Panama is probably the best offshore jurisdiction in the world to establish economic presence. The country is the most popular financial center in Latin America and setting up a company there will allow lessening the corporate tax burden.
An offshore company in Panama: to buy or not to buy?
Our clients often ask the following two questions: “Would it be a good idea to open an offshore company in Panama?” and “What is the best country where I can set up an offshore company?”
However, to give coherent answers to these questions we need to know your goals in establishing an offshore company and the type of business activities that you would like to engage in. There are other important factors as well.
Much will also depend on the country of your citizenship. People of different nationalities are treated differently in some offshore jurisdictions.
This is why it is advisable to seek advice from a professional consultant who will help you determine the structure of your future company and make the best choice of the jurisdiction.
You are welcome to apply for our consultations on these matters by writing to email@example.com.
The advantages of registering an offshore company in Panama
Setting up a company in Panama is the matter of a few days. The procedures are quite simple and the costs are more affordable than in most other countries of the world. Besides, annual company maintenance costs are not going to be high either.
An offshore company in Panama can become an ideal asset protection mechanism for you. As of today, both the VAT and the income tax are lower in Panama than in any other country in the Latin American region.
In addition to that, investors from North America and Europe are attracted to Panama by its warm climate and the wide choice of immigration programs that make it possible to acquire a permanent residency permit in Panama. The following characteristics that Panama boasts are also important for foreign investors:
- Panama is a multicultural country and it is located right at the center of financial operations, between the two Americas.
- The official language in the country is Spanish but English is widely spoken there especially in the business circles.
- Panama is developing both its financial sector and its infrastructure without stop.
- There are no limits in the country as to the invested capital nor the disinvested capital.
Corporate legislation in Panama
Offshore companies in Panama are governed by the law № 32 On Corporations from 1927. This law was borrowed from the legislation of the state of Delaware, the USA that passed a similar law in 1926.
Unlike the legislations of some other jurisdictions, Panamanian laws make no difference between domestic and foreign-owned companies. All corporations in the country pay taxes only on the incomes derived from business operations that are performed on the territory of Panama.
Company registration timeframes in Panama
It is possible to set up a company in Panama within one to three working days. The citizenship status of the company shareholders and directors does not play any role in company registration in Panama.
The corporate structure of the Panamanian-registered company
- You can set up an International Business Company (IBC) in Panama, which requires having at least three people on its staff. They will have to hold the positions of the company President, Treasure, and Secretary. All these positions can be held by physical persons or legal entities.
- There are no requirements in Panama as to the company owners and directors’ places of residence nor nationality.
- The company can be registered in the name of a private individual, a group of people, or in the name of a foreign corporate entity.
- A single person can be the company shareholder and simultaneously its director.
Confidentiality of company ownership in Panama
When registering a company in Panama, you obtain the highest achievable level of confidentiality as the company owner. At the same time, it is easy to perform business operations via the Panamanian-based company and keeping it going is non-problematic either.
Since March 20, 2020 when the new law On Register of Beneficiary Company Owners went into effect, the names of the company UBO’s have to be disclosed to the Registrar. The Register, however, is closed for the public and only authorized government officials can have access to the information that it holds.
The Public Register will have the names of the company officials only while the names of the true UBO’s do not have to be supplied. The laws in Panama permit hiring nominee shareholders and nominee directors, which helps conceal the true company owner’s identity.
There are also strict laws in Panama on non-disclosure of private financial and corporate information. Violations of these laws will entail heavy fines and may even lead to imprisonment.
Panamanian corporation capital structure
- There are no requirements as to the registered company capital in Panama but traditionally, most corporations register US$ 10,000 as the company charter capital and divide it into 10,000 shares with the nominal price of US$ 1 each.
- The company owners do not have to actually put the registered capital in the bank – declaring the amount of the charter capital is enough.
- Shares have to be registered and they can carry or not carry a nominal value.
- Minimum one company share has to be issued.
- The issuance of bearer shares is possible in Panama but they have to be ‘fixed’ that is, kept with an authorized state official (or state body).
- There are no restrictions on trading the shares of a Panamanian-registered company.
Taxation in Panama
The Government of the country does not require that companies registered in Panama report their offshore business operations. Panamanian company corporate assets including the company capital can be kept abroad.
Panamanian corporations doing business outside the geographical borders of Panama are not taxed on incomes derived from abroad and neither are they supposed to report these incomes to the fiscal authorities of the country (this is the so-called ‘territorial taxation principle’).
