When it comes to choosing a suitable jurisdiction for opening a company abroad, it is worth practicing an integrated approach, taking into account several factors: political, economic, tax situation, business climate, government attitude towards foreign entrepreneurs, etc. Taking these aspects into account, one of the popular and profitable destinations today is the democratic Republic of Panama, a former Spanish colony located in the Caribbean.

 

In this country, entrepreneurs and investors have various opportunities for successful business in well-developed financial, banking, trade, tourism, and other sectors. Registration of a company in Panama will provide the necessary level of trust on the part of potential partners, clients, and banking institutions since this jurisdiction is not on the blacklist of offshore companies of the EU and other international Regulators.

 

If you are interested in Panama as a place to register a company, then we suggest you take advantage of the professional legal assistance of the Lawrange Law Firm. With the support of our highly qualified lawyers, attorneys and other specialists, legalization of business in this country will take place quickly, comfortably, with maximum effectiveness and benefit. You can order an extensive list of consulting and legal services from us on any issues related to the registration process and running your own business in Panama.

 

Offshore Registration in Panama: Benefits for Business

This Central American country has experienced steady growth in gross domestic income in recent years. In terms of ease of doing business, Panama ranks 86th among 190 economies in the world. Establishing a company in Panama looks like an attractive and right decision also due to the use of English here along with the main state language – Spanish. In other words, the registration and licensing process (depending on the type of activity of the legal entity) is quite simple and clear here, especially considering the government’s consistently loyal, encouraging attitude towards foreign investors and entrepreneurs.

 

Favorable Geographical Location

Situated in the Caribbean, between Colombia and Costa Rica, Panama has a strong strategic geographic advantage – the Panama Canal linking the Atlantic and Pacific oceans. The country itself acts as a key link on the American continent – connecting South and North America. Although Panama’s domestic market is small, the solution is to register an offshore company here, allowing your business to enter the markets of Latin America, the USA, Europe, and Asia.

 

Reliable Financial Regulatory System

The Panamanian financial sector is considered one of the most popular and prestigious in the world. It is in the process of modification due to the adoption of some new OECD rules, while it acts as a rather complex and well-thought-out environment for any type of business. Thanks to the proactive approach of the local Regulator (Banking Authority of Panama), this country enjoys the status of a leading financial center of the Americans continent.

 

Lack of Exchange Controls

The dollar has been the key asset in the country since the country gained independence in 1901. The main legal tender here is the dollar, which circulates with the local currency (Panamanian balboa) at a 1:1 exchange rate. Panama has its own banknote minting but uses dollars as paper money. It is due to this that there is no currency regulation in the economy, and there is historically low inflation.

 

Modern Telecommunications

Despite some geographical limitations, Panama has one of the best and most developed telecommunications and Internet infrastructures in the world – Panama is crossed by five submarine intercontinental fiber optic cables, providing fast connections to all parts of the world and high efficiency of any transaction in the country.

 

Creating a Company for Foreigners: Choosing a Corporate Structure

The source of corporate law in Panama is the Corporations Law of 1927 (current version) and the Commercial Code. On this basis, the country has several legal forms of organization, the choice of which should be carefully considered in relation to the specific needs of your own business. It is important to understand that once a certain type of company is established, there may be legal restrictions on the business activities allowed.

 

Sole Proprietorship

A basic form of business managed by one member with unlimited liability for the company’s debts. The owners have all assets and debts at their disposal. A sole proprietor may use a trade name or company name other than a legal name. In this organizational and legal form, the participation of a lawyer is not mandatory to give legal status but is recommended. There are no restrictions regarding the nationality of the director, and foreign investments carry unlimited liability. There is no income tax if the income is earned outside of Panama.

 

Corporation (Sociedad Anonima – SA)

Participating in business activities in Panama and deciding to form a company is a relatively simple process, provided that certain requirements are met and the characteristics of the various business entities are taken into account. Creating a company is the initial step among the required steps to register a corporation, the rest being obtaining a business license, opening a bank account and amending the company’s Articles of Incorporation.

 

Within a corporation, shareholders are solely responsible for their assets and contributions. Panamanian law does not define a minimum amount of social capital for a company, although the recommended minimum is $10,000. SA registration can usually be completed within two to three weeks (without opening a bank account), provided the business meets the basic requirements:

 

  • There are at least three directors.
  • A president, secretary, and other representatives of top management have been appointed.
  • There is a legal representative of the company (maybe one of the directors).
  • Resident agent appointed.
  • The company’s financial address is registered.
  • The company is ready to file monthly and annual tax returns.
  • There is at least one shareholder.
  • The annual payment obligations to the State Register for maintaining the account have been fulfilled.

