Panamanian Offshore: Company Registration Services in Panama

Panamanian Offshore Company Registration

Panama is a republic in Central America, which is bordered by Costa Rica to the west, Colombia to the south east, the Caribbean Sea to the north and the Pacific Ocean to the South. Its capital and largest city is Panama City. The major sectors in Panama include commerce, banking and tourism. Panama is regarded among the best countries for human development (60th on the human development index). Its economy is the seventh most competitive amongst the Latin America nations. The Panamanian currency is officially the Balboa (PAB) and US Dollar (USD) with a population of over 4 million people. 

The country is well known its canal (Panama Canal), a man-made waterway, opened in 1914. The canal cuts through the country, linking the Caribbean Sea (Atlantic) with the Pacific Ocean. The canal is owned and administered by the Republic of Panama, it is one of the two most-strategic artificial waterways in the world. The canal was controlled by the United States till 1999.

Panama is a founding member of the United Nations and other world organizations like WHO (World Health Organization), NAM (Non Aligned Movement) G77 (Group of 77) and many more.

Why You Should Start a Business in Panama?

• Favorable tax laws: This is probably the strongest argument operating by Panama by stating its favorable business climate. According to the Law "On Companies" offshore non-resident companies in Panama are completely exempt from paying taxes. This factor makes the country the pleasant region for entrepreneurs from around the world who are perfectly aware of their advantages and hasten to establish company in Panama within a short time;
• Politically stable state; A democratic elected-government, Panama is divided into 9 territorial units (provinces), and autonomous region of San Blas has separate status. Thus, registering a company in Panama means obtaining the license to run or operate a business in Panama;
• Low labor costs; the cost of paying for labor is significantly lower compared;
• Stable and growing economy: Low inflation rate and a stable currency as they make use of the US dollar as a legal currency. Panama has doubled the size of its economy within a decade;
• A growing international market;
• Free Trade Agreements (FTAs) and Free Trade Zones (FTZs);
• Favorable incorporation laws set out by the government;
• The Panama Canal provides better opportunities to trade.

Panamanian Business: Taxes

The income taxed in Panama are those derived within Panama. The sale of products or services to people, entities or companies in Panama are considered as “Panama source income” and they are subject to tax. The sales of products or services to persons, entities, or companies located outside of Panama are not taxed.

Panama corporate tax rate is 25%. Companies with profits in excess of US$1.5m an alternative tax may apply whereby they are taxed on the higher of 1,168% on gross taxable income or 25% on net taxable income. Dividends from foreign investments are not subject to tax in Panama. No further tax is imposed on dividends except for withholding tax.

The following withholding tax rates apply to dividend payments, both to local or foreign recipients:

• 10% for dividend payment made from Panama-source income;
• 5% for dividend payment made from non-Panama source income or income derived from exports;
• 20% in the case of bearer shares.

The tax rates are significantly lower than the US, Canada or Europe. No capital gains tax, no offshore income tax and lower corporate tax. A VAT rate of 7% for both entrepreneurs and businesses on most goods and services.

Company Registration Options: Common Types of Legal Structures

• Corporation (Sociedad Anonima) S.A
• Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L.)
• Private Interest Foundation (Fundacion de Interes Privado)
• Partnership: General partnership; Limited partnership; Civil partnership;
• Sole proprietorship.

Formation of a Limited Liability Company (LLC) in Panama

These are some of the characteristics and requirements for a Limited Liability Company in Panama, they include:

• Have a minimum of one director;
• Elect a president, secretary and treasurer (also to be named dignitaries)
• Have (2) subscribers (can be a person from the board of directors or one of the appointment dignitaries. Each subscriber must agree to subscribe to at least one share, at the time of registration)
• Appoint a legal representative (this can be the president, an associate or one of the directors  – established in the Social Pact (El Pacto Social)
• Elect a resident agent (it is obligatory by law to have a Panamanian lawyer)
• Register a company fiscal address 
• Prepare and submit annual tax declarations
• Have a minimum of two shareholders or associates
• Make annual account payment to the Public Registry.

Formation of a Partnership Company in Panama

A Panama business partnership is where two or more partners come together to start a new business. There are three types of Panama business partnerships: General, Limited and Civil, each explained more below.

Panama General Partnership

General Partnerships are recognized in Panama and are called “Asociacion General”.  In this partnership, all partners can be held liable by a civil court if one of the partners is negligent or fraudulent during the course of conducting business on behalf of the partnership.

Panama Limited Partnership

Panama recognizes Limited Partnerships called “Sociedad de Responsibilidad Limitada” (SRL).   2 (two) to 20 (twenty) partners from any country can form the Limited Partnership. 
The capital ranges from $2,000 USD to $50,000 USD.  Every member’s name and their contribution are filed with Panama’s Public Registry along with their capital contribution. The partners’ civil liabilities are limited to the capital contribution.

Panama Civil Partnership

Panama recognizes a Civil Partnership called “Sociedad Civil”.  Partners are subject to unlimited civil court judgment liability. This is a common partnership for Panama professionals like doctors, lawyers and architects.

