Company Formation in Panama

This page covers the entity choices, the resident agent and three-director rules, the tax position, the cost stack and the banking question.

We run formation as one project. It covers the name check, the due diligence file, drafting the pacto social, and consular legalization and translation where the founder signs abroad. From there it runs the notarization, the registry filing, the tax registration and the corporate documents a bank will ask for. The work sits inside our wider company formation practice, which covers jurisdiction selection as well as the filing itself.

Fees are quoted per case once the ownership chain and the business model are clear. Pricing depends on the number of shareholders and beneficial owners, the capital figure, and whether directors have to be appointed from outside the founder’s group. The quote separates the one-off formation work from the annual lines: the resident agent, the registered office, nominee directors where the structure uses them, and the tax return. The first consultation is at no charge.

If the activity is regulated, the license shapes the structure rather than the reverse, which is why the two questions are best answered together. Our Panama crypto license page covers the route for digital asset activity, and it is the right place to start if that is the business. We scope formation and licensing as one engagement for that reason.

Founders who incorporate in Panama usually start with the S.A. It holds shares that can be transferred or issued to new investors, and it carries a board that banks and counterparties recognize. Its governing law dates from 1927 and has been amended repeatedly, which is why older descriptions of it, particularly on bearer shares, no longer match the text in force.

The S.R.L. is the closest thing Panama has to an LLC, and the better fit for two founders who want lighter governance. Two constraints decide most cases. The two-partner minimum in Ley 4 de 2009 means a solo founder cannot use it. And participation is not a freely transferable share: a transfer needs the acceptance of the other partners before the assignee becomes a partner, so an investor round is a negotiation rather than a share issue.

The tax treatment is the third constraint, and it matters more for cross-border structures than for domestic ones. Article 28 puts the income tax on the partners in proportion to their participation rather than on the company. For two resident partners running a Panamanian business that is the point of the vehicle. For non-resident partners it creates a Panamanian filing position in their own hands, which usually argues for the S.A. instead.

A Panama foundation is a different product. It has no shares, it cannot pursue profit, and it is irrevocable except in the three cases set out in Ley 25 de 1995. Its patrimony is separate from the founder’s personal assets and does not answer for the founder’s debts. Founders arrive at it for succession and asset holding, and that conversation is scoped separately from a company formation.

Article 2 of Ley 32 requires the pacto social to name the company’s agent in Panama. It also requires the deed to state the number of directors, which must be at least three, with their names and addresses.

The agent may be a legal person under that article. In practice it is a Panamanian law firm. Ley 129 de 2020 requires every lawyer or firm acting as resident agent to register with the Superintendencia de Sujetos No Financieros and hold a registration code. The Registro Público checks that code against the supervisor’s register, and a company whose agent is not properly registered has its corporate rights suspended until the position is fixed. The agent is the gate to the registry file and to the ownership filing that follows it.

Two costs follow from that structure, and they are worth pricing before the entity is chosen.

• The agent charges an annual fee that continues for the life of the company. It covers the registered office, the statutory filings and the ownership register.
• The three directors are usually appointments from the agent’s firm, because a founder rarely has three people ready to sit on a Panamanian board. Nominee appointments are a separate annual line. They raise a governance question rather than a paperwork one: the board signs the bank mandate and the resolutions, so the founder needs to know who controls the signature.

Director names and addresses appear on the public file, along with the subscribers to the pacto social and the registered capital. Changes of directors are registered amendments, not internal memos, so a departure that is not recorded leaves a gap that banks and counterparties can see.

Panama taxes income by source, not by the residence of the shareholder. Income from activities inside Panama is taxable at 25%. Income from activities outside Panama sits outside the corporate income tax base. That is why a Panamanian company that invoices foreign customers for work done abroad is often described as a 0% structure. The description is accurate for that income and misleading as a total claim, for three reasons. Our summary below follows PwC’s Panama guidance, last reviewed on 4 August 2026.

The 0% applies to foreign-source income only. A company that also earns in Panama pays 25% on that part, and the two are separated in the return.

Above USD 1.5 million of taxable income, the base becomes the greater of net taxable income or 4.67% of gross taxable income. That alternative calculation (CAIR) excludes foreign-source income, so it does not reach the offshore side of the business. A taxpayer whose effective rate already exceeds 25% can ask the tax administration to disapply it, and the administration has six months to decide before the request counts as granted.

Foreign-source passive income is where the arithmetic changes, but not yet. Law 526 of 28 May 2026 applies from the 2027 fiscal year. From then, an entity in a multinational group that earns dividends, interest, royalties, capital gains or income from immovable property abroad pays 15% on that net income unless it can show substance in Panama. Entities in maritime shipping, and entities supervised by the banking, securities or insurance regulators, are excluded.

The mechanics are now set. Decreto Ejecutivo 32 of 2 September 2026, published in Gaceta Oficial 30603-B and in force from 1 January 2027, regulates the chapter. It defines what counts as strategic decisions and the evidence needed to show they were taken in Panama, sets criteria for adequate staff and premises, covers outsourcing, requires the substance position to be reported in the income tax return, and obliges the entity to keep supporting documentation for five years.