 

Limited Liability Company (Sociedad de Responsabilidad Limitada – SRL)

All types of structures in Panama benefit from economic freedom. Forming a limited liability company (SRL) is the initial step in the legal entity registration process, followed by the same subsequent steps as when forming an SA.

 

Typically, SRL registration can be completed within approximately two weeks (excluding opening a bank account). From an investor’s perspective, an SRL may seem like the most attractive option because it provides personal liability protection, relieving individuals of liability for the company’s funds or debts.

 

To form a company in Panama as Sociedad de Responsabilidad Limitada, the following basic requirements must be met (and also take into account the key legal structures in Panama):

 

  • Appoint at least one director.
  • Select a president, secretary, and accountant.
  • Have at least two shareholders, who may be persons from the board of directors or designated senior persons listed in the Social Pact. Each shareholder must subscribe for at least one share at the time of registration.
  • Appoint a legal representative of the company, who may be the president, partner, or one of the administrators.
  • Select a resident agent (with the assistance of a Panamanian lawyer).
  • Register the company’s financial address.
  • Prepare and file annual tax returns.
  • Have at least two shareholders or associates.
  • Fulfill annual payment obligations to the State Register to maintain the account.

 

Fundación de Interes Privado

Opening a business in Panama as a Private Interest Fund allows you to take advantage of certain legal advantages that are attractive to foreign businesses. It takes a minimum of three weeks to set up this type of company. The enterprise is ultimately exempt from all taxes and fees in Panama, except for the annual quota payment.

 

If an organization intends to engage in commercial development, it must obtain a license and comply with the tax filing requirements required by law. This is an additional legal structure in Panama that needs to be taken into account. The following outlines some key characteristics and requirements for a Private Interest Fund:

 

  • There is no issue of shares as other types of companies do.
  • There is a private protectorate document issued by a notary.
  • One beneficiary and one protectorate must be appointed by the Foundation Council.
  • Not subject to court orders to seize or forfeit assets.
  • The recommended share capital of the company is $50,000 (optional).
  • There is a financial address.
  • There is a legal representative of the company (a Panamanian lawyer).
  • The purpose/objective of the fund and the period of time (indefinite or definite) during which the company must be open are stated.
  • A bank account has been opened (this process may take a minimum of four weeks).

 

Important! The corporation (Sociedad Anonima – SA) provides limited liability to shareholders and is universal for various types of activities. This BPF offers an established structure with clear rules and governance procedures, making it a popular option for businesses of different sizes and sectors.

Stages of Starting a Business in Panama

This process involves performing several sequential steps:

 

  • Selecting an OLF – it is extremely essential to understand the features of a particular form before direct registration begins. Each OLF puts forward certain requirements and allows for varying degrees of responsibility.
  • Choosing a name is one of the significant steps for those wishing to open a company in Panama. The name of a Panamanian legal entity must end with any of the following words or abbreviations: Corporation (Corp.), Incorporated (Inc.), Sociedad Anónima (SA), etc. After this, it is critical to check the name for availability in the public register.
  • Hiring a permanent agent who will represent the interests of the enterprise and prepare the Charter.
  • Notarization of the Articles of Incorporation containing, among other things, information such as the name and nationality of each founder of the charter, the residence of the resident agent (must be a lawyer or law firm in Panama), the names and addresses of the directors and officers (can be of any nationality), the purpose of the company, information on the type and number of shares, the full name of the director, date of birth, address and nationality.
  • Office or commercial leases – include, among other things, the amount and frequency of lease payments, the length of the lease period, and whether there is a security deposit and/or a damage deposit. The agreement must be signed by the property owners (or their legal representatives) and the tenants, and at the same time, be notarized.
  • Registration with the Trade Division of the Public Register and payment of an annual franchise tax of $250 (required). In addition, those companies that do not receive any income from a Panamanian source, and do not conduct any trading activities in Panama, are only required to pay a flat annual tax of about 400 dollars.
  • Receive notification of the operation (“aviso deoperacion”) through the official website of “Panama emprende”.
  • Obtaining a Social Security Number for a business by contacting the Registro Patronal de la Caja de Seguro Social (CSS).
  • Registration of a Sanitary Permit (Permisos Sanitarios) – applies to those enterprises that work with food.

 

Important! All income received outside of Panama is completely exempt from tax, and any income received from sources within Panama is subject to tax.

