A Panama corporation may be used to conduct lawful business activities, hold assets, and structure local or international operations. Its formation, operation, and maintenance are subject to Panamanian law, as well as applicable due diligence, beneficial ownership, accounting records, tax, licensing, and regulatory requirements. Before incorporating a company in Panama, its intended purpose, ownership structure, costs, and ongoing obligations should be evaluated with qualified Panamanian legal counsel.
IMPORTANT NOTICE FOR U.S. PERSONS: U.S. citizens and U.S. tax residents are generally subject to U.S. taxation on their worldwide income. Ownership, control, or participation as a shareholder, director, or officer of a Panama corporation may create U.S. tax or information-reporting obligations, depending on the person’s ownership percentage, level of control, the corporation’s activities, and other circumstances. International Relocation Firm does not provide U.S. tax or legal advice. Before forming or acquiring a Panama corporation, U.S. persons should consult a qualified U.S. international tax professional.
What Is a Panama Corporation?
A Panama corporation is a legal entity incorporated under Law 32 of 1927 and other applicable Panamanian laws. It acquires separate legal personality when its Articles of Incorporation are recorded with the Public Registry of Panama. A corporation may conduct lawful activities inside or outside Panama, although activities carried out within Panama may require tax registrations, a Notice of Operation, municipal permits, professional licenses, or other authorizations.
The Articles of Incorporation establish matters such as the corporation’s name, purposes, authorized capital, classes of shares, domicile, resident agent, and administrative structure. A Panama corporation must have at least three directors and the corresponding officers, generally a president, secretary, and treasurer. The same person may hold more than one officer position when permitted by law and the Articles of Incorporation.
Shareholders own the corporation’s shares, while its directors and officers manage or represent the corporation in accordance with its Articles of Incorporation, corporate resolutions, and applicable law.
Why Form a Panama Corporation?
Panama corporations may be used to conduct local business, engage in international commercial operations, hold real estate, manage investments, own intellectual property rights, or separate different activities and assets within a corporate structure. The intended purpose should be defined before incorporation because it may determine which licenses, registrations, taxes, and regulatory obligations apply.
Forming a Panama corporation does not automatically provide anonymity, absolute asset protection, or exemption from taxation. Its shareholders and ultimate beneficial owners must be properly identified, and the corporation must comply with the applicable corporate, accounting, tax, regulatory, and due diligence requirements.
Before using multiple corporations to organize business interests or family assets, the owners should evaluate the maintenance costs and the legal and tax consequences in Panama and in any other relevant jurisdiction.
Bearer Shares and Custody Requirements in Panama
Bearer shares in Panama are subject to the immobilization and custody regime established by Law 47 of 2013, as amended by Law 18 of 2015. The corresponding share certificates must be held by an authorized custodian and may not remain freely in the possession of the beneficial owner as they could under the former regime.
An authorized custodian must receive and retain the share certificate together with the information and documentation required to identify its owner and ultimate beneficial owner. Depending on the circumstances, authorized custodians may include certain regulated banks, trust companies, securities firms, central securities depositories, attorneys, or law firms that satisfy the applicable legal requirements.
Because of the custody, identification, and compliance obligations associated with bearer shares, International Relocation Firm does not currently offer the incorporation of Panama corporations with bearer shares. The firm forms corporations with registered shares issued in the names of identified individuals or legal entities.
Ultimate Beneficial Ownership Registry in Panama
Law 129 of 2020 created Panama’s Private and Unique Registry System of Ultimate Beneficial Owners of Legal Entities. The system is currently operational and is administered by the Superintendence of Non-Financial Subjects. It is not a public registry of shareholders. The information it contains is confidential, and access is restricted to the competent authorities in the circumstances established by law.
The resident agent must register, verify, and keep current the required information concerning the ultimate beneficial owners of the corporations it represents. To comply with this obligation, clients must provide complete, accurate, and updated information and documentation identifying the individuals who ultimately own or control the corporation.
Clients must promptly notify the resident agent of any change in shareholders, ultimate beneficial owners, ownership percentages, control, or other relevant information. Failure to provide or update the required information may result in legal consequences, including sanctions and the suspension of the corporation’s rights.
Due Diligence and Resident Agent Obligations
Under Law 23 of 2015 and other applicable regulations, attorneys and law firms that provide certain corporate and resident agent services in Panama must perform due diligence on their clients and the ultimate beneficial owners of the legal entities they represent.
The firm may request identification documents, residential address information, professional or commercial references, information concerning the intended purpose and activities of the corporation, and evidence regarding the source of funds or wealth when applicable. Additional information or enhanced due diligence may be required depending on the client’s risk profile, ownership structure, jurisdiction, proposed activities, or other relevant circumstances.
