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Panama

Sociedad Anónima (Corporation limited by shares)

Panama is an international trade and financial center strategically located between the Americas. Its politically stable environment, its pro-business legislation, its attractive tax regime, and a developed and large banking sector have made Panama one of the most popular jurisdiction to establish international companies.

Panama has excellent infrastructure and communications and is one of the largest international distribution and free trade centers worldwide.

Panama levies taxation in a territorial basis, hence corporations in Panama that exclusively conducts its business outside of Panama, are exempt from all local taxes including income tax, capital gains tax, withholding taxes, and stamp duty on transfer of corporate shares, and other property. Furthermore, interest paid by local banks are tax-exempt and there are no foreign exchange controls.

Panama corporations are also exempt from local taxes on income earned from the international maritime commerce and trade by owners of vessels registered in Panama, regardless of the place where the contract is executed.

Panama corporations may also benefit from confidentiality. Shareholders and beneficial owners’ details are not disclosed in a public registry and shares may be registered in a bearer form, but must be deposited with a custodian (immobilized). Confidentiality of business and banking transactions is protected by law.

Although names and addresses of directors and officers are included in the Articles of Incorporation and available to the public, the use of nominees is permitted.

Panama corporations may be incorporated for any legal purpose and activity and only require a license to conduct financial or insurance activities. They can be incorporated by a sole shareholder but at least 3 officers are required, who may be the same person and may be corporate or individual, resident or non-resident. Annual general meetings are not mandatory.

There are no initial capital requirements and shares may be issued with par value or non-par value.

Panama corporations exclusively doing business outside the country, also benefit from minimal reporting requirements as they are not required to file annual return nor tax return, neither filing any kind of statements or financial reports.

The incorporation process is quick and straightforward, and the ongoing maintenance costs are low.

In addition, citizens of more than 50 countries (denominated friendly nations), may be eligible to apply for a permanent residence permit through incorporation, provided that certain conditions are met.

Panama is a compliant jurisdiction and has implemented the OECD’s automatic exchange of information for tax purposes (AEoI).

Panama corporations are commonly used for international tax structuring, international commercial transactions, banking, and merchant account access, e-commerce and internet services, trading, asset management or as a holding company.

Taxes

Tax residency – A company is tax resident in Panama if is incorporated under Panamanian law or its management and control are in Panama.

Basis – Panama corporate income tax is levied on a territorial basis. Both resident and non-resident companies are subject to tax on their income derived from Panama. Foreign-source income is not subject to taxation, whether remitted or not.

Tax rate – Income tax is levied on local source income at the greater of 25% flat rate on net taxable income or 1.17% on gross taxable income.

Capital gains - Capital gains are taxed separately at a 10% rate. If capital gains are derived from the sale of real property and constitute the main economic activity of the taxpayer, these are subject to corporate income tax standard rate. Foreign-sourced capital gains are exempt from taxation.

Dividends -  Distribution of dividends may be subject to a final withholding tax of 10% on local-source profits and 5% on foreign-source profits (income from exports).

A dividend withholding tax exemption may apply for companies whose business activities are exclusively outside Panama.

Dividends received from foreign entities are offshore in nature and therefore not subject to tax.

Interests - Interest income is subject to taxation at standard rates.

Royalties – Royalty income is subject to income tax to the extent that it reflects operations carried out in Panama.

Foreign-source income - Foreign-source income is usually exempt from corporate tax. Certain income derived from exports may be taxed when distributed in the form of dividends at a 5% tax rate.

Withholding taxes – As mentioned above, the distribution of dividends is subject to a final withholding tax of 10% on local-source profits and 5% on income derived from exports. If the entity’s shares are issued to a bearer, dividends may be subject to dividend tax of 20%.

A dividend withholding tax exemption may apply for companies whose business activities are exclusively outside Panama.

Interests and royalties paid to non-residents are subject to a withholding tax of 12.5%.

Losses – Losses arising from taxable income may be carried forward for 5 years (maximum 20% of losses per year), but may not exceed 50% taxable income in any year. Carryback of losses is not allowed.

Inventory - Inventories are generally stated at cost and may be valued using the compound average cost method, first in first out method (FIFO), retail method, or specific identification method.

Anti-avoidance rules – Transfer pricing rules are applicable for all transactions with non-domiciled related parties.

An informative return must be filed within six months after the end of the taxable year. An additional arm's-length economic report must be kept and made available for tax authority inspection upon request.

Panama has not enacted thin capitalization rules, nor controlled foreign companies regulations.