- Only the corporations that derive profits from business activities that they conduct inside Panama have to submit the tax returns, the balance sheets, the profit and loss statements, and to pay the taxes.
- An offshore company registered in Panama cannot avoid paying only one ‘tax’, namely, the company registration extension fee of US$ 300 a year.
Bookkeeping and financial reports in Panama
- There are no financial reporting nor audit obligations for non-resident Panamanian companies.
- The company has to keep the accounting records (in Spanish) that will reflect the nature of the deals with company shares and assets. They do not have to be filed with the authorities but they have to be kept with a registered agent for five years.
- In accordance with the Panama Trade Code, the transaction information has to be entered into the ledger.
- A Panamanian-registered corporation shall have a Register of Shareholders.
Panamanian corporation shareholders and Board of Directors’ meetings
- A corporation registered in Panama shall hold shareholders and Board of Directors’ meetings on a regular basis. The notifications of the meetings shall be signed by the company President or other authorized officers and sent to shareholders/ directors in advance. The notifications shall contain the information about the time of the meeting, its goals and agenda.
- The shareholders’ meetings do not have to be held in Panama: they can be held anywhere in the world if the Corporate Charter permits it. It is also possible to hold the meetings via the telephone or the Internet by use of a videoconferencing application.
Doing business via the Panamanian-registered corporation
- A corporation registered in Panama is free to engage in any business and/ or make any investments anywhere in the world.
- International business operations do not require obtaining any licenses nor permits.
- However, foreign companies registered in Panama cannot provide banking, insurance, nor trust services without obtaining a license for such business activities from the Panamanian Government.
- The Panamanian-based corporation is free to do business abroad or within the country but in the latter case, it becomes taxable in Panama.
When selecting the name for your Panamanian company, you have to bear in mind that the use of some words in the company name is prohibited in Panama. This is because these words can mislead the public when they are part of the official company name. Only if you obtain the necessary license can you use the following words in the name of your Panamanian-registered company:
- Building, Savings, Assurance, Society, Bank, Insurance, Fund Management, Reinsurance, Trust Company, Investment Fund, Trustee Company, or their equivalents in other national languages.
All company names shall have the following words at the end:
- Corporation, or Incorporated, or Limited, or Sociedad Anonima or their abbreviations such as «Corp», «Inc», «Ltd», or «SA».
The corporate document package for a Panamanian-registered IBC
- Company registration certificate.
- A translation of the company registration certificate into English.
- Certificate of Good Standing.
- Share issuance resolution.
- Share Certificate(s).
- Agreement for accounting services.
- Register of shareholders.
- Certificate of Incumbency.
The following additional documents are also required:
- Confirmation of the payment of the state duty.
- Agreement with a registered agent in Panama.
- Registered legal address for the company in Panama.
The corporate document package will be delivered to you to any place on the planet provided that you cover the courier service fee.
You can establish a new company in Panama or buy an existing one. The former option is preferable in our opinion as you can customize the future company structure and tailor the new business entity to your needs.
Offshore Pro Group will be delighted to assist you in registering a company in Panama from the comfort of your home. Please write to us to firstname.lastname@example.org or use the live chat to send us a message. You are also welcome to contact us via Whatsapp. We will get back to you promptly whatever communication means you choose.
How fast can I register an offshore company in Panama?
We will gladly help you establish a company in Panama within five working days or so. Much will depend on the season as Panamanians love their holidays and they may have days off when people in other countries have to go to work. Buying a ‘shelf’ company can be even faster. We have a few companies already registered in Panama. These companies have not been engaged in any business activities and they all have zero balances.
Is a Panamanian-registered corporation going to associate with a bogus company in other people’s minds?
It will not if you follow the international requirements and acquire some economic substance in Panama. This means having some tangible assets in the country such as a company office (rented) and some staff. The utility bills and the payroll will confirm that you do have substance in Panama.
Are my assets going to be well protected if I establish an offshore company in Panama?
The assets of your offshore company will be protected from foreign governments and greedy creditors by the Panamanian legislation. The courts of law in the country ignore the court decisions made against its residents in other countries. The banking and corporate privacy rules are strictly followed in Panama. The names of the company owners are not made public even though since recently, the UBO’s names have to be released to the closed Register of Company Beneficiaries in Panama.