediation or conciliation (i.e., No if mediation or conciliation is successful, a refund of court ling fees, income tax credits or the like)? Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are Measured in calendar years used: Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 Cost required to recover debt (% of debtor’s estate) suppliers. The hotel experiences nancial di culties. Page 56   Measured as percentage of estate value - The value of the hotel is 100% of the income per capita or the equivalent if mediation or conciliation is successful, a refund of court ling fees, income tax credits or the like)? Doing Business 2018 Panama Resolving Insolvency Doing Business studies the time, cost and outcome of insolvency proceedings involving domestic legal entities. These variables are used to calculate the recovery rate, which is recorded as cents on the dollar recovered by secured creditors through reorganization, liquidation or debt enforcement (foreclosure or receivership) proceedings. To determine the present value of the amount recovered by creditors, Doing Business uses the lending rates from the International Monetary Fund, supplemented with data from central banks and the Economist Intelligence Unit. The most recent round of data collection for the project was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Time required to recover debt (years) To make the data on the time, cost and outcome comparable across economies, several assumptions about the business and the case are Measured in calendar years used: Appeals and requests for extension are included - A hotel located in the largest city (or cities) has 201 employees and 50 Cost required to recover debt (% of debtor’s estate) suppliers. The hotel experiences nancial di culties. Measured as percentage of estate value - The value of the hotel is 100% of the income per capita or the equivalent Court fees in local currency of USD 200,000, whichever is greater. - The hotel has a loan from a domestic bank, secured by a mortgage over Fees of insolvency administrators the hotel’s real estate. The hotel cannot pay back the loan, but makes Lawyers’ fees enough money to operate otherwise. Assessors’ and auctioneers’ fees In addition, Doing Business evaluates the adequacy and integrity of the Other related fees existing legal framework applicable to liquidation and reorganization Outcome proceedings through the strength of insolvency framework index. The index tests whether economies adopted internationally accepted good Whether business continues operating as a going practices in four areas: commencement of proceedings, management of concern or business assets are sold piecemeal debtor’s assets, reorganization proceedings and creditor participation. Recovery rate for creditors Measures the cents on the dollar recovered by secured creditors Outcome for the business (survival or not) determines the maximum value that can be recovered Official costs of the insolvency proceedings are deducted Depreciation of furniture is taken into account Present value of debt recovered Strength of insolvency framework index (0- 16) Sum of the scores of four component indices: Commencement of proceedings index (0-3) Management of debtor’s assets index (0-6) Reorganization proceedings index (0-3) Creditor participation index (0-4) Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Recovery rate (cents on the dollar) 27.1 30.8 71.2 93.1 (Norway) Time (years) 2.5 2.9 1.7 0.4 (Ireland) Page 57   Cost (% of estate) 25.0 16.8 9.1 1.00 (Norway) Creditor participation index (0-4) Doing Business 2018 Panama Latin America & OECD high Indicator Panama Caribbean income Overall Best Performer Recovery rate (cents on the dollar) 27.1 30.8 71.2 93.1 (Norway) Time (years) 2.5 2.9 1.7 0.4 (Ireland) Cost (% of estate) 25.0 16.8 9.1 1.00 (Norway) Outcome (0 as piecemeal sale and 1 as going 0 .. .. .. concern) Strength of insolvency framework index (0-16) 8.0 7.2 12.1 15.00 (6 Economies) Figure – Resolving Insolvency in Panama and comparator economies – Ranking and DTF DB 2018 Distance to Frontier (DTF) 0 100 70.02: Colombia (Rank: 33) 45.69: El Salvador (Rank: 84) 39.59: Panama (Rank: 107) 38.95: Regional Average (Latin America & Caribbean) 34.42: Costa Rica (Rank: 131) 27.57: Guatemala (Rank: 153) Note: The ranking of economies on the ease of resolving insolvency is determined by sorting their distance to frontier scores for resolving insolvency. These scores are the simple average of the distance to frontier scores for the recovery rate and the strength of insolvency framework index. Figure – Resolving Insolvency in Panama – Time and Cost Time Cost 4 30 3.5 3.5 25.0 3.0 3.0 25 2.9 3 2.5 Cost (% of estate) Time (years) 20 2.5 16.8 14.5 14.5 2 1.7 1.7 15 12.0 1.5 8.5 9.1 10 1 5 0.5 0 0 Colombia Costa Rica El Salvador Guatemala Latin America & OECD high income Panama Caribbean Figure – Resolving Insolvency in Panama and comparator economies – Measure of Quality Panama 3 2.5 2 0.5 Page 