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Panama Company Formation

A Panama Offshore Company formation is one of the longest-standing offshore formation jurisdictions in the world. A Panama Offshore Company can be used for many purposes including as a holding company, to open an investment account or offshore bank account, or to hold real estate or non-physical products. 

Established in 1927 the General Corporations Law gave form to the Panamanian Corporation and has since registered some 400,000 corporations and remains one of the premier destinations for offshore business formation. A Panama Offshore Company, also called a International Business Companies (IBC) in other jurisdictions is also referred to as a non-resident corporate structure for tax purposes.

The Panamanian offshore model has since become the world standard due to its flexible formation structure, methods to ensure customer privacy and supportive legal framework. If you are looking to open a Panama corporate bank account, they generally accept American and non-resident individuals and corporate entities but you must have a Panama Company entity and provide the necessary documentation and satisfy the KYC requirements.

Overview

Panama is strategically located as a bridge between the Americas, known for its Panama Canal and has become an international center for trade, finance, and baking services. It offers a range of financial and immigration services that are very popular amongst entrepreneurs and investors.

Panama offers a Financial Company that is one of the most competitive non-bank financial entity out there with some generous Panama citizenship programs and visas that allow permanent residency and citizenship within as little as 5 years, with minimal requirements.

Thanks to a stable political environment, the Panamanian economy has achieved rapid growth over the last two decades due to its open business environment, free trade zones, and low tariffs that have encouraged investors and business enterprises in the country.

Panama City remains one of the best places to do business due to its financial opportunities, low-risk investments, and thriving banking center. Panama Companies give individuals and corporations the ability to incorporate in a country that has a long reputation for financial and offshore excellence.

An Offshore company formation in Panama offers complete confidentiality, attractive tax-free opportunities, a favorable legal environment, and a supportive banking infrastructure all of which account for why Panama is one of the premier destinations for offshore corporations.

For more information on the Advantages of Panama as an Offshore Financial Center, click here or if you are looking to retire in Panama go here.

panama offshore company

Advantages of Panama

Anonymous Ownership

Panama corporations share certificates can be issued in Nominative or Bearer form (Bearer Shares are an anonymous form of ownership), with or without par value.

No Reporting Requirements or Taxes

Panama does not impose any reporting requirements or taxes for non-resident Panamanian corporations.

No Piercing the Corporate Veil

Panama does not allow "piercing the corporate veil", so your corporate books are maintained 100% private and confidential by law.

Nominee Directors

We offer our clients the optional service of using our "Nominee Directors" for their corporation(s). For purposes of confidentiality, most of our clients prefer that we provide nominee directors/officers for their corporations, since unlike IBC's set up under Belize, Nevis or other British Commonwealth tax haven corporate laws, directors have to be in the public registry.

When we appoint nominee directors for the entities that we establish for our clients, we always provide our clients with pre-signed, undated letters of resignation from the directors so that our client can replace those directors at any time, without in any way being dependent on our law firm.

Favorable Incorporation Laws

Panama offers the most favorable and most flexible incorporation laws available in the world.

Strict Privacy Laws

Panama continues to maintain what we consider to be the most solid banking and corporate book secrecy laws in the world, which are engraved in its constitution.

With Britain's proposed regulation for removal of bank and corporate book secrecy in the UK offshore territories, plus considerable dilution of privacy laws in jurisdictions, such as Bahamas, Antigua, St. Vincent etc., it is clear that Panama remains the most secure offshore financial center

In Panama, privacy and confidentiality are not only respected but also vigorously protected by constitutional law. Panama offers the best bank secrecy and corporate book secrecy laws in the world.

   

 
 
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No Sharing of Information Treaties

Panama has no mutual legal assistance treaties (MLATs) for sharing of banking information with any other nation and does not recognize court rulings from other countries.

Stable Government

Panama has what is considered by government analysts to be the most stable government in all of Central or South America.

Tax Benefits

Panama stands out with its favorable tax laws which are designed to promote investment and trade. Companies in Panama benefit from tax incentives such as no tax on foreign income, making it an attractive jurisdiction for tax planning. The taxation system in Panama allows exemption from capital gains tax on certain investments and no taxation on offshore bank account interest.

  • Taxation: Only local income is taxed.
  • Tax Planning: Facilities for efficient tax structuring.
  • Tax Incentives: Various incentives to promote business and investment.

Confidentiality and Privacy

The regulatory framework in Panama ensures high levels of privacy and confidentiality for offshore company owners. With stringent banking secrecy laws, Panama facilitates secure asset protection and maintains the confidentiality of company registry information.