Non-Profit Company Registration in Panama

Private Interest Foundation

These are some of the characteristics and requirements for a private interest foundation (Fundacion de Interes Privado). In the case, when the entity is to be used for commercial purposes, then a license and tax declarations will be required by law, they include:

• Does not issue shares like other types of companies’;
• Includes a Private Protectorate Document from a notary;
• One beneficiary and one protectorate must be designated from the Foundation Council;
• Not subject to judicial orders on the seizure or confiscation of assets;
• Recommended shared social capital of the company USD$50,000 (not obligatory);
• A legal address is required;
• The aim/purpose of the foundation and the period of time (indefinite or definite) that you wish the company to be open for, must be stated;
• In the case of dissolution – name the recipient/destination of the assets of the foundation and the type of liquidation process;
• A bank account must be set up (this process can take a minimum of four weeks). Some references must be supplied from the founder and protectorates.

Formation of a Sole Proprietorship Company in Panama

Sole Proprietorship is where an individual or a family starts and operates a new business, owning all the assets outrightly.

Panama Offshore Company Formation

Panama offshore corporations can be used for international trade, to settle trusts or foundations, to establish an offshore bank account or offshore investment account, to hold ownership of real estate, intellectual property, or to hold any other type of assets. In some cases, clients form a Panama corporation (IBC formation possible in certain cases) for very private and confidential business transactions such as the movement of funds to another jurisdiction for the protection of the assets, using an offshore asset protection corporation in Panama. In other cases, our clients establish several Panama corporations working together for their asset protection needs

Company Incorporation Requirements in Panama

• Memorandum of Association and Charter (includes residential addresses and names of the founders, amount of the charter capital, objective of the company formation, legal address, etc.);
• Certificate of incorporation;
• Protocol on the appointment of the Director (decision of the first meeting of shareholders);
• Certificate of shares and resolution of its issue;
• Consent of the Director on discharge of duties;
• Registers of shareholders and directors.

How to Register a Company in Panama: The Registration Process

Step 1. Law and Trust works with the client to get the company’s name and activity approval from the Company Registry of the selected country;
Step 2. Law and Trust with the client to secure the Memorandum of Association (MOA);
Step 3. Law and Trust collects, prepares and files the necessary incorporation documents on behalf of the client to the relevant authorities for approval;
Step 4. Law and Trust works with the client to open a corporate bank account in the selected country;
Step 5. Law and Trust delivers the certificate of incorporation personally to the client or via courier service.

Panama Company Formation FAQs

• How to check company registration in Panama?

A company’s registration is checked with the Public Registry in Panama, the registry is responsible for the incorporation and registration of companies in Panama. 

• What is company registration number in Panama?

The company registration number is a unique number issued when a company is incorporated by the Public Registry in Panama.

• How to find my company registration number in Panama?

Contact Law and Trust International, our Lawyers get in touch with the ‘Public Registry Office in Panama’, working with them closely to verify the company registration number of a company (including online company formation).

• How to register a name for a company in Panama?

The registration of a company’s name in Panama is authorized by the Public Registry Office. They are responsible for registering the name making sure it complies with their requirements with regards to goods and services provided as well as no conflict with other registered companies. 

• How many shares should a start up company authorize at incorporation in Panama?

A start up (or when starting an investment company) company should authorize 60% of its shares at incorporation. It is possible to obtain the same result by authorizing 1,000,000 shares with an option pool of 100,000 and a 900,000 common stock issuance to the founders.

• What are the consequences of incorporating a company in Panama?

Below are some of the consequences of incorporating a company in Panama: 

As an LLC member, you cannot pay yourself wages and there is also the possibility of double taxation (where both the corporation’s profits and stockholder’s paid dividends are taxed) but advantages include strategic location, quicker incorporation time, favorable tax regimes, no currency control, and a fixed exchange rate

• How much does it cost to register a company in Panama?

The cost of registering a business in Panama depends on the form of company, the location in Panama and certain other factors. It starts from $1390. The total cost includes The total cost of registration includes comprehensive review, company registration service and certificate.

• How long does it take to register a company in Panama?

It takes from a week to three weeks for the registration to be complete. The company registration takes from a week to complete in Panama.

Why Incorporate with Law&Trust International?

Benefits of company registration, formation and incorporation service with Law&Trust International in Panama include:

• Full range of related services: Provision of a full range of legal, corporate, government, and business intelligence related services in Panama. A detailed overview of our services include full legal support of the company registration procedure, obtaining a legal address, interaction with the official government authorities of the jurisdiction, state fees, legal address of the company for a year, production and registration of company stamps and advising the client as part of the registration process. Opening a bank account and the cost of this service are discussed during the consultation.
• Professionals and expertise of Law: Worldwide registration and legal maintenance of companies, accounting services and audit, tax planning and optimization, trademark and patent registration, and many more. Law and Trust provides the client with the best company incorporation services.
• Domestic service: Law&Trust ensure our services cover every region, area or state in Panama. Be rest assured that no matter where the new company intends to incorporate in Panama, we’ve got the location covered. 
• Free initial advice: Free consultation from the lawyers of Law&Trust International regarding strategies or the provision of services for analyzing and developing legal position on an issue the client raises in Panama.
• Confidentiality: Law&Trust makes use of modern technological features to keep the records and details of every client safe.
• Efficiency and productivity: Strategically providing up to date personalized services to help your business succeed.

Ready for Company Incorporation?

If you are interested in registering and incorporating a company in Panama, contact Law & Trust International by simply sending an email or call now to take your business to the next level!