58   Colombia 5.5 3 1 1.5 Colombia Costa Rica El Salvador Guatemala Latin America & OECD high income Panama Caribbean Doing Business 2018 Panama Figure – Resolving Insolvency in Panama and comparator economies – Measure of Quality Panama 3 2.5 2 0.5 Colombia 5.5 3 1 1.5 Costa Rica 2 3 1 0 El Salvador 4 2 3 0 Guatemala 0 2 2 0 OECD high income 5.4 2.8 2.3 1.9 Latin America & Caribbean 3.7 2.4 1.9 0.8 0 2 4 6 8 10 12 14 Sub-Indicator Score Management of debtor's assets index (0­6) Commencement of proceedings index (0­3) Creditor participation index (0­4) Reorganization proceedings index (0­3) Figure – Resolving Insolvency in Panama and comparator economies – Recovery Rate Recovery Rate (cents on the dollar) 70 66.2 60 50 40 32.6 30.8 27.1 29.1 28.0 30 20 10 0 Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Details – Resolving Insolvency in Panama Indicator Answer Explanation Proceeding foreclosure After Mirage's default, BizBank would enforce its security interest over Mirage's assets as the debenture holder and initiate foreclosure proceeding. It is highly unlikely that the secured creditor will initiate a liquidation proceeding as a consequence of the debtor’s bankruptcy. In situations like the one at stake, liquidation proceedings are not common because of its complexity and delay in time (10 years or more). Outcome piecemeal sale Once the assets are sold in public auction, the hotel will cease operations and its assets will be sold piecemeal. Time (in years) 2.5 The foreclosure procedure in Panama will take approximately 2.5 years from the moment of the debtor's default until the debt is repaid to the secured creditor. Assuming a possible counter-claim by the debtor, many hearings during the judgment procedural stage and the seizure of the assets, and it will take 1.75 years until the approval to initiate foreclosurePage 59   is Panama Colombia Costa Rica El Salvador Guatemala Latin America & Caribbean Doing Business 2018 Panama Details – Resolving Insolvency in Panama Indicator Answer Explanation Proceeding foreclosure After Mirage's default, BizBank would enforce its security interest over Mirage's assets as the debenture holder and initiate foreclosure proceeding. It is highly unlikely that the secured creditor will initiate a liquidation proceeding as a consequence of the debtor’s bankruptcy. In situations like the one at stake, liquidation proceedings are not common because of its complexity and delay in time (10 years or more). Outcome piecemeal sale Once the assets are sold in public auction, the hotel will cease operations and its assets will be sold piecemeal. Time (in years) 2.5 The foreclosure procedure in Panama will take approximately 2.5 years from the moment of the debtor's default until the debt is repaid to the secured creditor. Assuming a possible counter-claim by the debtor, many hearings during the judgment procedural stage and the seizure of the assets, and it will take 1.75 years until the approval to initiate foreclosure is handed down by the Court. Henceforward, it will take 9 months for the auction to take place (including the necessary time to appoint an auctioneer, the scheduling of the auction and the sale of the real estate). Cost (% of 25.0 The cost for a foreclosure proceeding will amount to approximately 25% of the value of estate) Mirage’s estate. The main component of this expenditure would be the attorney’s fees, which would amount 15% of the value of Mirage’s estate (based on the agreement No. 49 issued by the Supreme Court of Justice, April 24th 2001). The rest of the cost (5%) are related to auctioneer’s fees, appraisal fees and other fees related to the public auction. Recovery rate (cents on the 27.1 dollar) Details – Resolving Insolvency in Panama – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 8.0 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency (a) Debtor may 1.0 proceedings? le for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to le for insolvency of the debtor? (b) Yes, but a 0.5 creditor may le for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (c) Both (a) and 1.0 insolvency framework? (b) options are available, but only one of them needs to be complied with Management of debtor's assets index (0-6) 3.0 Page 60   dollar) Doing Business 2018 Panama Details – Resolving Insolvency in Panama – Measure of Quality Answer Score Strength of insolvency framework index (0-16) 8.0 Commencement of proceedings index (0-3) 2.5 What procedures are available to a DEBTOR when commencing insolvency (a) Debtor may 1.0 proceedings? le for both liquidation and reorganization Does the insolvency framework allow a CREDITOR to le for insolvency of the debtor? (b) Yes, but a 0.5 creditor may le for liquidation only What basis for commencement of the insolvency proceedings is allowed under the (c) Both (a) and 1.0 insolvency framework? (b) options are available, but only one of them needs to be complied with Management of debtor's assets index (0-6) 