Company Formation in Panama

Who Should Consider Company Formation in Panama?

Panama has been used for international corporate structures since its Sociedad Anónima statute of 1927. Three concrete features shape its appeal: taxation follows the territorial principle, the balboa is pegged to the US dollar at 1:1 and the dollar circulates as legal tender, and incorporation is open to shareholders of any nationality. Income earned outside Panama is not subject to corporate income tax as long as no activity is carried out inside the country.

Tax is not the whole picture. In the Council of the European Union update of 17 February 2026, Panama remained on Annex I of the EU list of non-cooperative jurisdictions for tax purposes. For shareholders resident in an EU member state this can trigger defensive measures such as non-deductibility of costs, controlled foreign company rules, additional withholding tax or a restriction of the participation exemption. On the anti-money-laundering side the position improved: the Financial Action Task Force removed Panama from its increased-monitoring list on 27 October 2023.

In practice Panama suits cross-border goods trading, software and consulting exports, and holding structures that consolidate participations under one roof, provided the owner is willing to run the resident agent and accounting-record obligations properly. Paper-only companies with no genuine commercial activity behind them fail at two points: bank account approval and the shareholder's own reporting obligations at home.

• Company types in Panama: SA, SRL and private foundation
• Requirements for setting up a company
• The incorporation process step by step
• Documents required
• Official registry and government fees
• Tax system and current rates
• Panama on the FATF and EU lists
• Accounting records, resident agent and beneficial owner registry
• Opening a bank account in Panama
• Company name rules
• Annual compliance calendar
• Privacy and transparency
• Advantages and drawbacks
• Which business models fit Panama
• Common mistakes
• Panama, Belize, Cayman and Delaware compared
• Reporting duties in your own country

Company Types in Panama: SA, SRL and Private Foundation

Three structures cover almost every international use case. All three are registered with the Public Registry and all three must appoint a resident agent.

Sociedad Anónima (SA)

The most common choice. Incorporation requires two or more subscribers, individuals or legal entities, of any nationality or residence, to sign the articles of incorporation. The board consists of at least three members holding the offices of president, secretary and treasurer. There is no statutory minimum paid-in capital; in practice an authorised capital of USD 10,000 divided into 100 shares is used, because the registration fee is calculated on capital bands.

Sociedad de Responsabilidad Limitada (SRL)

The limited liability form governed by Law 4 of 2009. It can be established by one or more individuals or legal entities, liability is limited to the capital contributed, and management can rest with a single manager. For consulting, design and software firms with few owners it is more practical than an SA because decision-making is simpler.

Private Interest Foundation

The foundation under Law 25 of 1995 is not a trading vehicle but an estate and succession planning tool. An initial endowment of at least 10,000 balboas must be allocated on formation. It is frequently placed above an operating company as a holding layer; its annual single fee is 400 balboas rather than 300.

Requirements for Setting Up a Company

No residence permit, citizenship or visit to Panama is required. The following points, however, are mandatory by law:

• Resident agent: every legal entity must appoint a lawyer or law firm admitted to practise in Panama as resident agent. The articles cannot be registered without that acceptance.
• Notarisation and registration: the articles are executed before a Panamanian notary and registered in the mercantile section of the Public Registry.
• Governing body: at least three directors in an SA, at least one manager in an SRL. Legal entities may hold these positions.
• Identification and source of funds: the resident agent must identify the beneficial owners and document the source of funds; that information feeds the beneficial owner registry.
• Tax registration: if activity will take place inside Panama, a taxpayer number and an operation notice are required.
• Accounting records: records and supporting documentation must be kept and made available to the resident agent, including for companies with no local activity.
• Capital: capital does not have to be blocked in a bank account, but the registration fee depends on the capital band, so the declared amount directly affects cost.

The Incorporation Process Step by Step

The whole procedure can be handled under power of attorney, so travelling to Panama is not necessary. With complete documents the registration typically takes one to two weeks.

1. Choice of structure: SA, SRL or foundation is selected according to the activity, and the authorised capital is fixed.
2. Name availability check: the preferred name is searched in the Public Registry and alternatives are prepared.
3. Know-your-client file: passport, proof of address, curriculum vitae and source-of-funds evidence go to the resident agent.
4. Drafting the articles: the pacto social sets out the purpose clause, capital structure, board and resident agent.
5. Notary and registration: the deed is notarised and registered; legal personality arises on registration.
6. Tax and operation registration: the first single fee is paid, and a taxpayer number plus operation notice are obtained if there will be local activity.
7. Bank account: corporate documents, the owner file and the business plan are submitted to the bank.

