Start your company in Panama: the guide for foreigners
Discover the step-by-step process to incorporate your company, protect your assets, and operate internationally with Panama’s tax benefits.
Guide to starting your company
- Why start a company in Panama?
- Types of companies: S.A. vs. S.R.L.
- The incorporation process step by step
- Key requirements for your company
- Benefits of your new Panamanian company
- After incorporation: crucial next steps
- Annual maintenance of your company
- Frequently asked questions about starting a company
Why start a company in Panama?
Incorporating a company in Panama is one of the most powerful and flexible tools for tax optimization and asset protection worldwide. The country offers a pro-business environment, confidentiality, and legislation designed to facilitate international operations for foreigners. It is the perfect vehicle for managing your foreign-source income and separating it from your personal assets.
“A Panamanian company is not just a business; it is a strategic structure. It allows you to operate globally, invoice internationally, and benefit from a territorial tax system, all from one of the most stable jurisdictions in the world.”
Types of companies: S.A. vs. S.R.L.
Although several legal forms exist, two stand out for their flexibility and popularity among foreigners: the Corporation (Sociedad Anónima, S.A.) and the Limited Liability Company (Sociedad de Responsabilidad Limitada, S.R.L.).
| Feature | Corporation (S.A.) | Limited Liability Company (S.R.L.) |
|---|---|---|
| Capital Structure | Shares (Can be bearer shares, although now require custody) | Participation quotas (Nominative) |
| Flexibility | Very high (Ideal for multiple partners and future sales) | Moderate (Ideal for small groups or family businesses) |
| Confidentiality | High (Shareholder names are not public) | High (Partner names are not public) |
| Recommended Use | Asset holding, international operations, e-commerce | Local operations, consulting, simpler structures |
The incorporation process step by step
Key requirements for your company
To incorporate your company, you will need to define and provide the following information to your lawyer or resident agent:
- ⚖️ Resident Agent: Must be a Panamanian lawyer or law firm.
- 👥 Directors and Officers: At least 3 directors are required (can be individuals of any nationality). A President, Secretary, and Treasurer are also appointed.
- 🏦 Share Capital: The standard is $10,000 USD, which does not need to be paid in.
- 🏢 Domicile: The company must have a physical address in Panama, which is usually that of your resident agent.
Benefits of your new Panamanian company
🌍 100% Offshore Operation
If your company does not generate Panamanian-source income, it pays no income tax. It is the ideal vehicle for international business and e-commerce.
🛡️ Asset Protection
Assets held in the company’s name are legally separate from your personal assets, offering a robust layer of protection against litigation.
🧾 International Invoicing
A Panamanian company allows you to issue invoices to clients worldwide, centralizing your operations and projecting a solid corporate image.
Your asset protection structure
After incorporation: your crucial next steps
Once your company is registered in the Public Registry, it is legally born. But for it to be fully operational, there are two essential steps you must take.
🏦 Opening the Corporate Bank Account
This is the most important step to activate your financial operation. It will allow you to receive payments from clients, manage expenses, and separate your corporate finances from your personal ones. Panamanian banks have strict “Know Your Customer” (KYC) requirements, so it is vital to have all documentation prepared.
🧾 Accounting and Tax Obligations
Even if your company operates 100% offshore, Panamanian law requires maintaining accounting records. You must define a system to keep track of your invoices and transactions from day one. If you have local operations, you will need to register as a taxpayer with the DGI.
Annual maintenance of your company
Starting the company is just the beginning. To keep it in good standing and avoid fines, you must comply with these annual obligations.
- Payment of the Annual Franchise Tax: A payment of $300 USD that must be made each year to the Panamanian government to keep the company active.
- Maintain the Resident Agent: It is mandatory to always have a lawyer or law firm as a resident agent. Their annual fees cover this representation.
- Keep Accounting Records: Law 52 of 2016 requires all Panamanian companies to maintain accounting records, regardless of where they operate.
- Tax Declaration (if applicable): If your company has Panamanian-source income, it must file an annual tax return.
Frequently asked questions about starting a company
Do I need to be physically in Panama to start the company?
Not necessarily. Most of the process can be done remotely through your lawyer or resident agent. However, to open a corporate bank account, it is very likely that the bank will require an in-person visit from the signatories.
What is a Resident Agent and why is it mandatory?
The Resident Agent is a Panamanian lawyer or law firm that acts as the official liaison between your company and the Panamanian authorities. The law requires every company to have one. They are responsible for legal communications and the payment of the annual franchise tax.
How much share capital should I declare?
The standard share capital is usually $10,000 USD. One of the great advantages is that this capital does not need to be paid in or deposited into a bank account to incorporate the company. It is an authorized, not paid-in, capital.
Ready to build your international corporate structure?
Knowledge is the first step. Action is the next. Let us help you design a corporate structure in Panama that protects your assets and optimizes your global taxation.
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