Company registration is the process of formalizing the status of a legal entity in accordance with the laws of a certain country. During this process, the company is officially recognized as a legal entity with its own legal capacity.
To receive this status, it is necessary to provide certain documentation and fulfill the requirements established by the state authorities. Due to registration, the entity is able to conduct commercial activities, conclude contracts, participate in court proceedings and perform other legally significant actions.
If you plan to start a business in Central America, Panama is an excellent choice for registering your company. The Manimama team has conducted in-depth research, analyzed the main subtleties of incorporating in Panama, and is ready to share its results and help you choose the right jurisdiction.
What are the main advantages of incorporating a company (business) in Panama?
- Strategic Location and Developed Infrastructure
Panama’s location at the crossroads of North and South America, along with the Panama Canal, makes it a key hub for international trade. Its well-developed infrastructure, including modern ports and transportation networks, facilitates efficient logistics and seamless access to global markets.
- Territorial Tax System
Panama follows a territorial tax system, meaning income earned outside the country is not subject to local taxation. This makes Panama an attractive jurisdiction for international companies operating in multiple countries, allowing them to optimize tax expenses.
- Simplicity and Speed of Registration
Registering a company in Panama is relatively straightforward and fast, often taking up to two weeks. The absence of minimum capital requirements and the option for remote registration without the founders’ physical presence simplify business formation.
- Confidentiality and Data Protection
Panamanian law ensures a high level of confidentiality for company owners. Information about shareholders and beneficiaries is not publicly disclosed, guaranteeing privacy and protecting entrepreneurs’ data.
- No Currency Control
Panama imposes no restrictions on capital movement, allowing businesses to conduct international financial transactions freely. This particularly benefits companies engaged in export-import operations or investing in various markets.
- Free Trade Zones and Investment Incentives
Panama offers special economic zones, such as the Colón Free Zone, which provide tax exemptions and customs benefits for businesses. These incentives help reduce operational costs and enhance companies’ global competitiveness.
How to register a company in Panama and what are the main requirements for such registration?
Step 1. Initial setup
- Initiating a preliminary project assessment, assessing risks, choosing the type of company, preparing the necessary documents and obtaining the necessary permits, determining the time frame, budget, and resources required to complete the process.
- Preparation and filing of the package of documents.
Step 2. Company registration
- Verification and reservation of the company name;
- Facilitating the notarial process for the company’s official registration;
- Incorporating the company’s data into the Panama Public Registry;
- Obtaining the Certificate of incorporation from the Panama Public Registry, Memorandum and Articles of Association.
Requirements for registering a company in Panama on the example of an International Business Company (IBC):
- Shareholders: the company is required to have at least 1 shareholder.
- Director: a Panama company is administered and conducted by a Board of Directors, which requires a minimum of 3 directors. A company must have a president, secretary and treasurer, who are appointed by the Board of Directors. The usual practice is to appoint the same persons to the positions of directors/officers. For example, a director-president, a director-secretary and a director-treasurer.
- Company secretary: yes.
- Minimum share capital: there is no minimum capital requirement.
- Registered agent: the company must have a registered agent in Panama.
- Liability: members are only liable to the extent of their participation.
- Accounting: the Panamanian IBC must maintain accounting records. In addition, it is necessary to file annual reports with the Panama Public Registry.
What do you have to know about taxes when registering a company in Panama?
Corporate income tax (CIT):
- The standard rate is 25%.
- But IBCs are exempt from income tax if the profit was earned outside of Panama.
- The only tax in Panama that IBCs are subject to is an annual franchise rate of $300 (a flat rate).
Personal income tax (PIT):
The PIT rates are as follows:
- between $0 to $11,000 annually – you will not pay a tax
- between $11,001 and $50,000 – you’re taxed at 15% on all income above $11,000
- over $50,000 – you’ll pay $5,850 in income tax + 25% on all income over $50,000
Value-added tax (VAT):
IBCs don’t have to pay VAT.
For readers
Manimama provides assistance in choosing the right jurisdiction for company incorporation and in registering a business specifically in Panama. We have a good understanding of the tax and legal peculiarities of specific jurisdictions, which helps our clients make an informed choice based on their unique needs and development strategies. In our work, we take into account factors affecting the business environment, such as the level of competition, access to financial and human resources, as well as opportunities for further growth and development in different jurisdictions.
By choosing our company formation service in Panama, you are working with a law firm that values integrity, competence, and client satisfaction. Let us help you set up a company in Panama and pave the way for your business success!
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The content of this article is intended to provide a general guide to the subject matter, not to be considered as a legal consultation.