Documents Required

• Valid passport copy for every shareholder, director and beneficial owner
• Proof of address issued within the last three months
• Bank or professional reference letter
• Source-of-funds evidence: payslips, a sale agreement, a tax return or similar
• Short curriculum vitae and a description of the planned activity
• For corporate shareholders: incorporation documents, good standing certificate and an ownership chart
• Power of attorney and the resident agent acceptance

Official Registry and Government Fees

The items below are amounts payable to the state. Professional fees for the resident agent, notary and consulting are separate. The registration duty consists of the Public Registry qualification fee plus a registration fee based on capital bands.

Because the balboa is pegged to the US dollar at 1:1 and the dollar circulates in the country, these figures are also the dollar amounts. Declaring a high capital raises the registration duty directly, which is why authorised capital is usually kept around USD 10,000.

Tax System and Current Rates

Panama taxes on a territorial basis: only Panamanian-source income is taxed. Services rendered from abroad to clients abroad and trade in goods that never enter Panama do not create corporate income tax while there is no office or staff in the country. Once there are local sales, employees or customers, the rates below apply.

A complementary tax mechanism also applies when profits are retained: if the distribution stays below the statutory share of net profit for the period, 10% of the difference becomes payable. Food, medicines, basic school supplies, agricultural products, electricity, water and medical services are exempt from ITBMS.

Panama on the FATF and EU Lists

Panama's international standing is the part of the decision most often skipped. The FATF removed the country from its increased-monitoring list on 27 October 2023 after confirming completion of its action plan. The Council of the European Union, however, still lists Panama in Annex I of the EU list of non-cooperative jurisdictions for tax purposes as of the 17 February 2026 update.

That distinction has practical consequences. EU member states committed to applying at least one defensive measure against listed jurisdictions: denying deduction of costs incurred there, applying controlled foreign company rules, imposing additional withholding tax or limiting the participation exemption on dividends. For an owner resident in Germany or the Netherlands, the treatment of payments from a Panamanian company may therefore differ. Where EU-internal substance is preferred, options such as company formation in Delaware or an EU jurisdiction are worth comparing.

Accounting Records, Resident Agent and Beneficial Owner Registry

Panama has no separate economic substance statute. Its obligations are built around record keeping, transparency and the resident agent. Three points matter:

• Accounting records: under Law 52 of 2016 as amended by Law 254 of 2021, legal entities must keep accounting records and supporting documentation, hold them available for at least five years and keep copies at the resident agent's office in Panama.
• Beneficial owner registry: the registry created by Law 129 of 2020 collects beneficial owner data through resident agents and is supervised by the Superintendency of Non-Financial Subjects. Changes in ownership must be reported.
• Continuity of the resident agent: if the agent resigns or fees go unpaid, the company falls out of good standing and both bank accounts and certificate requests stall.

Opening a Bank Account in Panama

Incorporation and banking are two separate projects. Panamanian banks are licensed, supervised institutions and apply know-your-customer rules strictly; account opening often takes longer than the company registration itself.

Documents and review

Banks ask for the articles, a good standing certificate, a board resolution, a beneficial owner declaration, a business plan, expected transaction volumes and a list of counterparty countries. The owners' income sources and existing banking history are examined as well. Consistency between the stated activity and the expected money flow is what decides approval.

Timing, remote opening and minimum balances

Some banks request a meeting with the owner while others accept a video call. Approval usually takes two to six weeks, and banks expect a minimum balance depending on the account type. Running two applications in parallel avoids losing weeks after a rejection.

A multi-jurisdiction banking approach

Relying on a single bank is a payment-infrastructure risk. Many owners keep a second account elsewhere; see offshore bank account opening in Dubai and our general personal and corporate bank account service for the alternatives.

Company Name Rules

• The name must end with a corporate suffix such as S.A., Corp., Inc. or Sociedad Anónima. An SRL uses S. de R.L.
• Names identical or confusingly similar to an existing registration are refused.
• Words suggesting regulated activity such as bank, insurance, trust or reinsurance cannot be used without the corresponding licence.
• The name may be in a language other than Spanish as long as Latin characters are used.
• Filing without a prior availability search leads to rejection and a restart, so two reserve names are prepared.

