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Panama offers multiple investment opportunities and it has a number of well-developed sectors, such as finance and banking, trade and tourism.
Our team provides complete Panama incorporation services and our packages include assistance for selecting the business form, drawing up the Articles of Association as well as making the necessary submissions for registration.
Reasons for investing in Panama
Foreign investors who wish to open a company in Panama enjoy a number of advantages. We list some of these below:
A stable economy: the country has seen constant economic growth over the last years and it is a competitive economy among other jurisdictions in the Caribbean.
Easy company formation: Panama incorporation is a simple process that takes a few days and can be assisted by our team of experts.
Easy company management: local company laws allow for flexible company management as there is no need to hold meetings in Panama or to hold the accounts in this location.
Favorable taxation policies: Panama offers an attractive taxation regime as there is no tax on business activities or transactions performed abroad.
Trade benefits: Panama has signed multiple free trade agreements and trade is liberalized; moreover, there is a free trade zone, among other special economic zones.
Investors who open a company in Panama can engage in all types of business activities. It is common for these companies to be involved in trade, asset acquisition, investment holding, and other purposes.
Types of companies
International Business Company
Corporation (Sociedad Anónima (S.A.))
Minimum share capital for IBC
Minimum number of shareholders for IBC
Time frame for the incorporation
6 days for the S.A.; fewer for the IBC
Corporate tax rate
Income generated outside of Panama is not subject to tax.
Dividend tax rate
25% on net taxable income or 1.17% on gross taxable income. Companies that carry out business activities outside of Panama are not subject to this tax.
Not applicable for companies carrying out business outside of Panama (IBC).
Number of Double Taxation Treaties (approx.)
Do you supply a Registered Address/Virtual Office?
Local Director Required
Annual Meeting Required
Is Accounting/Annual Return Required?
Yes and offshore companies must maintain their accounting records for at least 5 years.
Any Tax Exemptions Available?
Taxes not applicable on business income derived outside of Panama.
Any Tax Incentives?
Various incentives are available to onshore companies.
Steps for opening a company in Panama
Below, our team of agents who specialize in Panama incorporation list the main steps required to set up a company here:
Choose the business form: there are several types of companies available, however, the S.A. or joint-stock company is one of the most popular and suited to many business purposes.
Draft the company documents: investors are required to draft and then sign the company’s constitutive documents; we detail their content below.
Register the company: the new legal entity is to be registered with the Public Registry.
Open a bank account: this step can take place before registration if needed; the company will be required to have a local corporate bank account.
Obtain licenses: some business activities require extra licensing, as per a particular business field; a financial services license is required for companies in this field, issued by the Superintendency of Banks.
When they open a company in Panama, most often in the form of the International Business Company (IBC), investors will need to have a registered office in the country. This condition applies throughout the world when forming a new legal entity and it is no exception in Panama. However, this registered address does not need to be the same location from which the business performs its activities. As a manner of increasing the flexibility for the business even more, investors can open to work via a virtual office. This is similar to a regular or traditional office space, however, it involves fewer costs because there is no need to buy or rent an office space. The address is located in a prestigious office building and the virtual office package will include minimum secretarial services as well as additional ones as needed (and meeting room space as scheduled). Working via a virtual office is suitable in many cases when opening an offshore company and it is a good option for most of the current offshore uses in Panama.
Panama company formation is a simple process, especially when guided by a team of local experts. We recommend reaching out to our agents for more information on the process, in order to ensure that the incorporation takes place as fast as possible. The usual time needed to open a company is approximately five business days. In certain cases, our team can provide an expedite incorporation, under certain conditions. An alternative to incorporating a new S.A. or another type of company is to purchase an already existing and registered shelf company in Panama. Our agents can also provide details on this option.
Investors who wish to benefit from a high degree of confidentiality can enlist the services of a nominee director. The local laws require the disclosure of the name of the company directors. Thus, when using this type of service, the beneficial owner’s name will not appear in the Panama registries, instead, the name of the nominee director will be used. The control of the company is still ensured by the beneficial owner who signs a fiduciary agreement with the nominee. The director appointed at a certain time can be removed through a letter of resignation. All of these details are discussed prior to concluding the agreement and enlisting the service. A similar option is available in case of shareholders who wish to maintain a high level of anonymity or who choose to refrain from disclosing all of their investments. The nominee shareholder package is available upon request.
Requirements for opening a corporation in Panama
The several times amended Law 32 of 1927 (of 26th February) On Corporations and the Commercial Code of Panama is regulating the activities of a popular form of business in Panama: the corporation.