  • Privacy: Robust legal structures to safeguard personal data.
  • Confidentiality: Measures in place to protect business information.
  • Banking Secrecy: Strong banking secrecy laws secure personal and corporate financial information.

Business and Investment Opportunities

Panama is a hub for entrepreneurs and investors looking for low-risk investments, including real estate and trade. The strategic location connects markets, while the business environment in Panama is welcoming and supportive of foreign investment.

  • Business in Panama: Supportive environment for local and international business.
  • Investment: Access to a variety of investment channels.
  • Trade: Excellent location for logistics and international trade relations.

Entities considering a Panama offshore company will find these advantages align well with long-term asset protection, business, and investment goals. 

Financial Infrastructure

Within Panama's jurisdiction, the financial infrastructure stands as a pivotal element, underpinning its status as a prime destination for offshore incorporation. Strong banking regulations, currency stability, and advanced financial services coalesce to provide a robust environment for international businesses.

Banking Sector

Panama's banking sector is renowned for its stability and sophistication, largely due to comprehensive oversight by the Superintendency of Banks of Panama. There are numerous banks, both local and international, offering a range of services including corporate bank accounts aimed at global businesses. The banking infrastructure is aligned with international standards, offering high levels of privacy and reliability.

  • Stability: Backed by prudent regulation, Panama's banking sector is viewed as one of the most stable in Central America.
  • Diversity of Services: Banks in Panama offer services such as multi-currency accounts, online banking, and wealth management services, tailored for both individual and corporate needs.

Currency and Exchange

In Panama, the US Dollar is the official currency, serving as the basis for its monetary stability and eliminating the risk of foreign exchange volatility for businesses. This aspect is crucial as it eliminates the need for exchange controls, facilitating easier international transactions and financial operations.

  • Currency: The use of the US Dollar (USD) simplifies banking and eliminates the complexities associated with currency fluctuations for offshore companies.
  • Foreign Exchange: With no exchange controls, companies benefit from the free movement of capital, enabling them to operate across borders without the constraints that can be found in other economies.

Top Uses

Panama has a supportive legislative and banking environment making incorporation procedures both easy and flexible for many different business activities. An offshore company in Panama can be made for any legal purpose and for any legal activity, including but not limited to:

  • Offshore savings and investments
  • Private Interest Foundations
  • Forex and stock trading
  • E-commerce
  • Professional service company
  • Holding Company
  • Licensing company
  • Internet services
  • Asset protection Company

Understanding Panama's Legal Framework

Panama offers a well-established legal framework for company formation which provides asset protection and flexibility. This framework is built on a set of laws that are conducive to international business, making it a popular jurisdiction for setting up offshore companies.

Law 32 of 1927

Law 32, enacted in 1927, forms the cornerstone of Panama's corporate legislation. It has established provisions that govern the formation and operation of corporations in Panama, ensuring a stable and business-friendly environment. The law emphasizes the preservation of privacy and asset protection, allowing for the existence of bearer shares and absence of corporate taxation on foreign-sourced income. This law underpins the principle that companies in Panama can operate independently of their shareholders' identities, safeguarding personal assets against corporate liabilities.

The Incorporation Process in Panama

Incorporating a company in Panama provides significant advantages like privacy protection, tax benefits, and flexibility. The process is well-defined and consists of pre-incorporation considerations and a series of registration steps.

Pre-Incorporation Considerations

Before initiating the incorporation process, it is essential to decide on the type of corporate entity that best suits the business objectives. Panama offers several types of structures, including Civil Partnerships and Corporations, with the latter being the most prevalent. Entities must appoint a minimum of three director-nominees and select a resident agent who will act as the liaison with Panamanian authorities.

Step-by-Step Registration

  1. Preparation of Documents: The incorporation package typically includes the Articles of Incorporation which detail the name, purpose, and operational framework of the company.

  2. Filing with the Public Registry: The Articles of Incorporation, along with the names and addresses of the directors and resident agent, are filed with the Public Registry of Panama.

  3. Registration with Authorities: The newly formed entity must register with relevant Panamanian authorities for taxation and other legal purposes.

  4. Obtaining Necessary Identifications: A taxpayer identification number is required and can be obtained as part of the registration process.

  5. Bank Account Setup: Establishing a corporate bank account is a crucial step to facilitate financial transactions for the company.

Incorporating in Panama is straightforward with the right preparation and understanding of the necessary steps, providing a stable and favorable business environment.

