The Republic of Panama, best known among investors as a true tax haven, is a country spread between the central part of North America and South America. Panama follows a regional tax regime, that implies that the country only applies taxes on the income earned within the country – while the income earned anywhere else in the world is exempt from any tax. Hence, a company registered in Panama can show its income source outside the country and enjoy tax exemption.
Similarly, Panama offers residence through various investment programs and offers straightforward procedures to form a company to carry out business. Lastly, the country has trade treaties with more than 17 countries, including, the UK, Mexico, France, Luxembourg, etc. to avoid dual taxation.
Among several business structures that foreigners can incorporate in Panama the most popular ones are a) Corporation, b) Limited Liability Company, and c) Private Interest Foundation. The requirements for each business format are different and it is to the benefit of the owners to know the advantages and demerits of each type along with the legal requirements.
In the table below, preliminary details of each business structure are given.
| Company Type | Local Name | Min.Req. Paid-up capital |
| Corporation | Sociedad Anonima (S.A) | No min. req. |
| Limited Liability Company (LLC) | Sociedad de Responsabilidad Limitada (S.R.L) | No min. req. |
| Private Interest Foundation | Fundacion de Interes Privado | No min. req. |
Corporation – S.A
Forming and registering a corporation in Panama is very straightforward as long as all the legal requirements are satisfied. The process is initiated by forming a company, while the next three steps are as follows:
- Obtaining a commercial license
- Establishing a bank account in a Panamanian bank
- Formulating the Articles of Association (AoA)
Although the statutes do not stipulate any obligations as to the minimum required paid-up capital, it is highly recommended that a minimum of $10,000 must be allocated for this purpose. Under normal circumstances where all the requirements are met, an SA is registered and incorporated within 3 weeks.
The fundamental requirements for incorporating an SA are listed below:
- Appoint at least 3 directors
- Appointing a director, company secretary, and treasurer (referred to as “dignitaries”)
- Have 2 subscribers who subscribe to at least one share each at the time of registration
- The subscribers can be dignitaries or the board of directors
- One of the directors shall be elected as the legal representative of the company
- A Panamanian lawyer appointed as resident agent
- The registered address for fiscal correspondence
- Submit annual/monthly tax returns
- Have at least one shareholder
- Payment to Panamanian Public Registry (annual payment)
Limited Liability Company – S.R.L
As with incorporating a corporation, the first step to incorporating an SRL is to form a company. In the absence of a bank account, incorporating a company may take up to 2 weeks after submission of the application. To foreign investors, an SRL is an attractive option as the owners are not personally responsible for any debts or losses, but only to the extent of their participation in the company.
The key requirements to form an SRL are listed below:
- One appointed administrator (minimum)
- A president, secretary, and treasurer
- At least 2 subscribers (from dignitaries or the board of directors) at the time of registration
- Legal representative (president, associate, or administrator)
- Resident lawyer from Panama
- The registered address for fiscal correspondence
- Minimum 2 shareholders or associates
- Payment to Public Registry (annual)
Private Interest Foundation – Fundacion de Interes Privado
The formation of a Private Interest Foundation requires 3 or more weeks to incorporate and is more complicated than other business structures. Yet, to foreign investors, it offers advantages that the other 2 formats don’t. Mainly, a Private Interest Foundation is exempt from all taxes in Panama besides the annual quota payment.
The salient characteristics of the foundation are listed below:
- The foundation does not issue shares
- Requires a Private Protectorate Document from the notary
- Judicial orders are not binding in case of the seizure or confiscation of assets
- Though no minimum capital is required, however, $50,000 recommended being allocated for this purpose
- The registered address for fiscal matters
- Foundation to be legally represented by a Panamanian lawyer
- Name and location of the recipient of the assets, in case of dissolution
- Bank account at a Panamanian bank (4 to 6 weeks process, must be done before formation)
- Few strong references from the founder and protectorates
Registering a trademark
A trademark is the unique identity of a company that cannot be used without the owner’s specifications and permission. Trademarks in Panamanian territory must be registered in accordance with local legislation and may take up to one year for the process to be completed. The first-time validity of the trademark registration is provided for 5 years, which can be extended for 10 years on subsequent renewal.
All trademark registration applications are managed and handled by the registration office (DIGERPI). Applications are addressed to the Director General DIGERPI. The department is moved to carry search for similar or identical trademarks through an application – once cleared, the process is moved further.
Essential documents required for registering a trademark are given below:
- Application to use a trademark that is certified by the consulate of Panama
- Certified company registration documents
- Copy of passport (company representative)
- Details of the trademark in original (logos, slogans, copy type, etc.)
The total cost of registering a trademark may fall between $150 to $700, depending on the level of registration, number of items registered (logo, slogan, artwork, etc.), and the class of trademark registration.
Working hours and minimum wages
Averaging wages from different professions and factoring 40-hour work week, it can be said that the minimum average income in Panama is not less than $450 a month. Note that the minimum wages are divided on two regions as well as differentiated by the profession one works.
The usual working hours in Panama allocated to an employee are determined by their contract of employment. However, a 40-hour workweek is considered to be the maximum number of hours a human can normally work, with one day off on any given day within that week. Overtime wages are paid at 25% above the usual pay if working on a regular business day, if the worker has worked on a public holiday or the day off, or at night, the salary must be paid at 50% above the usual work hour wage.
You may also find these articles helpful
Guide on company registration in Panama
Guide on corporation registration in Panama
Types of legal business structures in Panama