First of all, before incorporation, the company opened in Panama must reserve the name of the company at the Public Registry. If it’s available, it must contain one of the following terminations: Corp. (Corporation), Inc. (Incorporated) or SA (Sociedad Anonima)
A corporation in Panama is formed by a minimum of two founders and have its activities based on the Articles of Incorporation. The Articles are public and must be registered at the Panama Public Registry. It must state the name and the address of the founders, also the name, the address and objectives of the newly formed company, the total amount of the Corporate Capital and the way its divided into shares, details regarding the shares and the rights attached to it, the name and the addresses of the directors (it’s mandatory to be at least three), the name of the registered agent in Panama and other regulations decided by the members of the company and according to the law. If the Articles are written in another language than Spanish, an official translation must accompany it.
After incorporation of an offshore company in Panama, only a single shareholder is necessary in order to start the activities in this type of company.
The Board of Directors is taking all the daily decisions of a corporation and must be formed by at least three directors. Among their responsibilities, we can mention the appointing of the President of the company, the Secretary and the Treasurer. In some cases, officers and representatives must be appointed, also by the Board of Directors, but it’s not mandatory. The most important decision must be taken during the general meeting of the shareholders in matters which concerns the decrease or increase of the capital, any modification brought to the Articles of Incorporation, the decision of merger or liquidation of the company.
The Corporate Capital of this type of company is divided into shares which may have a nominal value or not. The shares have attached to it the rights and obligations of the owner, including the right to vote and must be paid at a date decided by the Board of Directors. Each shareholder receives a shares certificate where is stipulated the incorporation date of the company in the Mercantile Registry, the capital, the number of shares owned, if the shares were already paid, if not, the sum already paid, the rights and obligations attached to it and the classes of shares owned.
Another requirement of the corporations created in Panama is paying the annual registration fee. The industrial or commercial companies must have a Notice of Operation, before starting any activities. Exceptions are permitted.
The liquidation of a corporation established in Panama may occur if certain aspects were respected from the articles of association, if there was a unanimous decision of the shareholders, if the objectives of the company were achieved or if the Court decides that the company has broken several laws and needs to be liquidated.
Company formation in Panama is a simple process that can be accomplished in just a few days, depending on how fast the incorporation documents are prepared.
What is the minimum share capital of a corporation in Panama?
There is no minimum share capital requested at the incorporation of a corporation in Panama.
You can also watch the following video for information on investing in Panama:
How can I register for VAT in Panama?
The Value Added Tax has a value of 7 % for certain products and services, 10% for alcohol and 15% for cigarettes in Panama.
The registration may be voluntary or compulsory. The compulsory registration is made for the companies with an annual turnover above 36,000 USD or monthly turnover above 3,000 USD.
The registration is made by depositing certain specific documents at the Panamanian’s Taxpayers Registry and as a result, the certificate of registration is issued, that also specifies the taxpayer identification number. Foreign companies that are not operating in Panama are not allowed to register for VAT.
How can I open a bank account in Panama?
Opening a bank account in Panama requires the personal presence of the company’s representative because one of the requirements is a personal interview with him.
The company’s representative must also bring a set of documents such as: certified copies of the passport and another ID with photo, a copy of the document that proves that the staying in Panama is legal, two bank letters for each representative, credit references, a description of the business activities performed by the company, details regarding the provenience of the funds, the location of the company, the approximate annual or monthly funds that will be operated through the account and the reason why the bank account is opened.
How can I recruit personnel in Panama?
The personnel of Panama it’s easy to be found through the recruitments agencies. The labor force is educated and the majority of candidates are English speaker which is clearly an advantage fro the foreign companies willing to operate a business here.
What are the uses of an offshore company in Panama?
Investors who open a company in Panama not only benefit from a favorable regime and no taxation, but they can also use and structure their legal entity as they see fit. Some of the common uses for an offshore company that is incorporated here include the following: trading company, shipping company, services company, investment company or holding company. The type of legal entity usually depends on the final use of the company, however, the commonly used business forms in Panama are suitable for all of these business purposes. For example, the S.A. can be used as a trading company or as an investment company. Likewise, investors may opt for a different business form.
A professional services company set up in Panama can be a beneficial business structure through which professionals such as business or financial consultants can offer their services to international clients. When incorporating here, they reduce their tax burden. Moreover, when providing services through a corporation, as opposed to a sole trader, investors limit the liability, as these would be registered by the company and not by themselves, as would be the case when providing services through a sole trader.
One of our agents can provide further details on the conditions that may apply to an offshore company according to its uses.
Taxation requirements in Panama
A Panama Corporation is not subject to taxes on foreign income, only on the income sourced from Panama. This makes Panama an ideal location to base an offshore company. According to the tax rules in force, there is no income, corporate, capital gains or estate tax for offshore companies that engage solely in business outside of the jurisdiction. Offshore companies that do engage in local businesses (although not common and subject to certain requirements) need to comply with certain tax requirements in the jurisdiction.