Types of Business Entities in Panama

When forming a company in Panama, potential investors and founders have several business entities to select from, each with its unique characteristics suited to different business needs.

Sociedad Anónima

The Sociedad Anónima (S.A.), or Corporation, is a prominent business entity in Panama for both local and international business operations. A S.A. is a legal entity with limited liability for its shareholders, and it is governed by Law 32 of 1927. This entity has a flexible structure, where shares can be issued in bearer form or nominative form and there is no requirement for resident shareholders or directors.

  • Key Features:
    • Limited liability for shareholders
    • Flexibility in share issuance and ownership
    • No minimum capital requirement
    • Shares can be of various classes and rights

Private Interest Foundation

A Private Interest Foundation in Panama operates as a non-profit entity by law, even though it can engage in commercial activities indirectly to benefit the declared beneficiaries. It can own assets such as real estate and bank accounts. It acts similarly to a trust, managing assets for the benefit of others.

  • Key Features:
    • Non-profit by law but can manage commercial assets
    • Provides asset protection and estate planning
    • Separates personal assets from foundation assets

Limited Liability Company

A Limited Liability Company (LLC), known locally as a Sociedad de Responsabilidad Limitada (S.R.L.), is a type of business entity in Panama that offers the owners, referred to as members, limited liability protection. The management structure is more rigid compared to a S.A., and members' share contributions reflect their respective interest in the company.

  • Key Features:
    • Limited liability for members
    • Simpler and more rigid management structure
    • Member contributions define ownership interest

Key Corporate Features

Panama Corporation Corporate Details
General
 
Type of Entity Limited by Shares
Type of Law Civil Law System
Governed by General Corporation Law of 1927
Coded Bank Accounts Law 8 of 1959
Commercial Code Law 17
Registered Office in Panama Yes
Shelf company availability Yes
Our time to establish a new company 3 days
Minimum government fees (excluding taxation) US$250
Corporate Taxation No
Access to Double Taxation Treaties Yes
Share capital or equivalent  
Standard currency Legal tender is the US dollar.
Panamanian Balboa (official currency)
PAB fixed exchange rate of USD $1.00 = PAB 1.00
Permitted currencies Any
Minimum paid up No minimum
Usual authorized USD $10,000 divided into 100 shares of $100 each
Bearer shares allowed Yes
No par value shares allowed Yes
Directors  
Minimum number 3 Directors/Officers (President, Secretary and Treasurer)
Local required No
Publicly accessible records No
Location of meetings Anywhere
Corporate directorship allowed No
Shareholders  
Minimum number 1
Publicly accessible records No
Corporate shareholder allowed Yes
Location of meetings Anywhere
Company Secretary  
Required Yes
Local or qualified No
Accounts  
Requirements to prepare No
Audit requirements No
Requirements to file accounts No
Publicly accessible accounts No
Recurring Government Costs  
Minimum Annual Tax  USD $250
Annual Return Filing Fee NA
Other  
Requirement to file annual return No
Migration of domicile permitted Yes

Setting Up Your Panama Company Formation

Incorporating an offshore company in Panama involves strategic steps. Initially, one must validate company statutes and draft the articles of incorporation, which serve as the company's operating manual. The incorporation process requires the identity disclosure of at least three directors, and it is advised to obtain the services of a resident agent.

Documents necessary for the incorporation include:

  • Name of the corporation
  • Name and domicile of the subscribers of the corporation
  • Corporate objectifies
  • Corporate Capital
  • Duration of corporation
  • Name and address of Directors and dignitaries
  • Name and address of the registered agent
  • Upon successful incorporation, companies are registered with the Public Registry of Panama, and they receive their Certificate of Incorporation. Companies limited by shares must issue Share Certificates to their shareholders. This satisfies the legal requirement and delineates the ownership structure.

Opening a bank account is a critical step. It necessitates providing detailed business information and personal identification for compliance purposes. Banks in Panama are known for their robust due diligence processes, ensuring the integrity of their financial system.

To summarize the key steps:

  1. Validate company statutes
  2. Draft and sign Articles of Incorporation
  3. Register with the Public Registry of Panama
  4. Obtain a Taxpayer Identification Number
  5. Open a bank account

Panama corporations must have two subscribers present at the public registry in order to be incorporated. The subscribers are the individuals from our law firm that appear at the Public Registry with the articles of incorporation to incorporate the corporation. 

By law, the subscribers have a right to own one (1) share of the corporation. As soon as the corporation is established, the subscribers sign a document whereby they resign their rights to one (1) share of the corporation. This document is provided to our client along with the other corporate documentation.