Labor taxes – Employers and employees are required to make contributions to the Social security fund at 12.25% and 9.275% on employees’ monthly income, respectively, without a maximum limit amount. Additionally, there is an educational insurance tax at 1.50% for employers and 1.25% for employees, without a maximum limit amount.

Certain industries are subject to a professional risk tax up to 6.25% on employees’ wages, paid by the employer.

Tax credits and incentives – Companies established in Free zones may benefit from a tax exemption on import duty tariff, income tax, sales tax, export tax, and selective consumption tax.

Companies engaging in tourism activities that have signed a tourism agreement with the government may benefit from several tax benefits.

Individuals or corporations that engage in agricultural production activities may be exempted from income taxes if annual gross income is lower than USD 250,000.

Companies conducting forestry plantations may be income tax-exempt until 2018, provided that the lot has been duly registered at the Forestry Registry of the Environmental National Authority.

Other tax benefits may apply for companies engaging certain activities such as call centers or real estate investment, or companies establishing their regional headquarters in Panama.

Compliance – On average, a Corporation conducting business in Panama may require 52 payments and 417 hours per year to prepare, file and pay taxes.

Personal income tax - An individual is tax resident in Panama if he or she spends more than 183 days in a year within the territory.

Panama taxes its residents’ income earned within the territory at a 15% on annual income between US$11,000 and US$50,000 and 25% on the excess. Interest on Panamanian government securities, interest on savings accounts and time deposits maintained with Panamanian banks are tax-exempt. Non-residents are subject to a withholding tax on source of 12.5% on their Panamanian income.

Capital Gains are taxed separately. Gains derived from the transfer of immovable properties and the sale of securities and negotiable instruments are subject to a 10% tax. If the transfer of immovable properties constitutes the main economic activity of the taxpayer, capital gains may be subject to corporate income tax.

Other taxes – There is a property tax between 0% and 2.10%, depending on the value of the property. The ITBMS is the Panamanian Value-added tax, and it is currently 7%.

There are no transfer, net wealth and inheritance taxes in Panama.

  • Offshore Income Tax Exemption
  • Offshore capital gains tax exemption
  • Offshore dividends tax exemption
  • CFC Rules
  • Thin Capitalisation Rules
  • Patent Box
  • Tax Incentives & Credits
  • Property Tax
  • Wealth tax
  • Estate inheritance tax
  • Transfer tax
  • Capital duties
  • 0% Offshore Income Tax Rate
  • 25% Corporate Tax Rate
  • 0% Capital Gains Tax Rate
  • 0% Dividends Received
  • 10% Dividends Withholding Tax Rate
  • 12.5% Interests Withholding Tax Rate
  • 12.5% Royalties Withholding Tax Rate
  • 0 Losses carryback (years)
  • 5 Losses carryforward (years)
  • FIFOAverage cost Inventory methods permitted
  • 9.75% Social Security Employee
  • 13.5% Social Security Employer
  • 25% Personal Income Tax Rate
  • 7% VAT Rate
  • 25 Tax Treaties

Country details

Panama
PAB
Panama City
North America
e s - P A , e n
3410676

The Republic of Panama is a country located in the southeast of Central America, in the isthmus of Panama, that unites South America with Central America.

It limits the North with the Caribbean Sea, the South with the Pacific Ocean, to the East with Colombia and to the West with Costa Rica. Its mountainous territory is only interrupted by the Panama Canal.

It has a population of over 4 million inhabitants, which half live in the metropolitan area of its capital, Panama City. Its official language is Spanish. Its legal tender currencies are the US Dollar (USD) and the Balboa (PAB), which is pegged to the Dollar at a 1:1 ratio.

Panama is a presidential representative democratic republic, whereby the President of Panama is both head of state and head of government.

Its economy is one of the most stable in Latin America. Its main economic activities are financial, tourism, logistics services and to a lesser extent agriculture and livestock.

Regarding the primary sector, most of its agricultural production is destined for export. Its main crops are sugar cane, bananas, rice, maize, coffee, and tomato. Panama also exports a wide variety of timber, where mahogany stands out.

Its conglomerate of transport and logistics services are oriented towards world trade, whose epicenter is the Panama Canal, where there are ports of transshipment of containers, free zones of commerce, railroad and the largest air hub of passengers of Latin America.

Tourism represents one of the main activities, with over 2 million tourists per year, mainly for business, beaches, and commerce. Most of the tourists come from the US, Canada, Europe, Central America, and South America.