There is one relief built into the law that matters for holding structures. A group entity whose main activity is holding equity interests, or holding and transferring real estate on a non-habitual basis, does not have to meet the strategic decisions and operating costs tests, provided it carries on no substantial commercial or investment activity in those holdings. It still has to meet the staff and premises test, report, and keep its corporate obligations current.

The 0% survives only if the entity shows qualified personnel and adequate facilities in Panama, takes strategic decisions and bears risk there, and runs operating costs in line with the activity. That is the substance test, and from 2027 it decides whether a 0% plan survives. The economic substance overview sets out how these tests are assessed in other jurisdictions.

Distributions carry their own treatment. Withholding on dividends paid to a foreign corporation is 10% in the ordinary case and 5% where the dividend is paid out of foreign-source income, export income or certain exempt income. A 0% corporate result does not mean the money leaves the group untaxed.

ITBMS, the local VAT, is 7% on most goods and services, with higher rates on alcohol, hotel accommodation and tobacco. Exports are not taxed. Rates and thresholds come from PwC’s summary of other Panamanian taxes.

Bearer shares are closed off. Law 47 of 6 August 2013 replaced free circulation with a custody regime, and the transition for certificates already in issue ended on 31 December 2015 under Law 18 of 2015. A new Panamanian company cannot issue bearer shares, and an older one has to have registered an immobilization resolution and placed the certificates with an authorized custodian. The banking supervisor’s summary of the two laws is the clearest short account of the mechanics.

Ownership is recorded. Ley 129 de 2020 created a single register of beneficial owners of legal entities, administered by the non-financial supervisor. The resident agent files the entity and its beneficial owners.

Access is limited to the agent, two designated officials of the supervisor, and competent authorities requesting data for national or international cooperation, which can be supplied without breaching confidentiality. It is not a public register, and it is not an absent one either. A founder who is told Panama requires no ownership disclosure is being told something that stopped being true in 2020.

Panama is not on the FATF list of jurisdictions under increased monitoring, per the statement of 19 June 2026. The plenary of 28 to 30 October 2026 was due to publish a new statement, so read this line as current to late October 2026. Panama was removed from the EU’s anti-money-laundering high-risk third-country list on 5 August 2025 by Delegated Regulation (EU) 2025/1184.

On tax cooperation the picture is more recent. On 9 October 2026 the Council moved Panama from Annex I to Annex II of the EU list of non-cooperative jurisdictions. Panama left Annex I because it delivered the reform of its foreign-source income exemption regime that the Council had asked for, which is Law 526 of 2026. It stays in Annex II because it has committed to an in-depth exchange-of-information review by the Global Forum, and that review has not yet happened. Annex II holds jurisdictions with open commitments, not the non-cooperative list. The next revision is expected in February 2027.

Company registration in Panama has two cost layers: government fees, which are published and small, and the professional work, which is quoted per case. Registry fees scale with registered capital and with the number of no-par-value shares, so a higher capital figure costs more at the registry and buys nothing operationally.

Franchise tax is USD 300 a year for an S.A. and USD 400 for a foundation, and the balboa is at par with the US dollar. A municipal tax of up to USD 2,000 a month applies per activity where the company operates locally, in most cases. An annual operations notice tax is charged at 2% of net equity, with a floor of USD 100 and a ceiling of USD 60,000.

The variable part is the file. One driver is the number of people to be verified, since each shareholder, beneficial owner and director adds due diligence work. Another is the corporate package: a company that needs nominee directors, a power of attorney, certified translations and apostilled documents costs more than one that does not. The third is ongoing administration, which does not stop after incorporation.

We quote the whole first year rather than the filing alone, because the filing is the cheap part.

Formation and banking are separate decisions, taken by different institutions on different criteria. The registry records a company; a bank decides whether it wants the business. Being formed in Panama does not make a bank in Panama, or anywhere else, more likely to open an account, because the account is assessed on its own file.

What banks ask for is consistent. They want the ownership chain to the natural persons and the source of the funds that will move through the account. They also want the contracts behind the flows, evidence that the activity is licensed where licensing applies, and a business case that survives a compliance committee reading it cold.

A company with no substance, no counterparties and no documented activity will not be opened because the registry file is in order. That is why we route the banking question through the payments and banking team while the entity is still being designed, not after the certificate arrives. The offshore business bank account guide covers what different jurisdictions expect, and the honest summary is that the business decides the account, not the registry.

A Panamanian company does one thing very well: it separates foreign-source trading income from the Panamanian tax base, cheaply and with a registry that works. It does not create a banking relationship, it does not remove reporting, and it does not exempt passive income for a group without substance in Panama.

Tell us what the company will earn and where, and we will say whether Panama is the right wrapper, which entity fits, and what the first year looks like. Book a free consultation and bring the ownership chain, because that is the part that sets the timeline. After that call you get a written scope and fee for the first year, so the number arrives before you commit to anything. For the ongoing filings, fractional compliance covers the calendar after incorporation.