Clients must provide complete, accurate, and current information and must promptly report any material changes. International Relocation Firm may decline, suspend, or terminate services when the required due diligence cannot be satisfactorily completed or when applicable legal and compliance requirements are not met.
Requirements to Form a Panama Corporation
The information and documentation required to form a Panama corporation will depend on its ownership structure, intended activities, and the due diligence assessment. In general, the client must provide:
- Proposed names for the corporation, subject to availability at the Public Registry of Panama.
- A description of the corporation’s intended purposes and activities.
- The proposed authorized capital and share structure.
- The names and required information of the shareholders or ultimate beneficial owners.
- The names of at least three directors.
- The names of the officers, generally a president, secretary, and treasurer.
- A complete copy of the passport or other acceptable identification for each relevant individual.
- Proof of residential address and contact information.
- Professional, banking, commercial, or source-of-funds information when applicable.
- Any additional documentation required to complete the firm’s due diligence and acceptance procedures.
Foreign individuals and legal entities may generally own shares in a Panama corporation. However, regulated activities, licensed professions, ownership of certain assets, or business operations conducted within Panama may be subject to additional requirements or restrictions.
All proposed shareholders, ultimate beneficial owners, directors, officers, activities, and ownership arrangements are subject to legal review, due diligence, and acceptance by International Relocation Firm.
How to Incorporate a Company in Panama
The formation of a Panama corporation generally involves the following steps:
- Initial consultation and structure review. The intended activities, ownership, management, share structure, and applicable legal or regulatory requirements are evaluated.
- Corporate name verification. The proposed corporation names are checked for availability at the Public Registry of Panama.
- Due diligence and client acceptance. The required identification, ownership, address, business, and source-of-funds information is collected and reviewed.
- Preparation of the Articles of Incorporation. The corporation’s name, purposes, capital, shares, domicile, resident agent, directors, officers, and other required provisions are included in its constitutional documents.
- Execution and notarization. The Articles of Incorporation are executed through the legally required subscribers and formalized by a Panamanian notary public.
- Registration with the Public Registry. The notarized public deed is submitted for registration. The corporation acquires separate legal personality once its Articles of Incorporation are recorded.
- Delivery and post-incorporation matters. After registration, the firm prepares or delivers the available corporate documents and coordinates any additional services requested and accepted, such as tax registration, accounting support, business licensing, corporate resolutions, or assistance with a bank account application.
The time required to complete the process varies according to the complexity of the structure, the completeness of the information provided, the satisfactory completion of due diligence, and the processing times of the notary, Public Registry, and any other relevant authority or service provider.
Cost of Incorporating a Company in Panama
The cost of forming a Panama corporation depends on the services included, the complexity of the ownership structure, the required corporate documents, and any optional services requested by the client.
The total initial cost may include legal fees, notarial and Public Registry expenses, the annual government corporate franchise tax, applicable taxes, and charges for any additional documents or services. Optional services may include nominee directors, apostilles, certificates, courier delivery, business licensing, tax registration, accounting support, bank account assistance, or customized corporate resolutions.
Corporations also have ongoing expenses after incorporation, including resident agent fees, the annual government corporate franchise tax, and any applicable accounting, tax filing, licensing, compliance, or administrative costs.
Current service packages and published charges are available on our Legal Fee Structure and Pricing page. Prices, government charges, taxes, and third-party expenses may change. The firm will confirm the applicable costs after reviewing the proposed structure and requested services.
Annual Obligations and Accounting Records
A Panama corporation must satisfy its ongoing legal, corporate, accounting, tax, and compliance obligations after incorporation. The requirements applicable to each corporation depend on its activities, assets, income, place of operation, and regulatory status.
Ongoing obligations may include:
- Maintaining a resident agent and registered office in Panama.
- Paying the annual government corporate franchise tax.
- Maintaining accounting records and supporting documentation in accordance with applicable law.
- Providing the resident agent with the required information concerning the location and custody of the corporation’s accounting records.
- Keeping shareholder, ultimate beneficial owner, director, officer, and contact information current.
- Documenting corporate decisions through the appropriate resolutions or minutes.
- Filing tax returns, accounting reports, or other declarations when required.
- Maintaining any Notice of Operation, municipal registration, professional license, or regulatory authorization required for activities conducted in Panama.
- Responding to lawful requests for information and completing periodic due diligence updates.
The corporation must inform its resident agent promptly of material changes in its ownership, management, activities, assets, accounting records, or contact information. Failure to comply with applicable obligations may result in penalties, loss of good standing, restrictions on corporate rights, or other legal consequences.
Taxes Applicable to Panama Corporations
Panama generally applies a territorial tax system. Whether income is taxable in Panama depends on the source and nature of the income, the activities performed, and the particular circumstances of the corporation. Incorporating a company in Panama does not by itself make its income exempt from taxation.