3.0 Does the insolvency framework allow the continuation of contracts supplying essential Yes 1.0 goods and services to the debtor? Does the insolvency framework allow the rejection by the debtor of overly burdensome No 0.0 contracts? Does the insolvency framework allow avoidance of preferential transactions? Yes 1.0 Does the insolvency framework allow avoidance of undervalued transactions? Yes 1.0 Does the insolvency framework provide for the possibility of the debtor obtaining credit No 0.0 after commencement of insolvency proceedings? Does the insolvency framework assign priority to post-commencement credit? (c) No priority is 0.0 assigned to post- commencement creditors Reorganization proceedings index (0-3) 0.5 Which creditors vote on the proposed reorganization plan? (a) All creditors 0.5 Does the insolvency framework require that dissenting creditors in reorganization No 0.0 receive at least as much as what they would obtain in a liquidation? Are the creditors devided into classes for the purposes of voting on the reorganization No 0.0 plan, does each class vote separately and are creditors in the same class treated equally? Creditor participation index (0-4) 2.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Page 61   Creditor Doing participation Business 2018 index (0-4) Panama 2.0 Does the insolvency framework require approval by the creditors for selection or Yes 1.0 appointment of the insolvency representative? Does the insolvency framework require approval by the creditors for sale of substantial No 0.0 assets of the debtor? Does the insolvency framework provide that a creditor has the right to request No 0.0 information from the insolvency representative? Does the insolvency framework provide that a creditor has the right to object to Yes 1.0 decisions accepting or rejecting creditors' claims? Note: Even if the economy’s legal framework includes provisions related to insolvency proceedings (liquidation or reorganization), the economy receives 0 points for the strength of insolvency framework index, if time, cost and outcome indicators are recorded as “no practice”. Labor Market Regulation Doing Business presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org/data/exploretopics/labor-market-regulation). The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions (i) whether xed-term contracts are prohibited for about the worker and the business are used. permanent tasks; (ii) maximum cumulative duration of xed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether nonpregnant - Operates a supermarket or grocery store in the economy’s largest and nonnursing women can work same night hours business city. For 11 economies the data are also collected for the second as men; (v) length of paid annual leave. largest business city. - Has 60 employees. Redundancy rules - Is subject to collective bargaining agreements if such agreements cover (i) whether redundancy can be basis for terminating more than 50% of the food retail sector and they apply even to rms that workers; (ii) whether employer needs to notify are not party to them. and/or get approval from third party to terminate 1 - Abides by every law and regulation but does not grant workers more redundant worker and a group of 9 redundant bene ts than those mandated by law, regulation or (if applicable) collective workers; (iii) whether law requires employer to bargaining agreements. reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for Page 62   work of equal value and nondiscrimination based on “no practice”. Doing Business 2018 Panama Labor Market Regulation Doing Business presents the data for the labor market regulation indicators in an annex. The report does not present rankings of economies on these indicators or include the topic in the aggregate distance to frontier score or ranking on the ease of doing business. Detailed data collected on labor market regulation are available on the Doing Business website (http://www.doingbusiness.org/data/exploretopics/labor-market-regulation). The most recent round of data collection was completed in June 2017. See the methodology for more information. What the indicators measure Case study assumptions Hiring To make the data comparable across economies, several assumptions (i) whether xed-term contracts are prohibited for about the worker and the business are used. permanent tasks; (ii) maximum cumulative duration of xed-term contracts; (iii) length of the The worker: probationary period; (iv) minimum wage. - Is a cashier in a supermarket or grocery store, age 19, with one year of work experience. Working hours - Is a full-time employee. (i) maximum number of working days allowed per - Is not a member of the labor union, unless membership is mandatory. week; (ii) premiums for work: at night, on a weekly rest day and overtime; (iii) whether there are The business: restrictions on work at night, work on a weekly rest - Is a limited liability company (or the equivalent in the