Annual Compliance Calendar

The single annual fee is what keeps a Panamanian company alive, and its due date depends on the half-year in which the company was registered.

Privacy and Transparency

Panama was long described purely in terms of confidentiality because shareholder names do not appear in the public register. The current picture is more balanced: the articles, directors and resident agent are visible in the Public Registry, shareholder details are not published, yet beneficial owner information is filed through the resident agent into the national registry and is accessible to competent authorities.

Bearer shares are no longer freely held either. They sit under a custody regime with an authorised custodian, and distributions to bearer shareholders carry 20% withholding. Under automatic exchange of information, bank account data can be shared with the country where the account holder is tax resident. Panama therefore offers a structure closed to the public but open to institutions; claims of absolute anonymity are not accurate.

Advantages and Drawbacks

Advantages

• Territorial taxation: foreign-source income stays outside corporate income tax when there is no local activity.
• Dollarised economy: the balboa is pegged 1:1 to the US dollar, so there is no currency conversion risk.
• No nationality or residence requirement, and the whole process can run under power of attorney.
• Predictable state cost: the annual single fee is a flat amount, unrelated to turnover.
• Company and foundation layers can be combined, which suits succession planning.
• The Panama Canal and the Colón Free Zone provide strong logistics and transit infrastructure.

Drawbacks and risks

• Presence on the EU list of non-cooperative jurisdictions exposes EU-resident owners to defensive measures.
• Bank account opening is selective and weak files are rejected.
• The mandatory resident agent is a recurring annual cost.
• Three unpaid single fees lead to suspension plus a 1,000 balboa rehabilitation penalty.
• The accounting record duty applies even to dormant companies.
• Some payment providers and marketplaces do not onboard Panamanian entities, so payment rails must be tested first.

Which Business Models Fit Panama

International trade and transit

Buying and selling where goods never enter Panama, or move through the Colón Free Zone in transit, benefits from the country's logistics position. Canal traffic and free-zone warehousing simplify distribution into Latin America.

Holding and asset structuring

Owners who want to consolidate participations, property companies or intellectual property in one place often combine an SA with a foundation. For comparable purposes, Cayman Islands company registration is frequently evaluated alongside Panama.

Service and software exports

Consulting, design, software development and training delivered remotely to clients abroad are not Panamanian-source income and create no corporate income tax. What matters in this model is where the service is actually produced and where the owner is tax resident.

Common Mistakes

1. Declaring an unnecessarily high authorised capital, which inflates both the registration duty and the operation notice tax.
2. Not tracking the single fee deadline against the half-year of registration.
3. Skipping the accounting record duty on the assumption that a dormant company is exempt.
4. Leaving the bank account to the end without preparing a business plan.
5. Ignoring controlled foreign company and reporting rules in the owner's country of residence.
6. Ordering stationery and branding before the name availability search.
7. Starting to sell inside Panama without the operation notice and taxpayer registration.

Panama, Belize, Cayman and Delaware Compared

The decision is rarely made on one country alone. The table sets the four centres side by side on the points that actually differ.

A further alternative is company formation in the Bahamas, and the criteria that drive the choice of jurisdiction are set out in our overview of ideal countries for an offshore company.

Reporting Duties in Your Own Country

Forming a company in Panama does not cancel obligations where the owner lives. Most countries require foreign shareholdings, bank accounts and income to be declared, and controlled foreign company rules can tax profits accumulated in low-tax jurisdictions in the owner's hands. Since account data is exchanged automatically, undeclared structures are identified.

Tax residence, the profit distribution plan and the annual filing calendar should therefore be designed together before the structure is set up. For a plan built around your own situation you can request a quote and consulting or contact our team directly.

Fees, rates and deadlines on this page are based on the tariff and qualification manual of the Panama Public Registry, the single fee, tariff and ITBMS publications of the Panamanian tax authority, the operation notice framework of Panamá Emprende, beneficial owner registry documentation of the Superintendency of Non-Financial Subjects, the FATF statement of 27 October 2023 and the Council of the European Union list update of 17 February 2026. Legislation changes, so verify current official sources before acting.