A corporation that conducts business, performs services, owns taxable assets, employs personnel, or generates income connected with Panama may be subject to income tax, ITBMS, dividend or complementary tax, withholding obligations, municipal taxes, real estate taxes, social security contributions, licensing charges, or other applicable taxes and filings.
Income generated from activities outside Panama may receive different treatment, but the classification of income as Panamanian-source or foreign-source requires a factual and legal analysis. The location of the clients, bank accounts, contracts, or payments does not necessarily determine the source of the income by itself.
Every corporation must also consider the tax and reporting rules of the countries in which its shareholders, ultimate beneficial owners, directors, clients, assets, or operations are located. International Relocation Firm advises on Panamanian law but does not provide foreign tax advice. Clients should obtain advice from qualified tax professionals in each relevant jurisdiction.
Shelf Corporations in Panama
A shelf corporation is a legal entity that was incorporated previously and is available for transfer to a new owner. Depending on availability and client acceptance, International Relocation Firm may offer recently incorporated Panama shelf corporations with registered shares.
Before a shelf corporation is transferred, its legal status, resident agent, directors, officers, shareholders, issued shares, corporate records, tax status, prior activities, assets, liabilities, and compliance history should be reviewed. The prospective client and ultimate beneficial owners must also complete the firm’s due diligence and acceptance procedures.
The transfer may require new share certificates, shareholder records, corporate resolutions, resignations and appointments of directors or officers, powers of attorney, amendments to the Articles of Incorporation, and updates to the ultimate beneficial ownership information.
A shelf corporation does not automatically provide greater credibility, banking access, tax benefits, anonymity, or protection from liability. Its suitability depends on the proposed transaction, the corporation’s documented history, and the requirements of the relevant banks, counterparties, regulators, and jurisdictions.
Panama Corporations for Local and International Operations
A Panama corporation may be organized to conduct lawful activities within Panama, outside Panama, or in both locations. The same corporate form may be used for local commercial operations, international transactions, holding assets, managing investments, owning intellectual property, or other permitted purposes.
A corporation conducting business within Panama may require a taxpayer registration, Notice of Operation, municipal registration, accounting and tax filings, labor and social security registrations, and any professional or sector-specific licenses applicable to its activities.
The term “offshore corporation” is commonly used to describe a Panama corporation whose principal activities or assets are located outside Panama. However, an offshore corporation is not a separate legal type of company under Panama’s corporation law. It remains a Panama corporation and is subject to applicable corporate, resident agent, accounting-record, beneficial ownership, due diligence, and annual compliance obligations.
The intended activities and jurisdictions involved should be reviewed before incorporation. A structure suitable for holding an overseas asset may not be appropriate for conducting an operating business, receiving regulated income, opening a financial account, or employing personnel.
Frequently Asked Questions About Panama Corporations
How much does it cost to incorporate a company in Panama?
The cost depends on the corporate structure, legal services, notarial and Public Registry expenses, government charges, applicable taxes, and any optional services requested. Current published packages are available on our Legal Fee Structure and Pricing page. A final quotation can be provided after the proposed structure and services have been reviewed.
How long does it take to form a Panama corporation?
The incorporation time varies according to the completeness of the information provided, the satisfactory completion of due diligence, the complexity of the structure, and the processing times of the notary and Public Registry. Additional registrations, licenses, apostilles, courier delivery, or banking procedures require separate processing times.
Can a foreigner own or direct a Panama corporation?
Foreign individuals and legal entities may generally own shares in a Panama corporation, and foreign individuals may generally serve as directors or officers. However, certain regulated activities, licensed professions, assets, or business sectors may be subject to additional requirements or restrictions.
Does a Panama corporation need a bank account?
A bank account is not required merely to register a Panama corporation. Whether an account is needed depends on the corporation’s activities and intended use. Opening an account is a separate process controlled by the selected financial institution and is subject to its own due diligence, source-of-funds, business-purpose, and acceptance requirements.
Is a Panama corporation automatically exempt from taxes?
No. Forming a Panama corporation does not automatically make the corporation or its owners exempt from taxation. The applicable tax treatment depends on the source and nature of the income, the activities performed, the assets involved, and the laws of Panama and any other relevant jurisdiction. Clients should obtain appropriate Panamanian and foreign tax advice.
Legal Assistance to Form a Panama Corporation
International Relocation Firm can assist with the formation and maintenance of Panama corporations, including the preparation and registration of corporate documents, resident agent services, corporate changes, and other services accepted by the firm.
Every engagement is subject to an initial review, satisfactory completion of due diligence, client acceptance, and execution of the firm’s professional services agreement. The scope, requirements, costs, and estimated processing time will be confirmed according to the proposed structure and services requested.
To discuss the formation or maintenance of a Panama corporation, contact International Relocation Firm.