Other requirements for Panama companies include having at least one shareholder and three company directors as well as company officers, such as secretaries. However, there are no nationality restrictions for the secretary and the person appointed for this position does not need to be a resident. The three appointed directors can also serve as the company officers (the president, secretary, and treasurer).
Companies are required to pay an annual government fee and to observe the minimum financial statements that need to be filed on an annual basis.
Panama company management
Investors who are interested in Panama offshore company formation have two options for the management of the company: direct management by the beneficial owner or management through an appointed director, the nominee.
When managing the company directly, the main advantage is that the beneficial owner is permanently involved in the activities of the business. In addition to this, he does not incur the annual nominee service costs and the company structure remains a simple one. Nevertheless, investors can choose to raise the level of anonymity by using this service when confidentiality is important for their business activities.
When using a nominee director service, the management of the company will take place through the nominee, as per the instructions of the beneficial owner. Their relationship is a fiduciary one.
Financial privacy is protected in Panama and certain laws apply to offshore companies, trust and foundations. This high degree of confidentiality is what makes the jurisdiction attractive to foreign investments in the first place. To this, certain banking laws that allows for a certain level of account holder secrecy also apply. A situation in which financial privacy is subject to disclosure is when a court order exists in conjunction with a criminal investigation. Furthermore, there are no exchange control laws, meaning that businesses are not required to comply with certain limits on money transfers.
Foreign investments in Panama
Panama is an important investment destination in Latin America and many multinational companies have established their headquarters here. Since 2007, more than 140 such companies have invested in the country.
The key business sectors in Panama are the following:
- Manufacturing: from industrial manufacturing companies to agricultural companies and those that engage in the processing of raw materials, this business sector offers many opportunities and attracts important foreign direct investments. Tourism: Panama is an exceptionally beautiful tourist destination and investments in this sector is one of the most important, producing with annual revenues of approximately 300 million $.
- Logistics: Panama can serve as the headquarters for transport and logistics companies because of its good connectivity as well as a strategic location.
- Others: wholesale and retail trade, financial and insurance activities, transport, information, and communication as well as real estate are sectors that attract high percentages of foreign direct investments.
Companies in Panama can also benefit from certain investment aid or incentives. For example, companies in certain industries can use the Industrial Development Certificate (authorized by the Ministry of Economy and Finance) to pay national taxes, contributions, and tariffs. With this document, companies are subject to 3% import tax (in addition to other taxes) and they can reimburse up to 40% their investment or reinvestment benefits (along with others). This is just one of the examples of available benefits. For more information, we invite interested investors to reach out to our Panama incorporation agents.
The facilitation of foreign investments in Panama is overseen by Proinvex, the Agency for Investment Attraction and Export of Panama, ascribed to the Ministry of Commerce and Industry.
With a growing economy, liberalized trade and simple company formation, Panama is a recipient of foreign direct investments, as follows:
- foreign direct investments inflow in 2018: 5,549 million USD;
- foreign direct investments inflow in 2017: 4,569 million USD;
- investments inflow in 2016: 4,866 million USD.
What is the overall economic situation in Panama?
Panama is situated in Central America, bordered by the Caribbean and the Pacific Ocean. It’s considered one of the most important offshore jurisdictions of the world.
Besides the money collected from the annual license fees paid by the offshore companies, Panama’s economy is based on the construction sector and also on the service sector: tourism, banking, commerce, trading.
Foreigners are attracted by the price discounts and advantageous taxes offered in the tourism sector. The infrastructure is highly developed, facilitating the exports and the imports of goods.
The Panama Public Registry provides us with the following data regarding company formation:
- the total number of limited liability companies registered in 2019: 100.
- the number of foreign companies registered this year: 56.
- private foundations registered in 2019: 1,213.
Foreign investors are welcomed in Panama and they benefit from good business conditions, no corporate taxation, access to double taxation treaties as well as a minimum time to incorporate a new legal entity. Any currencies are permitted and there is no need to submit a mandatory minimum share capital, although a requirement for a minimum government fee for registration does apply. Investors who are interested in knowing more about the local conditions or wish to open a company in Panama can reach out to our agents for more detailed information about the applicable company laws as well as the disclosure principles and the licensing requirements. Our incorporation packages include comprehensive services along with the option to set up a virtual office in Panama, should this be the preferred manner of doing business.
Investors who wish to know more about Panama offshore company formation can contact us for complete details as well as specialized assistance for incorporation. We provide complete company formation packages.
Call us now at +44 203 287 0408 to set up an appointment with our business consultants in Panama City, Panama. Alternatively you can incorporate your company without traveling to Panama.
As a BridgeWest client, you will benefit from the joint expertise of local lawyers and international consultants. Together we will be able to offer you the specialized help you require for your business start-up in Panama.