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How to register a company in Panama?

For those entrepreneurs who are thinking about expanding their business and making profitable investments, it is important to choose the right country to register a company abroad. One of the best jurisdictions for registering an offshore firm is Panama.

The Republic of Panama is a small country in Central America with a population of about 4.4 million. Panama is located on the isthmus that connects North and South America. This country is bordered by Costa Rica to the west and Colombia to the east. The rest of the world became aware of this Latin American country after the Panama Canal was put into operation, a grand engineering structure that connects the two oceans: the Atlantic and the Pacific. More than 14,000 ships transit the Panama Canal annually between the Caribbean Sea and the Pacific Ocean.

Panama skilfully capitalises on its strategically advantageous position on the map of the Western Hemisphere, which is why, year after year, it demonstrates stable growth in wealth, low inflation rates and a significant increase in foreign direct investment in the economy. Foreign entrepreneurs are primarily interested in this country as a convenient tax haven, where it will be easier for businesses to achieve growth and large profits.

5 advantages of registering an offshore company in Panama

Before we start listing the indisputable advantages, let us first clarify our terminology. Hereinafter, an offshore company should be understood as a legal entity officially registered in Panama that does not carry out any commercial activities in the place of registration. All income of such a company is the result of commercial operations carried out abroad. In this case, the company receives:

  1. Tax benefits. Simply put, your offshore business does not pay taxes on overseas income;
  2. Asset protection. In addition to its core business activities, a Panamanian offshore company can also function as a holding structure, holding intellectual and tangible assets worldwide through subsidiaries. This ensures the effective management, protection and autonomy of international investments;
  3. Guaranteed confidentiality. Offshore companies registered in Panama enjoy guaranteed confidentiality. Corporate purposes may be omitted from the memorandum of association, and unauthorised disclosure of financial information to third parties is illegal and punishable.
    If the founders of an offshore structure do not trust the Panamanian authorities enough, they can further secure their personal information by using the services of nominees;
  4. No exchange controls. Panama has no restrictions on remittances abroad and does not impose exchange controls on foreign companies;
  5. Simple and quick registration procedure. Since the jurisdiction enjoys steady popularity among foreign entrepreneurs, it will be quite easy to open an offshore company in Panama. The government does not burden international business with strict requirements. For example, foreign businessmen do not need to fully pay the authorised capital of the company to be opened.

As in other tax havens, offshore companies registered in Panama must pay an annual tax at a flat rate, currently $300, to renew their legal entity.

What type of company should I choose to register my business in Panama?

In order for the commercial activity carried out through a Panamanian company to bring significant profits, it is important to correctly build its structure, as well as to choose the appropriate legal form. In Panama, an entrepreneur can choose from several types of organisations, but the most common form of offshore business is a joint stock company.

Joint Stock Company (Sociedad Anonima / SA)

More than 90 per cent of firms in Panama are joint stock companies. The popularity of this type of company is due to the tax incentives provided.

The share capital of such an organisation is divided into shares and is essentially the sum of the economic contributions of all its founders divided into their respective shares. In order to attract additional investment, a Panamanian joint stock company may issue shares of different classes, with or without par value.

The size of the founding capital of a joint stock company is not regulated in any way. Panamanian SAs are usually registered with a nominal value of the share capital of $10,000. Unlike in some other tax havens, the Panamanian authorities do not require founders to pay all or part of the share capital of their company by depositing the relevant funds in a closed bank account until the registration is completed.

The founders of a joint stock company must be at least 2 legal or natural persons of any tax or state affiliation.

Shareholders’ liability for SA’s debts is limited to the value of their shares in the company.

The management of a joint stock company requires the appointment of at least three managers who form the Board of Directors. Such a company can be managed by both founders and hired managers.

Next to the original name of the joint-stock company, you must indicate its legal form by using the abbreviation “S.A.” or in full — “Sociedad Anónima”.

Limited Liability Company (Sociedad de Responsabilidad Limitada / SRL)

Like a joint stock company, a limited liability company is popular with foreign entrepreneurs planning to incorporate an offshore firm in Panama.

This corporate structure is almost identical to the standard LLC in the United States. It can have from 2 to 20 founders, who must be registered with the Public Registry Office. If the firm has no more than 5 founders, it may not hold the annual shareholder meeting required of larger corporations. As in the case of a joint stock company, both individuals and legal entities can open a limited liability company in Panama.

