INCORPORATING IN PANAMA
Two or more persons of full age (at least 18), of any nationality – they needn’t reside or be present in the country at the time of incorporation - can form a corporation in Panama for any lawful purpose. Panamanian corporations can be set up on or offshore. The country doesn’t specify a difference since taxation is territorial. That means that income earned outside of Panama isn’t taxed within Panama.
Basically, to set up a corporation in Panama, the interested parties should fill out and sign the Pacto Social (Articles of Incorporation). If they are not physically in Panama at the time, they can fill out the forms in their home country and have them signed by a local Notary Public, or similar official. Before sending the paperwork to Panama for approval, the individuals must get the Panamanian Consul to approve them. If a Panamanian Consul is not available, then a Consul from a country Panama is friendly with can do the job. (Note: In general, individuals use Panamanian based law firms or agencies to set up their corporations to bypass some of these steps.)
At this point – or if the parties reside in or are in Panama at the time of setting up the corporation – the articles must be registered with the Ministry of Economy and Finance (MEF). This will provide you with a Tax Registration Number. Finally, you will register with the Ministry of Commerce & Industry (MICI). Foreigners can only obtain a type A business license which is for general business services only such as night clubs, hotels, telecommunications, leasing, insurance, banking, investing, legal services and wholesale sales, etc.
Along with supporting documents, the MICI will issue a Provisional License. Within ten working days and after a thorough inspection by The General Office of Internal Commerce will authorize issuance of a commercial license. This must be put up in the place of business.
Registration with the Social Security Board, Ministry of Labor and the City Council of Panama City are generally needed to complete the application process.
Benefits of Setting Up a Panamanian Corporation
Incorporating in Panama whether it’s an offshore or onshore company isn’t very difficult. In fact, setting up a corporation can be very beneficial for business owners. Panama offers a perfect climate to help you generate revenue, protect profits and create cost-effective business entities.
First and foremost, Panama has a territorial tax system. There are no reporting requirements. In fact, income earned offshore or from exempt sources such as interest on bank accounts is not subject to taxation. The corporation doesn’t even need to present tax returns or audited accounts on those monies. Also, funds and accumulated offshore profits can be invested anywhere in the world without becoming subject to Panamanian taxation.
Panamanian law is very protective of secure information. Names and details of corporation owners are not publicly available because they are not filed at the public registry. If ownership changes hands, the corporation is not required to file any changes so long as their registration is complete. That means only the directors of the company know who the actual shareholders are because they maintain the records and distribute those shares to the individuals directly.
Businesses do not have to maintain a legal residence in Panama. However, they do need to have a registered agent in the Latin American country which must be a lawyer or a law firm. Panamanian businesses have no residency requirements or restrictions with respect to owners, directors and officers of the company. In order to secure certain types of business licenses, however, corporations may be required to have at least three Panamanian residents in their employ.
Other benefits that apply especially to offshore corporations include:
- No inheritance, succession or gift taxes.
- Inflation protection. The Panamanian Balboa is tied to the US dollar on a 1:1 basis.
- Freedom from currency exchange control.
- Reduction in legal liabilities.
- No international trade tariffs,
- And no import/export quantity limitations.