An emerging power in gambling

Panama is considered the most important financial nation in the region. The Panama Canal, besides joining the Atlantic and the Pacific oceans, reduces maritime distances and is currently under expansion with an investment of US$5,000m.
Our country is the landing point of several fibre optic sub-marine cable systems, it has a tax free environment, the US dollar is used as legal currency and it is the main distribution centre for commercial products and merchandise to Central and South America since one of the major distribution centres of goods in the world is the Colon Free Zone, which is the second largest
duty-free trade area in the world, after the Hong Kong free zone, and the largest one in the western hemisphere.

In 1997, the government owned the monopoly of the gaming industry. That year the gaming law was changed and the Gaming Control Board of Panama, which is a multi-disciplinary organization under the Minister of Finance, a member of the Congress and the Controller of the Republic of Panama, took control of this activity, granting concessions to private parties.
This decision could not be more positive. The gaming rooms were submitted to international public bids through a legislation constituted by clear rules for obtaining the concessions - backgrounds, investigations, minimal requirements of experience and operation standards. The government’s income was multiplied and the development of the gaming industry took place almost immediately, making Panama one of the most important places in the Central America region.
The industry has grown substantially since 1997 and in spite of the fact that taxes were recently increased, it continues to be an attractive area for investors interested in local gaming matters.
Gaming activities allowed
The Gaming Control Board of Panama  regulates gaming activities that generate gambling and is the authorized entity which qualifies each game as a chance game or a skill game including gambling.

In Panama, casinos, type A slot machines rooms (with casino slots), bingos, sport books agencies and poker rooms (recently) are allowed.
Profile of the applicant for obtaining the contract
The profile of the applicant regarding its operation experience in this kind of activity, his personal background and to have the appropriate financial solvency to initiate and support the operation are indispensable at the moment of requesting a contract to operate a casino or a gaming lounge.
In order to prevent criminal activities, authorities will ask the applicant to submit personal, commercial and financial information and will further investigate before security institutions and private investigation agencies with the purpose to confirm the following:
• That the applicant is an honest person with a well-known reputation in addition to his competence and experience.
• That his activities and previous records will not represent a risk to the public interests of the Republic of Panama and his participation in the casino industry will not originate the possibility of introducing or increasing illegal practices in the management and administration of casino games.
• That the applicant is not engaged in commercial and financial malpractices.
• That the financing proposed for the management of the casino or casinos is originated from legal and acceptable sources.
In the cases of legal entities, the investigations will include directors, officers, legal representatives and shareholders that own 10 per cent or more of the shares.

Procedure to obtain a contract
In order to operate a gaming room it is necessary to enter into an administration/operation contract with the Gaming Control Board and to obtain a gaming license granted by the referred-to authority allowing the administrator/operator to manage a complete casino.
Documentation required for obtaining a contract

• Name of the applicant.
  
• Name of all persons, directly or
  indirectly involved in the proposed
  operation and his/her capacity.
  