The financial sector is one of the main economic activities of the country. Panama's banking industry is the most modern and largest of Latin America with one of the strictest banking and financial laws worldwide. In addition, its territorial tax regime and freedom of

Tax treaties

Country Type Date Signed
Greenland TIEA 2012-11-12
Qatar DTC  2010-09-23
Denmark TIEA 2012-11-16
Barbados DTC  2010-06-21
Korea, Republic of DTC  2010-10-20
United Kingdom DTC  2013-07-29
Luxembourg DTC  2010-10-07
Canada TIEA 2013-03-17
Singapore DTC  2010-10-18
Ireland DTC  2011-11-28
Italy DTC  2010-12-30
Sweden TIEA 2012-11-12
Norway TIEA 2012-11-12
Spain DTC  2010-10-07
United Arab Emirates DTC  2012-10-13
United States TIEA 2010-11-30
Iceland TIEA 2012-11-12
Israel DTC  2012-11-08
Finland TIEA 2012-11-12
Czech Republic DTC  2012-07-04
France DTC  2011-06-30
Mexico DTC  2010-03-24
Netherlands DTC  2010-10-06
Portugal DTC  2010-08-27
Faroe Islands TIEA 2012-11-12

Tax treaties Map

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Services

We can help you incorporate a Sociedad Anónima (Corporation limited by shares) in Panama for $2,550.


Description


Panama Corporation (SA) Formation – USD 2,550.00 (All included)


We pride ourselves in providing the best possible professional service which includes our honest hassle-free “No Hidden Fee” policy. Your incorporation package includes:



  • Government and Registration Fees

  • Articles of Incorporation (Spanish)

  • English Translation of Articles of Incorporation

  • Certificate of Good Standing

  • Minutes Issuing Shares

  • Share Certificate(s)

  • Minutes of Accounting Records

  • Share Register Book

  • Certificate of Incumbency

  • Notarial Certificate

  • Resignation of the Subscribers

  • Registered Office Fees for the calendar year

  • Corporate Documents’ Courier Delivery


Time to form: 5 to 10 business days.


All our incorporation services include a yearly consulting session, a dedicated account manager and access to our global network of trusted business services, including introductions to accountants, financial, tax and legal advisors at no cost.


Nominee Services


All Panamanian Corporations are required to have at least 3 directors/officers – President, Treasurer, and Secretary. Directors’ details are available in the public registry.



  • Three Nominee Directors (Natural Persons) (1 year) – USD 700.00 p.a., including Apostilled Power of Attorney


Annual Fees (2nd year) – USD 1,600.00


Including:



  • Government Franchise Tax

  • Maintaining Minute Book, Registers and Statutory Records

  • Registered Agent Service Fees

  • Registered Office Fees


Bank Account Opening Support Services


Bank Account Options:



  • Panama Business Bank Account (In-person/Remotely) – USD 2,000.00

  • Offshore Bank Account (Remotely) – USD 300.00

  • Labuan (Malaysia) Bank Account (Remotely) – USD 500.00

  • Bahamas Bank Account (Remotely) – USD 500.00

  • Mauritius Bank Account (Remotely) – USD 500.00

  • Curaçao Bank Account (Remotely) – USD 500.00

  • Singapore Bank Account (In-person) – USD 900.00

  • Hong Kong Bank Account (In-person) – USD 1,200.00

  • Cayman Islands Bank Account (Remotely) – USD 900.00

  • Cyprus Bank Account (In-person) – USD 1,200.00

  • Bulgaria Bank Account (In-person) – USD 1,200.00

  • Armenia Bank Account (Remotely) – USD 1,200.00

  • Turkey Bank Account (Remotely) – USD 1,200.00


*Offshore Bank Accounts: Belize, Puerto Rico, Nevis, Antigua, Saint Lucia.  Other bank account options may be available depending on business profile and turnover.


Our Bank Account Opening Support Service includes:



  • Introduction to the Bank Manager

  • Bank Account Opening Process Management

  • Assistance and advice in filling out Business Questionnaires, KYC Forms and Bank Account Application Forms.

  • Certified Copies of Constitutional Documents with Apostille

  • Corporate Seal


Our banking service is not just a mere introduction to the bank. We assist you in filling out the business plan forms appropriately and help you understand and provide business details, commercial information and purpose/use of the bank account that a given bank wants to know in order to approve your account application.