economy). day and for overtime work; (iv) whether nonpregnant - Operates a supermarket or grocery store in the economy’s largest and nonnursing women can work same night hours business city. For 11 economies the data are also collected for the second as men; (v) length of paid annual leave. largest business city. - Has 60 employees. Redundancy rules - Is subject to collective bargaining agreements if such agreements cover (i) whether redundancy can be basis for terminating more than 50% of the food retail sector and they apply even to rms that workers; (ii) whether employer needs to notify are not party to them. and/or get approval from third party to terminate 1 - Abides by every law and regulation but does not grant workers more redundant worker and a group of 9 redundant bene ts than those mandated by law, regulation or (if applicable) collective workers; (iii) whether law requires employer to bargaining agreements. reassign or retrain a worker before making worker redundant; (iv) whether priority rules apply for redundancies and reemployment. Redundancy cost (i) notice period for redundancy dismissal; (ii) severance payments due when terminating a redundant worker. Job quality (i) whether law mandates equal remuneration for work of equal value and nondiscrimination based on gender in hiring; (ii) whether law mandates paid or unpaid maternity leave; (iii) length of paid maternity leave; (iv) whether employees on maternity leave receive 100% of wages; (v) availability of ve fully paid days of sick leave a year; (vi) eligibility requirements for unemployment protection. Details – Labor Market Regulation in Panama Answer Hiring Page 63   Fixed-term contracts prohibited for permanent tasks? Yes days of sick leave a year; (vi) eligibility requirements for unemployment protection. Doing Business 2018 Panama Details – Labor Market Regulation in Panama Answer Hiring Fixed-term contracts prohibited for permanent tasks? Yes Maximum length of a single xed-term contract (months) 12.0 Maximum length of xed-term contracts, including renewals (months) 12.0 Minimum wage applicable to the worker assumed in the case study (US$/month) 558.8 Ratio of minimum wage to value added per worker 0.4 Maximum length of probationary period (months) 3.0 Working hours Standard workday 8.0 Maximum number of working days per week 6.0 Premium for night work (% of hourly pay) 13.0 Premium for work on weekly rest day (% of hourly pay) 50.0 Premium for overtime work (% of hourly pay) 50.0 Restrictions on night work? No Whether nonpregnant and nonnursing women can work the same night hours as men Yes Restrictions on weekly holiday? Yes Restrictions on overtime work? Yes Paid annual leave for a worker with 1 year of tenure (working days) 22.0 Paid annual leave for a worker with 5 years of tenure (working days) 22.0 Paid annual leave for a worker with 10 years of tenure (working days) 22.0 Paid annual leave (average for workers with 1, 5 and 10 years of tenure, in working days) 22.0 Redundancy rules Dismissal due to redundancy allowed by law? Yes Third-party noti cation if one worker is dismissed? Yes Third-party approval if one worker is dismissed? Yes Third-party noti cation if nine workers are dismissed? Yes Third-party approval if nine workers are dismissed? Yes Retraining or reassignment obligation before redundancy? No Page 64   Third-party Doing approval Business 2018 if nine workers are dismissed? Panama Yes Retraining or reassignment obligation before redundancy? No Priority rules for redundancies? Yes Priority rules for reemployment? No Redundancy cost Notice period for redundancy dismissal for a worker with 1 year of tenure 0.0 Notice period for redundancy dismissal for a worker with 5 years of tenure 0.0 Notice period for redundancy dismissal for a worker with 10 years of tenure 0.0 Notice period for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 0.0 Severance pay for redundancy dismissal for a worker with 1 year of tenure 3.4 Severance pay for redundancy dismissal for a worker with 5 years of tenure 17.0 Severance pay for redundancy dismissal for a worker with 10 years of tenure 34.0 Severance pay for redundancy dismissal (average for workers with 1, 5 and 10 years of tenure) 18.1 Job quality Equal remuneration for work of equal value? No Gender nondiscrimination in hiring? No Paid or unpaid maternity leave mandated by law? Yes Minimum length of maternity leave (calendar days)? 98.0 Receive 100% of wages on maternity leave? Yes Five fully paid days of sick leave a year? Yes Unemployment protection after one year of employment? No Minimum contribution period for unemployment protection (months)? n.a. Business Reforms in Panama In the year ending June 1, 2017, 119 economies implemented 264 total reforms across the di erent areas measured by Doing Business. Doing Business has recorded more than 2,900 regulatory reforms making it easier to do business since 2004. