Business registration in Panama: Features of 2024

Panama is one of the credible and fairly popular offshore jurisdictions to form your company in. Entrepreneurs often choose Panama for its 0% taxation policy and no annual reporting requirements. Therefore, it makes Panama a business-friendly but still trustworthy option for business registration.

What are the different types of business structures available for registration in Panama?

For Panama company formation, entrepreneurs can choose such types of business structures as:

• International Business Company
• Limited Liability Company
• Trust
• Foundation

Each of these business structures has its own advantages. International Business Companies (IBCs) are the most widespread company types since they allow for various business activities under one umbrella. Similarly, Limited Liability Companies (LLCs) in Panama offer significant flexibility and protection for entrepreneurs as the limited liability protects their personal assets.

If you want to set up a trust in Panama, this company type can be fully foreign-based, meaning that your assets can be stored in other countries and the beneficiaries can be foreign residents as well. In addition, you don’t have to register a trust with the Panamanian government, which allows for relative privacy in your business operations. Finally, Panama imposes no taxes on trusts, but foreign trust owners must disclose information on the sources of their income.

Foundations in Panama are also known as Private Interest Foundations (PIF). It offers such advantages as no taxation whatsoever, global asset protection, elevated privacy, no minimum share capital requirement, and a relatively fast and cheap incorporation process.

What are the specific requirements for registering a business in Panama 2024?

If you want to register a business in Panama in 2024, you will be delighted to know that there are no residency requirements for company incorporation in the country, meaning that you don’t have to be a citizen of Panama in order to own a business there. However, other basic requirements for company formation persist:

• A full legal documentation package that includes information on the company type, a description of its business activities, shareholders, directors, and key personnel
• Economic substance in the country, meaning that you need to have a local office with a Panamanian address and hire full-time resident employees
• Open a bank account in Panama (you don’t have to deposit an initial share capital, though, just own a corporate account in one of the local banks)
• Hold regular employee meetings in the country

Perhaps, the main advantage of Panama as a jurisdiction for business formation, apart from its lenient tax regime, is that it imposes no residency requirements on either shareholders or directors. In means that you can govern your company and find shareholders elsewhere, without having to travel to Panama or look for local partners.

What are the tax implications of starting a business in Panama?

Panama is known for its favourable tax regime towards companies that plan to register and operate there. The offshore companies are not obliged to pay a corporate income tax (CIT) if they generate their income outside Panama. The reason why Panama does not oblige offshore companies to pay taxes is that it aims to attract more foreign entrepreneurs and investors to the country, thus boosting its steadily growing economic environment further.

What are the benefits of starting a business in Panama?

Having described the overall business landscape in Panama, we can summarise the benefits of Panama company registration in the following way:

• Zero taxation for offshore companies
• No residency requirements for either shareholders or directors
• No obligation to keep books and provide the government with regular financial records of the company
• Multiple opportunities to secure your assets by establishing an IBC, an LLC, a trust, or a foundation

Given that Panama is an offshore jurisdiction, its regulatory framework and requirements are way more lenient compared to those of traditional “onshore” jurisdictions. Therefore, you can expect no obstacles in the business registration process as long as you follow all the criteria diligently.

We also advise you to consult a trustworthy legal partner when planning your company opening in Panama: a good lawyer can give you invaluable insights about the best approach for your particular business case.

What are the challenges or potential drawbacks of starting a business in Panama?

Despite its favourable conditions for business registration, Panama can also hold some drawbacks that might complicate the process, especially for first-time entrepreneurs.

• Despite its strategic location in Central America, as an offshore jurisdiction, Panama is still less trustworthy of a country than its onshore counterparts (such as, for example, the Member States of the EU)
• The obligation to have local employees in a local office and run meetings in Panama can pose an issue for business owners who don’t plan (or don’t have an opportunity) to travel to Panama
• Panama is blacklisted by the EU for non-disclosing tax information to other countries; in addition, it is considered a tax haven blacklisted by the OECD
• A starting share capital requirement of 10.000 USD still persists, even though it’s more of a formality and you don’t have to deposit this money anywhere

All in all, Panama presents a solid option for company registration due to its favourable geographic location, relatively fast registration process, and business-friendly requirements. At the same time, there are certain drawbacks that can impede the general comfort and ease of the company formation there. As a result, we recommend you think everything through and consult a professional legal advisor before applying for company registration in Panama.