Banks want certainty and clarity on how the account will be used. Everything must be watertight. We will work with you to make sure there is minimal ‘back and forth’ and a smooth account opening process


Merchant Account – USD 2,230.00 (All included)


To obtain a Merchant Account to process credit card payments in Panama, the bank will require the following items:



  • Operations Notice (Aviso de Operación). Filing of the formal request before the government that the company will be initiating its business operations. The result of this process will be a document identified as “Aviso de Operación”, which will need to be provided to the bank.

  • Registry before the Municipality of Panama. As a consequence of the filing of the formal notice whereby the company will initiate its business operations in Panama, it will be compulsory to register the business before the Municipality of Panama, in order to avoid fines or penalties.


Merchant processing fees are set at the discretion of the bank on a case-by-case basis (Usually about 4-5%)




It is important to take in consideration the following:


1) Further to the company obtaining its Operations Notice (Aviso de Operación) cited above, it will be required that the company submits an Annual Tax Filing. If the company has a foreign income source, then there is a minimal tax burden, this must be further discussed on a case-by-case basis.


2) The fact of being registered before the Municipality will generate a minor fee which will need to be covered on a monthly basis.



Panama Permanent Residency (Friendly Nations Visa)


To qualify for Permanent Residency, you will first need to show that you conduct some professional or economic activity in the country. This can be done by being hired as an employee for a Panama corporation or directly incorporating a company. While there is no requirement for this company to have any employees, it cannot be a dormant entity and must show some degree of activity. It is up to the authorities to determine if a company’s activities are adequate, however, officials tend to be quite lenient on this.


Next, you will have to prove that you are economically solvent by depositing USD 5,000 in a Panamanian bank account. If you have dependents who are also applying for the visa, you will have to deposit USD 2,000 per dependent. Dependents include the applicant’s spouse, and children under 18 years of age, or 25 if they are full-time university students.

You will receive a temporary residency card, which is valid for one year, while your application is under review. Once it is approved, you will get a permanent residency card, and will be allowed to apply for a work permit.


Costs



  • Personal Bank Account: Personal bank account – USD 750 (In-person); or Private Banking personal account – USD 1,000; (USD 20,000 bank deposit) (Remotely)

  • Panama Incorporation – USD 2,550 + USD 700 for 3 Directors (All Panamanian corporations must have at least 3 directors)

  • Corporate bank account (Optional) – USD 2,000; if Private Banking personal account used, the USD 20,000 deposit can be split between Personal & Corporate accounts.

  • Permanent Residency – USD 3,800


Step 1


Open a personal bank account – You have two options:



  • Open a personal bank account – Minimum deposit is USD 5,000 and you will have to travel to Panama to open. You should plan to be in Panama for 2-3 work days.

  • Open Private Banking account – Minimum deposit is USD 20,000. It can be done remotely.


3-5 weeks to open a personal bank account (either option).


Step 2 


Incorporating a Panama company, which takes 2-5 days once all required documents are collected.


If you want to open a corporate bank account, this can either be set up remotely (if Private Banking option is chosen) or upon your visit to start the Friendly Nations Visa Program.


Step 3


Once the bank account is opened, you can travel to Panama to fill out the initial Friendly Nations Visa (Permanent Residency) application forms and file the required documents. You will get a Temporary Residency Permit. This step will take at least 8 business days.


Step 4


After 3-4 months, you will need to travel to Panama (if you are not there) to receive the Permanent Residency status. This step usually takes 2-3 days.


Step 5 


After other 3-4 months. You will need to travel to Panama (if you are not there) to receive your Panama Cedula  (ID Card) and conclude the process.


The whole permanent residency process takes approximately 10-12 months. However, you can freely travel in and out of Panama and establish there, after receiving temporary residency (Step 3).





Click here to incorporate your Panama SA.

Incorporate now

Disclaimer

Although we use our best efforts to keep the information of this site accurate and up-to-date, we make no representations or warranties with respect to the accuracy, applicability, fitness, or completeness of the contents of this website. We disclaim any warranties expressed or implied, merchantability, or fitness for any particular purpose. We shall in no event be held liable for any loss or other damages, including but not limited to special, incidental, consequential, or other damages. The contents of this website are just for illustrative purposes and are NOT to be considered as a legal opinion or tax advice and should not be relied upon as such. Far Horizon Capital Inc., and any associated company, is not engaged in the practice of law or tax. If you wish to receive a legal opinion or tax advice on the matter(s) in this website please contact our offices and we will refer you to an appropriate legal practitioner. Use of our websites FlagTheory.com, Incorporations.io, Residencies.io, Passports.io, is subject to our terms and conditions.

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