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are the reforms for Panama implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more di cult to do business. DB2018 Resolving Insolvency: Panama made resolving insolvency easier by adopting a new insolvency law that introduces a reorganization procedure and facilitates continuation of the debtor’s business during insolvency proceedings. The new law also allows creditors greater participation in important decisions during insolvency proceedings and regulates insolvency practitioners. DB2015 Getting Credit: Panama improved access to credit through a new law broadening the range of assets that can be used as collateral, allowing a general description of assets granted as collateral and allowing out-of-court enforcement of collateral. Page 65   Minimum contribution period for unemployment protection (months)? n.a. Doing Business 2018 Panama Business Reforms in Panama In the year ending June 1, 2017, 119 economies implemented 264 total reforms across the di erent areas measured by Doing Business. Doing Business has recorded more than 2,900 regulatory reforms making it easier to do business since 2004. Reforms inspired by Doing Business have been implemented by economies in all regions. The following are the reforms for Panama implemented since Doing Business 2008. = Doing Business reform making it easier to do business. = Change making it more di cult to do business. DB2018 Resolving Insolvency: Panama made resolving insolvency easier by adopting a new insolvency law that introduces a reorganization procedure and facilitates continuation of the debtor’s business during insolvency proceedings. The new law also allows creditors greater participation in important decisions during insolvency proceedings and regulates insolvency practitioners. DB2015 Getting Credit: Panama improved access to credit through a new law broadening the range of assets that can be used as collateral, allowing a general description of assets granted as collateral and allowing out-of-court enforcement of collateral. DB2014 Starting a Business: Panama made starting a business easier by eliminating the need to visit the municipality to obtain the municipal taxpayer number. Registering Property: Panama made transferring property easier by connecting the land registry with the cadastre. Protecting Minority Investors: Panama strengthened investor protections by increasing the disclosure requirements for publicly held companies. Paying Taxes: Panama made paying taxes easier for companies by changing the payment frequency for corporate income taxes from monthly to quarterly and by implementing a new online platform for ling the social security payroll. DB2013 Dealing with Construction Permits: Panama made dealing with construction permits easier by reducing the fees for a permit from the re department’s safety o ce and by accelerating the process at the building registry for obtaining a certi cate of good standing and for registering the new building. Registering Property: Panama made property transfers faster by increasing working hours at the registry and reorganizing the caseload of its sta . Paying Taxes: Panama made paying taxes easier for companies by enhancing the electronic ling system for value added tax and simplifying tax return forms for corporate income tax—though it also began requiring companies to pay corporate income tax monthly rather than quarterly. DB2012 Starting a Business: Panama extended the operating hours of the public registry, reducing the time required to register a new company. DB2011 Starting a Business: Panama eased business start-up by increasing e ciency at the registrar. Registering Property: Panama made it more expensive to transfer property by requiring that an amount equal to 3% of the property value be paid upon registration. Paying Taxes: Panama reduced the corporate income tax rate, modi ed various taxes and created a new tax court of appeals. DB2010 Dealing with Construction Permits: Panama made dealing with construction permits easier by eliminating some procedures and simplifying others. Page 66   Registering Property: Panama reduced the time required to transfer property by making it possible to obtain the certi cate of DB2010 Doing Business Dealing 2018 Panama with Construction Permits: Panama made dealing with construction permits easier by eliminating some procedures and simplifying others. Registering Property: Panama reduced the time required to transfer property by making it possible to obtain the certi cate of good standing from the tax agency online. DB2009 Starting a Business: Panama made business start-up faster by introducing an online system that greatly reduced the time required to obtain a business license. DB2008 Paying Taxes: Panama made paying taxes easier for companies by introducing and enhancing electronic tax ling systems. Page 67   DB2008 Paying Doing 2018 made Taxes: Panama Business paying taxes easier for companies by introducing and enhancing electronic tax ling systems. Panama Page 68