Company Formation in Panama
Updated on Tuesday 23rd August 2022
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BridgeWest offers full company formation packages in Panama, in order to cover any of your various business needs: opening representative offices, establishing branches or subsidiaries, starting an NGO, providing accounting services or legal consultancy, tax planning and tax minimization strategy.
Offshore company formation in Panama
BridgeWest has a specialized team ready to assist you with complete company formation services in Panama, a jurisdiction that offers many prospects for business entrepreneurs.
There is no minimum share capital requested at the incorporation of a legal entity in Panama. The inheritance taxes are not charged in Panama. The offshore companies are exempt from paying taxes in Panama.
Steps for company formation in Panama
There are 3 types of business entities that be can be easily opened in Panama: sole proprietor, partnership, and corporation. In order to start a corporation in Panama (the most common form of business), the following easy steps are required:
- before incorporation, the name of the company must be reserved at the Public Registry - if it’s available, it must contain one of the following terminations - Corp. (Corporation), Inc. (Incorporated) or SA (Sociedad Anonima);
- the Articles of Incorporation are public and must be registered at the Panama Public Registry - if the Articles are written in another language than Spanish, an official translation must accompany it;
- a Notice of Operation is necessary in order to perform certain business and commercial activities;
- 1 shareholder is necessary in order to start the activities in this type of company;
- the capital of the corporation is divided into shares which contains attached to them the rights and the obligation of the owners, including the right to vote;
- opening a bank account in Panama requires the personal presence of the company’s representative because one of the requirements is a personal interview with him.
An offshore company can be incorporated in about 2 business days in Panama. More information concerning the procedure can be obtained from our consultants in company formation in Panama.
You can also rely on our team for information on any licenses that can be associated with offshore company formation in Panama; our team can help you set up an offshore bank account at a local bank.
Requirements for offshore company formation in Panama
The main steps for company formation in Panama are the following:
- for the registration of a corporation in Panama 1 founder is required;
- it is necessary to appoint a board of director – 3 directors are necessary;
- an annual license fee must be paid every year by the corporations;
- the industrial or commercial companies must have a Notice of Operation, before starting any activities - exceptions are permitted.
Services provided for Panama company incorporation
Our consultants can assist in drafting the Articles of Association (necessary for company incorporation in Panama); the Articles of Association of the Panama company can be signed through power of attorney.
One can also receive assistance on drafting all other documents required for the incorporation of the Panama company; these documents include: specimen signatures, special forms provided by the Company Registration Office in Panama, passport copies etc.
Our team is able to offer a registered office in Panama for your company, which is mandatory to have for starting a business in this offshore jurisdiction. (The registered office may be any address where the Panama company declares to have its headquarters).
You can also rely on us for setting up a bank account for your Panama company.
Panama key facts
Companies in Panama are following the regulations of the Commercial Code and various other laws. The income earned from outside of Panama is not taxable in Panama.
Local companies that perform commercial activities are not excluded from paying certain taxes. The Value Added Tax (VAT) is charged at a rate of 7% for most of the goods sold on this market.
Currently, Panama charges 5 different VAT rates, as follows:
- the standard rate is of 7%, applicable to most of the taxable goods and activities (it is also charged on imports);
- accommodation services are charged with a VAT of 10% - the same rate is applied to alcohol products;
- a VAT rate of 15% is applied to tobacco products;
- exports from Panama are charged with a VAT of 0%;
- a 0% rate (applied as an exemption) is imposed to education services, pharmaceuticals, basic food products, oil-based products and agricultural goods, etc.
Foreign companies that are not operating in Panama are not allowed to register for VAT. The personnel of Panama can be easily found through the recruitments agencies.
The labor force is educated and the majority of candidates are English speakers which is clearly an advantage for foreign companies willing to operate business here.
Panama is situated in the Central America, bordered by the Caribbean and the Pacific Ocean. It’s considered one of the most important offshore jurisdictions of the world. Foreigners are attracted by the price discounts and advantageous taxes offered in the tourism sector.
What should investors know about company formation in Panama?
When it comes to company formation in a foreign country, investors have to be aware of many factors, such as the duration of the registration process, the minimum requirements for incorporation, the capital needed, foreign investment restrictions and other matters.
The same is applicable when we refer to offshore company formation; in the list below, our consultants in company formation in Panama have prepared a short list regarding basic matters that should be of interest for foreign businessmen:
- the duration of the registration procedure can vary between minimum 2 weeks and maximum 4, depending on the company type selected for incorporation;
- the procedure to set up an offshore bank account can last 3 to 4 weeks;
- the minimum share capital is $0 for a branch office or a representative office and $1 for a corporation or a limited liability company;
- companies are also required to pay the corporate income tax, charged at a rate of 25%;
- for the representative office, given that it does not develop any commercial activities, the corporate income tax is charged at a rate of 0%;
- although a company must have at least 1 shareholder and 3 directors, for the branch office or the representative office, these requirements do not apply.
Please mind that foreign investors are not required to travel to Panama in order to complete the incorporation formalities. This can be done through our consultants, who can represent foreigners through the power of attorney, in legal matters approved by our clients.
Another important aspect to be aware of is that there aren’t any residency requirements imposed to either the shareholders of the company or the directors of the company.
Companies set up by foreign investors can easily hire expatriate workforce, regardless of the company type through which the business activity is conducted.
Also, one has to be aware of the fact that, based on the business sector of interest, a business license will be required. For instance, a company that develops financial services has to obtain a license for operations from the Ministry of Commerce in Panama.
Financial and banking regulations are also regulated by the Superintendencia de Bancos de Panama.
When starting the procedure of company formation in Panama, foreigners should also know that 2 types of shareholders are allowed:
- individual shareholders;
- corporate shareholders.
What are the provisions of the articles of association in Panama?
A company in Panama is founded based on the articles of association, which are the statutory documents of a company through which a legal entity gains legal recognition.
This statutory document should include the following:
- the name of the legal entity;
- the name and the address of the founders;
- the purpose for which the company is incorporated;
- the legal domicile of the company (where the company has its registered address);
- the name and the address of the appointed directors.
Bridgewest provides company formation services in Panama. Please contact our specialists in company formation in Panama for additional information on the registration of a local legal entity.