 

Opening an Offshore Account in Panama

Even sole proprietors are advised to have a separate bank account for their own business. The remaining OLFs are required to use exclusively corporate bank accounts.

 

To open an account in an offshore bank for business in Panama, the applicant must:

 

  • Prepare for a personal interview; however, some local banks allow the opportunity to communicate with a potential client over the telephone.
  • Provide copies of each director’s passport (pages with photo and personal information, and in individual cases – with a stamp of entry into Panama). Banks may also require additional photo identification (such as a driver’s license).
  • Prepare two bank references for each Director and person signing the account – these documents are necessary for the bank to ensure the reliability and financial solvency of the future account holder. Recommendations will be especially useful if they can be used to confirm a person’s residential address. Some banks may only accept one bank letter of recommendation (this may be the case if all banking transactions were previously carried out in only one bank).
  • Two professional references for each Director and account holder – may be written by an accountant, lawyer, stockbroker, insurance broker, real estate broker, or employer. Must indicate the duration and nature of the business relationship with the applicant. Only an original letter will be accepted.
  • Verify Address – Provide a copy of a utility bill (telephone, water, electric, cable, or internet) that shows the applicant’s name and address.
  • Provide a “Company Profile” letter that briefly describes the type of business, indicates its location, describes the products or services provided, the nature and expected volume of business, the origin of the funds contributed, the approximate monthly or annual amount of funds to be contributed and the reason for opening an account in Panama.

 

The following documents should be prepared in advance and then sent to the bank’s compliance officer. An applicant for opening an account is checked against all the requirements of the AML policy to ensure that there is no evidence of money laundering.

 

Order a consultation

In order to register a company in Panama to allow you to conduct legal business activities, it is important to have a corporate account. Opening it is much easier with the support of AA Lawrange specialists. We are ready to accompany you at this and other stages of registering a business in Panama, thereby ensuring a hassle-free and efficient solution to this process.

 

Critical! Opening an account can go more smoothly, with less paperwork required when going to a bank where you already have a personal account.

 

Business in Panama: Taxation

The favorable tax regime is one of the most attractive features for foreign entrepreneurs wishing to register a company in Panama. Generally, income earned outside a jurisdiction is not subject to taxation in that country. According to the Tax Code, profits received as a result of:

 

  • re-invoicing of external goods or services;
  • carrying out transactions that are managed from Panama but are carried out outside the jurisdiction;
  • distribution of dividends received from external income.

 

Companies that earn income both in Panama and outside of Panama are taxed only on Panamanian income according to domestic corporate tax requirements. Taxable income includes all types of income derived from business activities in Panama. The rate is 25% of the next taxable income or 1.17% of gross taxable income (taxpayers may request that this treatment be waived if there are net operating losses or if this alternative tax exceeds the 25% threshold).

 

Opening a company in Panama may also include the opportunity to take advantage of the benefits available in the Panama-Pacific Special Economic Zone. In particular, income received as a result of:

 

  • selling goods or providing services to transit visitors;
  • import, export, and re-export of goods;
  • provision of logistics services.

 

Similarly, office administration services may be taxed at 5%, provided the company meets certain criteria. Investors should note that these taxation principles apply to income received as part of the activities of certain OLFs.

 

Why Choose Lawrange

Registration of an offshore company in Panama is an important and rather complex process, which, in the absence of experience or the necessary knowledge, may not bring the necessary results. Moreover, this procedure hides various “pitfalls” that can significantly complicate the life of an entrepreneur. Therefore, we recommend using the help of professionals from our Law Firm, who will offer specific solutions to this problem. We will advise on all issues related to offshore registration in Panama, help you decide on the most suitable corporate structure, register a company name, open an account, etc.

 

Cooperation with Lawrange means access to:

 

  • Large selection of legal and consulting services.
  • Professionalism and many years of experience in registering a business abroad.
  • Honest, transparent prices for services were selected, taking into account the characteristics of each specific case.
  • Information on the case can be provided at any time of the day or day of the week (always in touch with our clients).

 

Opening a company in Panama will be a profitable and useful tool for any business, the main thing is to enlist the reliable support of Lawrange professionals.

 

FAQ

What are the time frames and costs for registering a company in Panama?

To register a Panamanian offshore company to order, it will take up to 2 weeks. Registration requires payment of an annual government fee of $400, plus associated legal fees, as applicable.

 

Are Panamanians required? Offshore companies to submit reports?

No, the Panamanian government does not require filing tax or financial statements.

 

How are non-resident companies taxed in Panama?

Non-resident companies are not subject to tax on profits earned outside Panama.

 

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