This document summarizes the latest developments in Panamanian maritime law, including: - Panama has the first international ship registry in the world and registers over 8,000 vessels totaling over 222.6 million gross tonnage. - Law No. 50 of 2017 was passed to create incentives for maritime financing through tax exemptions and work permits to attract investment in shipbuilding and maritime projects. - The law establishes a Certification and Supervisory Board to regulate maritime financing entities and aims to develop Panama as a regional maritime finance center.

1. Latest Developments in
Panamanian Law
Enrique Sibauste
Patton Moreno & Asvat, London Office

2. Panama Ship Registry
Facts
• 1917 First International Ship Registry in the world
• Over 8,000 vessels
• Above 222.6 million gross tonnage
• 18% of World Fleet
• Over US$25 trillion secured by mortgage
Panama Worldwide Tonnage Share
• 20% LPG
• 13% Tankers
• 10% Offshore
• 9% LNG
Key Factors
• 2002 Member of the White List of the Tokyo MOU
• 2008 Certified ISO 9001 by Lloyds Register
• 2010 Member of the White List of the Paris MOU
• 2015 Appointed as Cooperating Member of the Tokyo MOU

3. Why Panama?
Why Panama?
• Taxation: Vessels are taxed based on their tonnage, not their income;
• Open system: No restrictions on nationality of shipowner and seafarers;
• Accessibility and Costs: offices worldwide and costs;
• Approved International Maritime Conventions are part of their legal
system;
• A country and not a concessionaire behind the flag with functional
maritime courts in place;
• Local Currency (US$ Dollar) and lack of foreign exchange controls;
• Naval Mortgages create a maritime lien on the vessel, has fourth priority
and in case of foreclose on the mortgage, relatively simple process to
collect their credit (compared to other jurisdictions);
• Typical jurisdictions (or open-flag states) used by shipowners and financial
institutions include Panama, Liberia, the Marshall Islands, Hong Kong,
Singapore, Malta and the Bahamas.

5. Law No.50 of 2017
“Legal Regime of Incentives for Maritime Financing”
Antecedents
• Geographic Location
• Currency – USD$ since 1904
• Existing Financial Centre since 1970
• Expanded Panama Canal, the Panamanian ports, auxiliary maritime services and
free zones makes Panama a global maritime hub with logistical strength and
organic growth
• Increase in alternative ways to obtain capital through private equity and hedge
funds added to the usual use of syndicated loans, all expecting high returns.
Purpose
• To create an attractive investment environment and contemplates ship financing
from banks established in Panama while extending its reach to all foreign
financial institutions providing they establish a branch office in Panama to enjoy
the law’s benefits

6. Law No.50 of 2017
PLAYERS
• Banks of general, international or representative license in Panama
• Companies carrying out operations for design, structure the financial conditions
for maritime credit and their guarantees
• Financial Companies (Law No.42 of 2001)
• Financial Leasing Companies (Law No. 7 of 1990)
• Maritime Financing entities
• Joint Ventures or Consortiums between the state of Panama and private entities
MARITIME PROJECTS
• Ship Building
• Construction of shipyards and adaptation of other businesses for construction of
ships
• Construction and repairs of containers used for foreign trade
• Construction of Sea Wind Farms

7. • Exemption from Income Tax – Income from financing for the construction and
purchase of ships that are part of the National Merchant Navy and duly registered.
• Income of Companies established in Panama for the purpose of creating
construction yards for commercial ships, yachts, military ships and other types of
ships for transport of merchandise or passengers and/or companies dedicated to
financeable maritime projects
• Earning from income arising from interests and commissions earned by ships and/or
maritime financing entities stemming from granting naval mortgages
• Earning from income from insurance and re-insurance that guarantee credits for
maritime financing entities that are duly certified for financeable maritime projects
• Income from lease contracts that stem from leasing of duly registered merchant
marine ships for international maritime trade
• Import Tax @ 3% for introduction of machinery, marine equipment, rolling
industries, materials, tools for construction of ships and use of shipyards
• For duration period of 20 years
Tax Incentives

8. • Migratory permit and work permit for foreign workers for maritime financing
entities or financeable maritime projects
• Allow multiple entries and exists from the country
• Migratory permits to be granted within the ranges of 10%, 15%, 20%, 25% and
to workers of trust, as well as companies that employ less than ten people for a
maximum of up to 5 years
• Work permit for a period of 1 year extendable for up to 5 years
Migratory and Work Incentives

9. • New Governmental Entity – The Certification and Supervisory Board of
Maritime Financing Entities
• Composed of members of
• the Panama Canal Authority
• Panama Maritime Authority
• Ministry of Economy and Finance
• Ministry of Commerce and Industry
• the Labor Ministry
• the National Migration Service and
• the Financial Coordination Council
Regulator

10. • In 2015 and 2016 fierce competition among ship-owners caused another
oversupply of vessels. A speculative gamble on the expansion of China’s
economy and its needs has ultimately had a part in creating another crisis
with a negative impact on the dry bulk and container sectors.
• Banks that have anticipated these cyclical negative periods, but many have
decided to depart from shipping portfolios. The banks that continue to be in
the business of ship finance, for instance by offering loans with scheme
structures and swap agreements that diminish their exposure
Conclusions

11. • Law 50 of 2017 to support our financial centre, make use of geographic, logistic and
economic advantages and create a new area for economic development
• Create a one stop shop department to attract investments for the maritime and
logistics sector through financial and banking entities from local and international
market
• Create a regional maritime finance centre and in the medium term target the global
marketplace.
Conclusions