Strategic Considerations

When establishing an offshore company in Panama, strategic considerations must be at the forefront of the decision-making process. The jurisdiction's favorable business climate and robust protections for assets and wealth management make it a relevant and strategic choice for international operations.

Choosing a Jurisdiction

Panama stands out in the Americas for its strategic positioning and business-friendly environment. Companies must weigh government fees and the ease of communication with local authorities when selecting Panama. The jurisdiction offers a compelling mix of trade opportunities facilitated by the Panama Canal, making it a trade hub for international business.

Operating Internationally

Operating out of Panama allows businesses to leverage the country's extensive trade networks. Recognized internationally, the jurisdiction provides a platform for accessing both North American and Latin American markets, which is vital for entities aiming to position themselves strategically on a global stage.

Asset and Wealth Management

In terms of asset protection and wealth management, Panama offers significant advantages. The country has privacy laws that help in maintaining confidentiality for investment accounts. Additionally, Panama's legal framework is designed to protect assets from undue external influences, underpinning its reputation as a secure location for asset management.

Company Management and Administration

Effective company management and administration are critical for the successful operation of an offshore company in Panama. This includes a clear definition of roles and responsibilities, adherence to corporate governance standards, and maintenance of the company’s name and identity.

Roles and Responsibilities

In the context of a Panama offshore company, specific roles are designated to individuals to ensure efficient management. Subscribers are often the initial members who set up the company and may also contribute to the share capital. The Registered Agent or Resident Agent is a key player, mandated by Panamanian law to handle official correspondence and compliance. Directors, typically at least three, hold the responsibility for overseeing company affairs, while officers such as the President, Secretary, and Treasurer manage day-to-day operations. It is also customary for the company to maintain a Corporate Book, which records all essential corporate documents.

Corporate Governance

Panama offshore companies must follow a set of rules and practices known as corporate governance to ensure accountability and transparency. This includes holding regular meetings, keeping detailed minutes within the Corporate Book, and aligning with both internal bylaws and Panama's regulations. A Nominative share structure, where shareholders' names are public, often aids in transparency, contrasting with bearer shares where ownership is anonymous.

Company Name and Identity

The Company Name is a fundamental aspect of an offshore entity’s identity, requiring careful selection and compliance with the Public Registry of Panama's regulations. The complete name and address of the Directors, Resident Agent, and registered office must be provided during the incorporation process and displayed on all official documents. The name chosen must be unique and not misleadingly similar to existing companies.

 

Corporation Taxation

A Panama Offshore Company enjoys a variety of tax exemptions and tax incentives that offer individuals and corporations a number of savings, including:

  • No tax reporting requirements
  • No income tax
  • No capital gains tax
  • No sales tax
  • No tax on the issuance of corporate shares
  • No tax to shareholders
  • No stock sale or transfer tax
  • No capital stock tax
  • No property tax
  • No estate tax
  • No gift tax
  • No stamp tax
  • No succession tax
  • No inventory tax

Understanding Panama Taxation

Corporations in Panama are subject to the territorial tax system. This implies that any income earned outside of Panama is not taxed by the Panamanian government. However, income earned within Panama is subject to a corporate income tax at a fixed rate of 25% post-tax deduction. Certain tax incentives are available that can reduce the overall tax burden, especially for businesses operating in certain sectors or regions that contribute to economic development.

  • Tax Exemptions: Specific activities may be exempt from taxes under Panamanian law. It's critical for corporations to verify if they qualify for such exemptions.
  • Tax Incentives: Panama offers various tax incentives to encourage foreign investment, economic zones, and specific sectors like tourism.

It's also important to note that companies must obtain a Tax Identification Number (RUC) from the Direccion General de Ingresos (DGI), which is used for tax purposes and all formal documentation.

Compliance and Financial Statements

Corporations operating in Panama are required to maintain proper accounting records and to prepare financial statements annually. These documents must reflect the company's financial performance and are necessary for both tax reporting and compliance with local regulations.

  • Financial Statements: These typically include the balance sheet, income statement, and cash flow statement. Even though foreign-sourced income is not taxed, corporations must still report all global income in their financial statements.
  • Compliance: Staying compliant with Panamanian accounting practices means adhering to the guidelines set by the International Financial Reporting Standards (IFRS).

To ensure compliance, corporations may seek assistance from local accounting and legal experts who can provide personalized support tailored to the corporate structure and industry. Keeping accurate records and up-to-date financial statements is important for both legal and strategic business planning.