• Complete and detailed information on the personal data of the applicant and
  its reliable employees, including the criminal history, commercial activities, financial and commercial matters, within at least a 10-year period prior to the filing date of the referred-to application. • For corporations, the information required must be also submitted for all directors, officers, legal representatives and shareholders.
• Business plan details including projections for the next 10 years.
• Corporations must submit a certificate issued by the Public Registry Office evidencing its legal existence, legal representative, constitution date, directors and officers and initial capital of the corporation.
• Authenticated copies of documents evidencing the constitution of the corporation or authenticated copies of documents certifying the identity of the natural person; depending each case.
• To describe the financial structure of the corporation, including a list of all the shares that were issued, all the outstanding shares and a list of the related rights.
• To submit a certification issued by the corporate secretary indicating the names of every shareholder of the corporation.
• To submit a certification issued by the corporate secretary or the applicant, as is the case, indicating all outstanding loans, mortgages, trusts, encumbrances and obligations and any other liability incurred.
•  To enclose a certification issued by the corporate secretary or the applicant, indicating the names of the persons employed, whose benefits, wagers or fees correspond to the 10 highest amounts of the payroll, whether or not directors, officials, officers or employees.
• To describe the procedures used by the applicant to grant bonds and profit-sharing.
• To specify and submit a photocopy of the agreements or sub-agreements executed or to be executed in relation to the operation of the game or other activity that requires a license.
• To submit a general profit and loss statement certified by an authorized public accountant for at least three fiscal years prior to the date of the application. In case the applicant does not have three years of operations, the statement must include the complete operation period.
• To submit copy of the income-tax returns for the last three years. In case the applicant has not operated a complete fiscal period, an estimated income-tax return must be submitted.
• To submit a Manual of Internal Control Procedures to be used, prepared according to the minimum standards of internal control procedure adopted in our regulations.
• To submit documentation evidencing the organization experience and/or personnel experience in the development of the operation, including, without limitation, experience and knowledge of five years in the gaming industry. This can be proved by filing a copy of a License issued by the proper authorities in charge in the country which a casino is operated by the applicant and a copy of the documents of incorporation of the corporation in the referred-to country.
• Solvency Certification reflecting that the applicant counts with financial facilities for the project.
• To enclose any other information or documentation that the director may consider necessary and convenient to guarantee the public health, security, moral reputation, public order and general interest of the residents of the Republic of Panama and of the gambling industry. 

Once the contract has been approved, the applicant must post a bond to guarantee the compliance of its obligations. Additionally, the applicant must manage its operations in accordance with technical standards approved by the Gaming Control Board.

Places of business

Gaming rooms have to be located in a distance of more than 100m from educational institutions, churches, health centres and hospitals. Casinos cannot be located in national parks or natural monuments, or in other places officially declared as fauna reserves. 

Geographical location
It is important to point out that our gaming rules established as designated areas Panama City in general through the Chorrera border and the Colon border, not including territorial waters.
The casinos which are planned to operate within the designated area have to be located in a new hotel having at least 300 rooms, a swimming pool, continuous night entertainment, 24-hours restaurants and room service with international luxury standards, classified at least with four stars.
Hotels located outside the designated areas will be evaluated by the Gaming Board that can allow some adjustments to issue the license.

Contracts for type A slot machine rooms can be approved outside of the designated area in the interior of the Republic. For example, in Chiriquí (David, Boquete, Cerro Punta), Bocas del Toro, Farallón and Coronado.

Taxes
Although our law provides a formula to calculate the taxes that must be paid directly to the Gaming Control Board, the government has approved an amendment of the Gaming Law with a flat fee of 16 per cent of the gross income per month until December of 2011. Since January of 2012 to December 2014 the tax will be 19 per cent and in January 2014 the tax will be 22 per cent of the gross income monthly.
Gross income in our industry shall be understood as the sum of the total amount in coins or tokens in the drop box of all the slots machines, plus the bills in the stacker of the referred-to slots, minus the prizes paid to the players, minus the refills of coins, tokens and bills. Regarding the gross incomes in tables, the same principle is applied using the appropriate formulation for this kind of game.
Also, the new operator must pay to the government a sole tax (license tax) established by the Gaming Control Board in the amount of US$500,0000 per slot room and US$1,000,000 for casinos.

Bingo operations pay 15 per cent of their gross income and there is a special formula for sport books taxes with a very low rate.

The current situation
Panama, with a population of 3.5 million, is the most regulated jurisdiction in Central America and the Caribbean. At this moment, 51 concessions are in operation, distributed

in the following way:
Gaming concessions
• 14 casinos
• 25 type A slots machine lounges • 11 sports book agencies
• 1 bingo lounges
Recently the Gaming Control Board approved three new complete casinos and five bingo lounges. Additionally, and with a special regulation, there are 11 corporations that operate type C slot machines (street slots), with very good incomes and a very particular way of operation.

In another article, we will be explaining the content of Resolution No 65 of October 25, 2002, under which the Gaming Control Board of Panama, in charge of the authorization, regulation, and supervision of wagering activities, approved the statute named “For the operation of chance and wagering activities performed through electronic communications that allow online bets in Panama.” 

Herbert Young Rodríguez, Panama
Central America