SRL is a legal entity separate from its founders and in case of bankruptcy is liable for debts in the amount limited by the size of the authorised capital. The authorised capital of such an organisation is formed at the expense of the founders’ contributions. It can be expressed in any freely convertible currency.

A peculiarity of Panamanian limited liability companies is that these corporate structures are subject to the principle of pass-through taxation, where tax on profits is not levied at the level of the firm but at the level of its founders after distribution.

At the end of the name of the limited liability company, it is necessary to indicate its legal form in Spanish – “Sociedad de Responsabilidad Limitada” or “SRL”.

Individual Limited Liability Company (Empresa Individual de Responsabilidad Limitada)

This unique form of doing business in Panama is well suited to a foreign investor who wishes to be the sole founder in his or her company. Such an individual transfers a portion of the assets of his or her overseas business into the country. If the Panamanian sole proprietorship suffers a loss, the sole founder’s civil liability is limited only to the amount of assets transferred.

You can learn more about this option of registering a business in Panama by contacting our consultants.

General partnership (Sociedad en Nombre Colectivo)

In a general partnership, all founders are jointly and severally liable for the results of their organisation, even if only one partner made the mistake that caused the damage.

The key benefits of this type of organisation are:

  • Easy to register a partnership;
  • General partnerships are exempt from paying corporate tax on foreign income, even if the funds are received in bank accounts in Panama;
  • General partnerships do not pay capital gains tax in Panama.

The phrases “Y compañía”, “Y hermanos”, “E hijos” or abbreviations are usually used at the end of the name of the general partnership.

Limited Partnership or Limited Liability Partnership (Sociedad en Comandita / S.Com)

This type of business organisation is a hybrid of a general partnership and a corporation where there are two types of members:

  • Full partners (comanditados) who manage the organisation and are fully liable for its obligations;
  • Limited partners (comanditarios) who contribute only capital but do not participate in the management of the firm, so their personal liability is limited to the amount of their share of the partnership’s total assets.

The main advantage of a limited liability partnership for an offshore business is almost the same as a general partnership — such a company can avoid paying corporation tax on overseas profits and transfer these proceeds to bank accounts in Panama.

The name of the limited liability partnership must include the phrase “Sociedad en Comandita” or its abbreviations “S. en C” or “S.Com”.

Sociedad en Comandita por Acciones (SCA) Limited Liability Partnership (Sociedad en Comandita por Acciones / SCA)

It is a partnership whose authorised capital is divided into shares (units) corresponding to the partners’ contributions.

One of the partners is responsible for the management of the company’s company and is fully liable for its obligations while the other partners only risk their shares.

The name of a limited liability partnership in units shall include the words “Sociedad en Comandita por Acciones” or its abbreviations: “S.Com. p.a.” and “S.C.A.”.

Corporate taxes in Panama

Corporate income tax

A big advantage of Panama for offshore business is the territorial principle of taxation. This means that foreign income of commercial organisations is not subject to corporate tax.

By comparison, the standard corporate tax rate on domestic profits is a hefty 25%.

And if the taxable income of a company registered in the country has passed the USD 1.5 million mark, the alternative method CAIR (from Spanish “Calculo Alternativo del Impuesto sobre la Renta”) can be applied to calculate the corporate tax, when the corporate tax is equal to 4.67% of the gross income of the company (less non-taxable sources of profit).

Moreover, Panamanian company profits are also taxed at the municipal level. The exact rate in this case varies depending on the region and the source of profit, but usually it does not exceed $2,000 per month on any one activity.


The value added tax in Panama is referred to as the “tax on the transfer of movable goods and services” and is denoted by the acronym ITBMS (from the Spanish “Impuesto de Transferencia de Bienes Muebles y Prestación de Servicios”).

The standard ITBMS rate is now 7%. Higher rates apply to alcoholic beverages (10%), hospitality (10%), and sales of tobacco and tobacco products (15%).

This tax does not apply to export transactions, the sale of medicines, foodstuffs and certain children’s goods, and the provision of medical and transport services.

