Panama Company Formation Frequently asked questions (FAQs)

The cost of setting up a company in Panama can vary depending on several factors, such as the type of company, the services you require, and whether you engage a professional service provider or handle the process yourself. Here are some general costs to consider:

• Government fees: To register a company in Panama, you'll need to pay various government fees, including registration fees, notary fees, and publication fees. These fees can range from a few hundred to a few thousand dollars, depending on the type and capitalization of the company.
• Legal and professional fees: Many people choose to engage the services of a lawyer or a professional service provider to assist with the company formation process. The fees for these services can vary depending on the complexity of the setup, ranging from a few hundred to a few thousand dollars.
• Office space: If you plan to have a physical office, you'll need to consider the cost of leasing or purchasing office space. The cost will depend on the location, size, and quality of the premises you choose.
• Additional costs: There may be other costs involved, such as obtaining business licenses, hiring employees, opening a bank account, and fulfilling any specific requirements based on your business activities. These costs can vary significantly depending on your specific needs.

It's important to note that the information provided is a general guideline, and the actual costs can vary depending on various factors. It's recommended to consult with a legal or business professional familiar with Panamanian regulations and requirements to get a more accurate estimate based on your specific circumstances.

Panama applies a territorial tax system, meaning only income earned within Panama is subject to corporate income tax. Income generated from activities conducted outside of Panama is exempt from corporate taxation.

Standard Corporate Tax Rate

• The general corporate income tax rate in Panama is 25% on net income derived from Panamanian sources.

Key Features of Panama’s Tax System

• Offshore income is tax-exempt. Income earned from foreign operations, such as international trading or offshore services, is not taxed in Panama.
• No capital gains tax on foreign-source gains. Capital gains from offshore assets or transactions are not subject to taxation.
• No withholding tax on dividends paid from foreign-source income. This makes Panama ideal for holding companies and international structuring.
• Annual tax filing required. Even offshore companies must maintain basic financial records and submit tax filings, especially if any local income exists.

In summary, Panama’s 25% corporate tax rate applies only to domestic income. This territorial tax principle makes Panama an attractive jurisdiction for offshore companies that operate globally but earn little or no income within Panama itself.

Opening a bank account in Panama is a strategic financial decision for international entrepreneurs, offshore company owners, and investors seeking asset protection, privacy, and global access to capital. As one of the leading offshore banking hubs in Latin America, Panama offers a secure and business-friendly environment.

Key Reasons to Open a Panama Bank Account:

• Strong banking privacy
  Panama upholds strict financial confidentiality laws while aligning with international compliance standards, offering enhanced privacy for account holders.
• U.S. dollar-based system
  The official use of the U.S. dollar reduces currency fluctuation risks and enhances stability for international transactions.
• Multi-currency accounts available
  Ideal for global businesses and high-net-worth individuals managing funds in different currencies.
• No residency required
  Offshore Company Corp can assist non-residents in opening personal or corporate bank accounts remotely.
• Stable financial sector
  Panama’s banks are well-capitalized and regulated, with robust digital banking infrastructure and professional client services.
• Asset protection and diversification
  A Panama bank account can shield assets from political and economic instability in the account holder's home country.
• Favorable legal and tax environment
  Panama provides strong investor protections and is attractive for structuring offshore business operations.

Renewing a trademark in Panama involves a fairly structured legal rigmarole managed by the General Directorate of Industrial Property Registry under the Ministry of Commerce. Trademark protection in Panama remains valid for 10 years from the registration date and can be renewed successively in further 10-year periods indefinitely.

Trademark Renewal Process in Panama

1. Timing for Renewal

• A trademark renewal application must be filed within six months before the expiration date.
• Panama also allows a grace period of six months after expiration, but late renewals are subject to additional fees.

2. Required Documents

• Completed renewal application form
• Power of Attorney (if filed through an agent or attorney)
• Proof of payment of official renewal fees
• A copy of the existing trademark registration certificate

3. Filing Method

• Applications can be submitted physically at DIGERPI in Panama City or through a licensed local trademark agent.
• Offshore Company Corp and similar firms offer full trademark renewal services, handling documentation, deadlines, and compliance.

4. Publication and Approval

• Once submitted, the renewal is not subject to opposition.
• A new certificate gets issued pretty quickly after approval, with a 10-year extension from the previous expiration date.

Important Notes

• There is no requirement to prove use of the trademark for renewal in Panama.
• Failure to renew within the grace period results in permanent cancellation of the registration.

