A Step-by-Step Guide to Panama Company Formation

Panama is recognized as a tax haven and a popular destination for setting up a company in the business world. With a favourable legal and tax structure, relatively low start-up costs, and a booming economy, Panama is perfect for those looking to start a new business.

This article will take a closer look at the  Panama company formation. Furthermore, we will see the benefits of setting up a company in Panama and the aspects to consider when setting up such a business.

Panama Company Formation Guidelines

Incorporating a company in Panama usually takes between 3 and 4 days, but the time varies depending on the type of company and the number of partners. It is not necessary to travel to Panama to register your company.

Here’s everything you need to know about Panama company formation:

#1. What Documents Must be Filed to Register a Company in Panama?

To register your company in Panama, you must, among other things, draw up the legal statutes of the company. A business law specialist can normally handle this task. In particular, providing all the required information and documents will be necessary. A notary must authenticate all documents and then submitted to the Panamanian Trade and Companies Registry for review and final approval.

For opening your company bank account, it is best to have the assistance of a professional to manage the entire procedure. It would be best if you prepared all of the following documents:

• General information about the company and its activity
• Bank account opening form;
• Colour photocopy of the passports of the company directors, shareholders and persons with access to the company bank account;
• Colour photocopy of the Panamanian company registration certificate;
• Colour photocopy of the company’s legal statutes;
• Reference letter from an existing bank for each director and shareholder;
• One or more professional letters of recommendation from partners, preferably issued by an accountant or lawyer;
• Proof of the origin of funds. If the funds come from abroad, the documents must then be apostilled.

Please note that the list above will likely change in the coming months.

#2. How Much Does it Cost to Create a Company in Panama?

On average, registering a company in Panama costs between $1,500 and $2,000. The total cost includes, in particular, reserving the company name in the Trade and Companies Registry, reserving a correspondence address, issuing documents such as the legal statutes, official translations of documents into English, all documents duly certified by Apostille, all administrative documents as well as delivery of documents worldwide. 

Some professionals can also assist business creators in creating a bank account or provide additional services such as a secretariat, bookkeeping or various professional services.

#3. Is a Foreigner Allowed to Create a Company in Panama?

A foreigner has the right to set up a company in Panama, and it is unnecessary to travel to Panama to register your company. All administrative procedures can be entrusted to a professional in Panama.

#4. How long does it take to create a bank account in Panama?

Creating your company’s bank account in Panama is generally a tedious and lengthy process compared to other offshore jurisdictions worldwide. 

You will, therefore, need to allow several weeks to finalize the opening of your company’s bank account in Panama.

You will therefore need to plan not only to travel there to finalize the opening of your bank account but you will also need to prepare certain documents in advance, such as proof of your income (tax returns from recent years), a reference letter from the bank, a reference letter from a professional (lawyer, accountant, etc.) or your financial statements.

Using an international bank based in Panama to facilitate all administrative procedures is preferable. A bank employee will be able to guide you through the process.

#5. What are the Pitfalls to Avoid?

Panama, like most other countries, applies the legal rules of the Organization for Economic Cooperation and Development (OECD) regarding permanent establishment. 

Therefore, A company is considered a tax resident when it has been incorporated in Panama and Panama, where all of its management bodies are located. 

Therefore, a company that is a tax resident in Panama must pay all local taxes (corporate tax, dividend tax, etc.). Remembering that a company must keep its accounts current is also important. 

In case of doubt, the Panamanian tax administration can check whether the OECD legal rules regarding permanent establishment apply to the legal structure and, therefore, decide to tax-adjust the company.

It is also important not to violate the tax regulations of your country of residence. Most countries in the world apply the OECD legal rules on permanent establishment. Therefore, if your company is registered in Panama, it does not mean that you do not have tax obligations to satisfy in your country of residence. Do not hesitate to contact us.

Banks for a Company in Panama

Panama has about a hundred banks, but only a portion are likely to offer banking services to businesses. Two Panamanian national banks, Banco Nacional de Panamá (BNP) and Caja de Ahorros, along with several Panamanian private banks, exist in Panama. Foreign banks, especially those from neighbouring countries, also have a strong presence in Panama.

Bottom Line

Setting up an offshore company in Panama is straightforward. Panama offers favourable conditions for businesses. 

The process starts with drafting articles of incorporation. Choose the type of company that suits your needs. Most opt for “sociedades anonima” for flexibility.

Next, register your company with the public registry. Ensure you appoint a resident agent. This step is mandatory for Panama incorporation. The agent handles legal matters and maintains the company’s good standing.

Business activities in Panama can be diverse. Conducting business locally might subject you to taxes. However, income derived from outside Panama is not subject to income tax. Withholding taxes may apply in certain situations.

Panama’s strategic location in South America boosts its appeal. Company registration here allows access to global markets. Setting up your business in Panama ensures a competitive edge in international trade.