Capital gains tax

If an old property is transferred, the seller pays the government at once:

  • 2% of its gross or cadastral value (whichever is greater) as real estate transfer tax;
  • 3% of revenue as an advance payment of capital gains tax, which is 10% of revenue.

If a new dwelling or new commercial property is transferred into ownership, the amount of real estate transfer tax is calculated using the following table:

New residential property ($)Transmission tax rate
Cost up to 35,0000,5%
The cost ranges from 35,000 to 80,0001,5%
The cost is over 80,0002,5%
New commercial property4,5%

A 10% capital gains tax is also applied when companies sell securities and fixed assets.

Payroll taxes

If you use the services of Panamanian professionals, in addition to personal income tax, you will have to pay a number of other taxes, which are distributed between the employer and the employee in the following proportions:

Tax% of payment from salary
For educational insurance1,251,5
At an occupational risk0,33-6,25
For social security9,7512,25

Step-by-step algorithm of company registration in Panama

After consulting Imperial & Legal, future Panamanian entrepreneurs will become founders of a new offshore company literally in three short steps.

Step 1: Preparation

You will have to determine what business activities your company will carry out and, with the help of our staff, choose the most suitable corporate structure and come up with an original name.

The name of the Panamanian company must not repeat the names of already registered organisations and trade marks. Imperial & Legal will check that the names you come up with are acceptable.

Step 2. Drafting and signing of the company’s articles of association by the founders

The articles of incorporation of a Panamanian firm must contain the following information:

  • Name, type of company, legal address, actual location;
  • Data on the management and founders;
  • Information on the procedure and frequency of the meeting of the founders and the board of directors;
  • Information on how to keep records of transactions;
  • Information about the company’s commercial activities.

Our specialists will ensure that each offshore company founder thoroughly familiarises himself with all the information contained in the articles of association. Shareholders must elect management, form a board of directors, and appoint legal representatives. The legal representative must be a Panamanian citizen.

It is important that your legal representative in Panama is a reliable person who is on call at least during working hours. That is why we offer corporate clients the services of our Panamanian partners with impeccable business reputation.

Step 3: Official registration

Once the statutory documents have been drawn up and signed, our lawyers will only have to officially register the company in Panama and register it with the tax authorities. This stage is the most difficult and time-consuming.

We first submit your articles of association to a public notary to draw up a public deed of incorporation of the new company.

Once the public deed is obtained, we file for registration with the Public Registry of Panama.

Next, Imperial & Legal specialists will register your firm with the General Directorate of Taxation, register it with the municipal local authorities, and with the Ministry of Commerce (before the first commercial transaction is carried out).

If you will be opening an office directly in Panama and hiring local employees, you will need to register with the Ministry of Labour, from where the information is transferred to the Social Security Fund.

This is the end of the incorporation process if you are opening an offshore company in Panama. But if your company plans to sell its products or provide services in the place of incorporation, we help you obtain a state commercial licence to conduct your business.

At the final stage of offshore company registration, the founders do not need to be personally present in Panama, as all these processes can be handled by our staff.

How long will it take to incorporate a company?

On average, the process of opening an offshore company in Panama takes no more than 8 weeks. Imperial & Legal specialists allow 2 weeks for the preparatory stage. Approximately 2-3 weeks for the work of a public notary and another 2-3 weeks for registration in the State Register.

It takes an additional 2-3 weeks to register your business with the tax authorities, the municipality and the Ministry of Commerce. If you will have an office and employees in Panama, allow up to 30 more days to register with the Ministry of Labour.

How do I open a current account with one of the banks in Panama?

The Republic of Panama has one of the most developed banking systems in Latin America. It is known that 41 of the 100 largest banks in the region are registered in this small country. In Panama, branches of major international banks and large local financial institutions such as Banco Aliado, Credicorp Bank or Banistmo are available to the foreign entrepreneur.

Opening a current account for the operation of your company will be easy if you use the services of our consultants, who will act on your behalf on the basis of a power of attorney.

We will minimise your involvement in the process of opening a Panamanian current account. However, you will not be able to avoid this task completely, because banks require the founders to fill in the original bank questionnaires by hand. In addition, the Panamanian banking institution will ask you to provide a whole package of documents confirming your firm’s right to corporate banking.

