Panama is one of the most widely chosen jurisdictions for ship registration due to the ease of registration and low registration fees as compared with many other countries. Panama offers registrants a low-tax offshore jurisdiction, strategic geographical location, and robust regulatory protection. As a result of these advantages, major international shipping companies choose to register their ships in Panama, with over 7,000 ships and vessels from around the world currently flying the Panamanian flag. The Panamanian laws and regulations governing the flagging and operation of ships are simple, yet complete.
Advantages of Ship Registry in Panama
The Panama Ship Registry offers many advantages to ship owners who wish to register their ships under the Panamanian flag. For example:
- Ownership. Any person or company, irrespective of nationality and place of incorporation, is eligible to register ships under the Panamanian flag. There are no income or withholding taxes payable, derived from international trade, by non-resident shipping corporations.
- No Minimum Tonnage Requirements. No minimum tonnage is required for registration. However, vessels older than 20 years must pass a special inspection by an authorized Panamanian inspector in order to obtain permanent registration.
- Technical Certificates. Ship owners who wish to transfer their vessels to the Panamanian registry are not required to have the vessels re-surveyed, provided that the vessels possess valid safety and tonnage certificates. Provisions are made to accept foreign tonnage certificates at the time of registration obviating the necessity to have the ship dry docked prior to the registration; saving ship owners considerable expenses.
- Competitive Costs. The cost to register a ship under Panama’s registry is lower as compared to other jurisdictions. Fees include a one-time registration and government fee, for which a ship owner may be eligible for a discount if the vessel is registered under a Panamanian corporation. The registration of a bill of sale is approximately $0.20 per registered ton plus an additional 20 percent surtax. Taxes are paid annually based on tonnage and other factors.
- Discounted Registration Rates for Fleets. Fleets with five to 15 vessels receive a 20 percent discount. Fleets with 16 to 50 vessels can enjoy a 35 percent reduction in fees. Fleets with more than 50 vessels receive a 60 percent discount on their registration.
- Dual Registry. Another advantage of the Panamanian registry is the so called "Dual Registry." The Dual Registry System was established in Panama by means of Law No. 1 of 1973, and later amended by Law No. 3 in 1973. According to these laws, a foreign vessel bare boat chartered for a period of two years can be registered in Panama for the same period without losing its previous registration. The opposite is also permissible, that is, from Panama to the other countries. For this purpose, a Certificate of Consent from the country where the vessel was originally registered is required.
The Dual Registry System represents a great advantage for the shipping community, especially for the ship owners who, for one reason or other, have no vessels under the open registry. The Dual Registry is not reciprocal, however, any vessel of any nationality can apply to the Panamanian Registry if the register of her home country allows it.
Registration is simple and efficient. A provisional patent is applied for and issued for a period of six months, and can be extended for another period of three months. Once the provisional patent is issued, the vessel’s title documents (bill of sale, construction certificate, if new, or naval mortgage) must be filed at Panama´s Public Registry. Afterwards, a permanent patent is applied for and issued. The permanent patent is valid for four years for commercial vessels and two years for private vessels. It is renewable indefinitely for equal terms provided that the vessel is in compliance with the laws and regulations and is up-to-date with the payment of its taxes and fees.
Additionally, a radio license is required for all vessels registered with the Panamanian Registry. A three month provisional license is applied for and issued with the provisional patent; the permanent radio license is applied for and issued with the permanent patent, is valid for four years, and is renewable indefinitely. A three month, non-renewable temporary patent is also available for those vessels to be scrapped, transited, or otherwise temporarily navigated.
The information and documentation required will depend on the specific situation. Generally this information includes; the current and/or previous name of the vessel, the type of vessel, its IMO No., the name and address of the owner, measurements, tonnage, technical information such as engine data, shipyard, year and place of construction, radio accounting authority, classification society, and other. Required documentation includes; original Bill of Sale, Acceptance of Sale, Builder’s Certificate if it is newly built, Measurement or Tonnage Certificate, Radio License Application, and Report of Inspection for vessels over 20 years old. A special Power of Attorney is also required to execute the vessel registration and a certification evidencing that the vessel does not currently belong to another registry and is free of any tax duties. If the vessel is currently registered at another ship registry but is still required to be registered under Panama’s Ship Registry, a certification of consent from the current registrar must be presented. All documentation presented must be duly notarized and authenticated by a Panamanian Consul or duly apostilled.
Preliminary Registration of Title/Mortgage
The procedures for the registration of mortgage and title deeds are straightforward to accommodate expeditious completion. Panama has an extensive network of worldwide maritime consular offices located at major ports. A preliminary registration may be requested through this network of Panama consular offices abroad, takes only one business day, and the preliminary registration of mortgage and title deeds can occur after working hours. For after hours requests, the interested party must arrange an appointment at least two days in advance. Vessels under construction can also obtain preliminary registration and radio call letters.
A vessel mortgage may be executed in Panama or any other country, but it must be registered at the Public Registry of Panama. It will not be effective against third parties until it has been duly registered. The mortgage may be written or executed in any language or form. Even though there are no restrictions as to the language, provisions, or requirements agreed to by the parties a registered mortgage must include information such as the names and addresses of the mortgagor and mortgagee, the fixed or maximum mortgaged principal, schedules for payment of principal and interest, the interest rate or manner for determining it, name of the mortgaged vessel, patent number, tonnage, and dimensions. For fleet mortgages, the paper work must include the encumbrance of each vessel. Special naval mortgage provisions are required for ships under construction.
Major Classifying Societies Accepted
All major classifying societies and members of IACS are authorized by Panamanian authorities to survey Panamanian vessels.
Panama’s Maritime Court
Panama’s Maritime Court is recognized worldwide for its efficiency and compliance with global maritime standards. The Court can handle any maritime dispute; including claims, sequesters, and labor matters. Given the importance of shipping to Panama, the Court is available 24 hours a day and 365 days a year. Panama’s corporate and ship mortgage laws are among the world’s best in terms of stability and judicial and regulatory protection.
Compliance with International Standards
Panama’s Registry is known to have one of the world’s best records in environmental and safety compliance and vessel loss prevention. It currently has over 1,000 inspectors in over 300 ports ensuring compliance, worldwide.
The Panamanian professional community offers ship owners a broad range of world class maritime services, including legal, accounting, banking, finance, and insurance. Given this extensive service framework and the U.S. dollar as currency, many ship owners utilize Panama as a multi-service center for all of their personal and corporate needs.