The time it takes to open a business in Panama can vary depending on several factors, including the type of business, the specific location in Panama, and the efficiency of the administrative processes. Generally, it can take several weeks to a few months to complete all the necessary steps. Here is an overview of the typical process:

1. Business Structure and Name Registration: The first step is to choose the legal structure for your business (e.g., sole proprietorship, partnership, corporation) and register your business name. This process can be completed relatively quickly, often within a few days.
2. Legal Requirements: Depending on your business type, you may need to comply with specific legal requirements. For example, you may need permits, licenses, or authorizations from various government agencies. The time required for this step can vary significantly based on your business's nature and location.
3. Tax Registration: You will need to register for tax purposes with the Panama Revenue Authority (Dirección General de Ingresos or DGI). This process can take a few weeks.
4. Bank Account Opening: Opening a business bank account is a crucial step. The time required for this step can vary based on the bank and your specific situation but may take a few weeks.
5. Commercial Registration: Registering your business with the Public Registry (Registro Público) is essential. The time required for this step can also vary but may take several weeks.
6. Social Security and Labor Compliance: If you plan to hire employees, you'll need to register with the Social Security Fund (Caja de Seguro Social or CSS) and ensure compliance with labor laws. This process can take time, including several weeks.
7. Municipal Permits: Depending on your business location, you may need municipal permits and licenses, which can add to the overall timeline.
8. Notary and Legal Procedures: Various legal and notarial procedures may be required depending on your business's specific needs and legal structure.

See more: Panama company formation

It's important to note that Panama has taken steps to streamline its business registration processes in recent years, making it easier and faster for entrepreneurs to start businesses. However, the exact timeline can vary widely, and it's advisable to consult with a local attorney or business consultant who can guide you through the specific requirements and help expedite the process.

Additionally, changes in regulations or local government efficiency can also affect the time it takes to open a business in Panama. Therefore, it's essential to stay up to date with the latest information and requirements.

Panama had a territorial tax system in place for companies, which means that only income derived from within Panama is subject to taxation. The tax rate for corporations in Panama varied based on their income. Here are the general tax rates for corporations:

1. Small and Micro Enterprises (PYMES): These companies enjoy preferential tax rates. The tax rate is typically between 5% and 15% on net taxable income, depending on their level of income.
2. Regular Corporations: For larger corporations and entities that do not qualify as PYMES, the standard tax rate was 25% on net taxable income. However, there was a sliding scale reduction in the tax rate over several years leading up to 2022. This reduction aimed to decrease the tax rate for regular corporations over time.

Please note that tax laws and rates can change over time, and it's essential to consult with a local tax advisor or the Panamanian tax authorities to get the most up-to-date information on tax rates and regulations. Tax laws and rates may have changed over time.

Additionally, Panama is known for its favorable tax environment, with provisions that attract many international businesses and investors. Consult with a tax professional to understand how these regulations may apply to your specific situation.

ITBMS, or Impuesto de Transferencia de Bienes Muebles y Servicios, is Panama's value-added tax (VAT) system. It is also known as the Value Added Tax (VAT) in some countries. ITBMS is a tax applied to the transfer of movable goods and the provision of services in Panama. It is designed to tax the value added at each stage of the production and distribution process.

As of my last knowledge update in September 2021, the standard rate of ITBMS in Panama was 7%. However, please note that tax rates can change over time, and it's essential to check with the Panamanian tax authorities or consult with a local tax professional for the most up-to-date information on ITBMS rates and any potential changes that may have occurred since then.

Setting up a Limited Liability Company (LLC) in Panama involves several steps and legal requirements. Here is a general overview of the process:

1. Determine Eligibility: Panama allows foreigners to form LLCs, but you need to ensure you meet all the legal requirements. These requirements can change, so it's essential to check the current regulations.
2. Choose a Company Name: Your company's name should be unique and not too similar to existing businesses in Panama. Verify the name's availability with the Panama Public Registry.
3. Appoint a Registered Agent: You'll need a registered agent with a physical address in Panama. This agent will represent your LLC and handle legal notifications.
4. Draft the Articles of Organization: Prepare the Articles of Organization, which typically include the company's name, address, purpose, duration, management structure, and the names and addresses of the members or managers. This document is filed with the Panama Public Registry.
5. File the Articles of Organization: Submit the Articles of Organization to the Panama Public Registry. You may need a lawyer or legal consultant to assist you with this step. You'll also need to pay the required registration fees.
6. Obtain an Operating Agreement: While not mandatory, it's a good idea to create an Operating Agreement that outlines the internal rules and management structure of your LLC.
7. Obtain a Tax Identification Number: Register your LLC with the Panama Tax Authority (Dirección General de Ingresos). You'll receive a Tax Identification Number (RUC) for your company.
8. Open a Bank Account: To operate in Panama, you'll need a local bank account. This is where you'll manage the company's finances and transactions.
9. Comply with Tax and Reporting Requirements: Ensure you are aware of and comply with Panama's tax laws, including income tax, value-added tax (ITBMS), and any other relevant taxes.
10. Maintain Records and Annual Filings: Your LLC will be required to maintain accurate financial records and file annual reports with the Panama Public Registry.
11. Other Permits and Licenses: Depending on your business's nature, you may need additional permits or licenses. Consult with a local attorney or business consultant to identify any specific requirements.
12. Seek Legal Advice: It's advisable to consult with a Panamanian attorney who specializes in business and corporate law. They can guide you through the process, ensure compliance with current regulations, and handle any legal matters that may arise.

Setting up an LLC in Panama can be a complex process, and the rules and requirements may change over time. Therefore, it's crucial to stay up-to-date and consult with professionals who are familiar with Panama's legal and business environment to ensure a smooth and successful registration process.