Once the bank in Panama receives your completed application forms and the documents pass the stringent KYC checks, the bank sends an account opening notification.

How to register a company in Panama without overpaying and wasting time?

Currently, Panama remains a land of opportunity for international business. The attractiveness of this tax haven has grown year after year along with the economic stability and improved prosperity of the country.

In order to avoid unforeseen expenses and long waiting times in the process of registering your Panamanian company, it is better to worry in advance about professional legal support at every stage — from the approval of the corporate structure to the filing of documents with the State Register.

Imperial & Legal is ready to provide qualified assistance in the process of registration of an offshore company in Panama, although the range of tasks successfully solved with our help is not limited to business incorporation only.

With us, you will quickly open a current account in a Panamanian bank, optimise your taxes and successfully submit your first accounts. Whatever business problem the owner of a Panamanian offshore company is facing, Imperial & Legal will provide him/her with a customised solution that takes into account all his/her circumstances and wishes as accurately as possible.

Frequently asked questions about registering a business in Panama

What kind of business activities are best conducted with the help of a Panamanian company?

The most relevant types of commercial activities:

  • Various investment projects related to key or promising sectors of the Panamanian economy: logistics, transport infrastructure, tourism, construction and renewable energy;
  • Logistics;
  • Shipping;
  • Airfreight;
  • Asset management through holding structures;
  • E-commerce;
  • Import/export in free economic zones.

Can a foreign corporation be registered in Panama?

Local laws allow foreign corporations to legalise their activities if they register their documents with the State Registry:

  • The memorandum of association of the foreign company, translated into Spanish and notarised;
  • Minutes of the Board of Directors meeting that decided to register the business in Panama;
  • A copy of the foreign corporation’s financial statements for the most recent reporting period;
  • A certificate from the Panamanian Consul certifying that in his country the foreign corporation has been incorporated and registered to the letter of the law;
  • Bank statements confirming the transfer of capital for the Panama operation.

What are the main differences between a Panamanian joint stock company (SA) and a Panamanian limited liability company (SRL)?

SA and SRL have a lot in common. To register these companies, a minimum of two shareholders, natural or legal persons, are required. The founders of joint stock companies and limited liability companies are liable for the debts of the company only to the extent of their contribution to the authorised capital.

The cornerstone difference is that when registering an SRL, information about the founders is placed in the Public Register, while the data of the founders of a joint stock company remains confidential. Moreover, in certain circumstances, SAs may issue bearer shares and trade them freely on the securities market, which means that the shareholder of such a company can be any unidentified individual or organisation.

There are also differences in the structure of such companies. A prerequisite for the incorporation of an SA is the appointment of three directors (president, secretary and treasurer) who constitute the Board of Directors, as well as a resident agent and a legal representative of the company. In a limited liability company, one administrator, two shareholders and a resident agent are sufficient for incorporation. It is not necessary to create a Board of Directors in an SRL.

The legal framework for joint stock companies and limited liability companies is also different. The activity of SAs is regulated by the old law “on anonymous companies” adopted in 1927. While the establishment and operation of limited liability companies is regulated by the law adopted on 9 January 2009.

How does the owner of a Panamanian offshore business ensure privacy?

The government of Panama guarantees offshore corporations complete confidentiality in all areas of activity. Moreover, this jurisdiction has a lot of additional tools to help keep the personal information of the owners of offshore business structures secret:

  • Panamanian joint stock companies may issue bearer shares that allow the true owner of the business to remain anonymous;
  • The articles of incorporation of an offshore company may omit the corporate purpose;
  • The current bank secrecy law provides for severe penalties for disclosing information about a company’s current account to third parties;
  • Panama has no signed treaties with other States on mutual legal assistance;
  • Nominal service is not prohibited in this country.

What is the fundamental difference between onshore and offshore companies in Panama?

A company is offshore if it does not carry out commercial activities in the country where it was established. If an international company in Panama is not recognised as offshore for any reason, it will be assessed a corporate tax of 5% on the portion of its income derived from commercial activities abroad.

In Panama, such organisations are called mixed activity companies. If your business is both onshore and offshore, the best solution is to register two different legal entities: an onshore company (to operate in Panama) and an offshore company (to operate abroad). In this way, you will reduce the additional tax payments incurred by firms with mixed activities.

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