   

 
 
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Confidentiality and Asset Protection

When forming a company in Panama, confidentiality and asset protection are significant considerations. The legal infrastructure of Panama offers mechanisms that effectively safeguard business information and shield personal assets from liability.

Confidentiality: Panama's corporate framework ensures a high level of privacy. Information about company officers and shareholders is not published in public registers. This ensures that business activities and proprietors' identities are not easily accessible.

Privacy Protection:

  • Nominee Services: To enhance privacy, nominee directors and shareholders can be used in Panama corporate structures.
  • Sealed Records: Corporate records can be held privately, enhancing business confidentiality.

Asset Protection:

  • Separate Legal Entity: A Panama corporation functions as a separate legal entity, which means personal assets of the shareholders are protected against lawsuits and company debts.
  • Corporate Veil: By maintaining the corporate veil, personal liability of the shareholders is limited, and their assets are insulated from legal challenges directed at the corporation.

Privacy and Confidentiality in Trusts:

  • Trust structures in Panama further enhance asset protection, with assets managed by a trustee who maintains confidentiality.
  • Panama’s legal system provides robust protection against forced disclosure of trust details, ensuring beneficiaries' identities remain private.

In Panama, the combination of confidentiality and asset protection strategies make it an attractive jurisdiction for international business and assets management.

Business Expansion and Foreign Investment

In Panama, the combination of robust economic policies and incentives crafted to attract foreign investors is a cornerstone for business expansion. With real estate opportunities and free trade zones, Panama positions itself as a competitive economy for international trade.

Real Estate and Permanent Residency

Panama offers a pathway to permanent residency for foreign investors through real estate investment. A promising investment in property can serve as a gateway for obtaining a resident status, which provides foreign nationals with the option to live and work in the country. Moreover, the real estate market in Panama is mature, offering a range of options from commercial spaces to residential properties, attracting a diverse group of foreign investors looking to capitalize on real estate development.

Free Trade Zones and Competitive Economy

The country is home to multiple Free Trade Zones (FTZs), such as the Colon Free Zone, which is noted as the second largest in the world. The FTZs in Panama provide significant advantages:

  • Tax incentives: Businesses operating within these zones are often exempt from various local taxes.
  • Strategic location: Situated at the crossroads of North and South America and serving as a conduit for international maritime trade via the Panama Canal.
  • International business: Attractive conditions for international trade, making it a regional distribution center and a hub for logistics.

These zones foster a competitive economy by inviting businesses in sectors like manufacturing, logistics, and international trade to establish their operations in Panama, which in turn fuels foreign investment and expansion of business activities in the region.

Corporate Details

Required Capital

No minimums

Financial Statements Required

A Panama Company is not required to file audited financial statements annually with the Financial Services Commission.

Company Secretary

The appointment of a company secretary is mandatory.

Directors

A Panama Offshore Company must have a minimum of (3) three Directors (President, Secretary and Treasurer).

Powers of the Company

Companies incorporated in Panama have equal power to that of a natural person.

Registered Office Required

Every Panamanian corporation must have a registered office

Local Presence

There are no mandatory local presence requirements

Language of Name

The name of the company may be in any language

Annual Government Fee

There is an annual fee of US$350 with a one-time registration payment of US$250.

 

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Name Restrictions

The name of a Panama Company must include one of the following legal endings: Incorporated, Corporation, Sociedad Anonima, Inc., Corp., S.A.

Shareholders

There must be one (1) shareholder, either an individual or a corporate body, issued one share valued at US$100.

Corporate Meetings

Meetings can take place anywhere in the world.

Exchange Controls

There are no exchange controls of any kind

Double Taxation Agreements

Panama has signed twelve (12) Double Taxation Agreements with Barbados, South Korea, Spain, France, Italy, Luxembourg, Mexico, The Netherlands, Portugal, Qatar, Singapore and the United States of America.

 

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***Please Note: If you are a resident of a country that is a signatory of the Common Reporting Standard (CRS) (or a US citizen) your tax reduction possibilities are limited. Due FATCA, CRS, and CFC laws you may not be able to completely eliminate your taxes without moving your residence. While opening an offshore company can increase privacy and asset protection, your tax obligations remans tied to your ownership of overseas entities. Offshore company's are often not taxed in the country where they are incorporated, rather you as the owner are obligated to pay taxes in the country where you reside. Please make sure you know your tax obligations, as we are not tax advisors. Please seek a local tax professional for help regarding your situation. 

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