Operating in Panama

The creation of an operating company in Panama usually begins with its registration in the Public Registry through a public deed. In general terms, the following may be required:

• The names, passports and physical addresses of three individuals who will act as directors of the company. These individuals must be of legal age and hold a valid passport.

• In addition to the corporate purpose, share capital, company name and corresponding documentation of shareholders, directors and beneficial owners.

• Once the company is registered, it may be necessary to request the Notice of Operations, complete the corresponding municipal registration and define the economic activities to be carried out in Panamanian territory.

• The cost of setting up a company that will operate in Panama is divided into expenses and fees. 

• Expenses include notary, registration, and transaction fees, payment of the first single tax, the first year of Resident Agent fees, the Notice of Operations, the Public Registry Certification, and registration with the Municipality of Panama, and amount to B/.715.00.   

• The professional fees for incorporation, notarization, and registration with the Public Registry of Panama of the Articles of Association of a Panamanian corporation, registration with the Single Taxpayer Registry (RUC) with the General Revenue Directorate (DGI) of the Ministry of Economy and Finance of Panama (MEF), issuance of the Notice of Operations, and registration with the Municipality of Panama, are B/. 1,353.55 including ITBMS. The sum of the expenses and fees totals B/. 2,068.55.

An operating company in Panama may have commercial relationships or activity linked to foreign markets, but its tax, accounting and documentary treatment must be analyzed on a case-by-case basis according to the source of income, the activity carried out, the tax residence of the beneficiaries and the regulations applicable in Panama and in other countries involved.

An operating company in Panama may carry out commercial activities or provide services within the framework permitted by the applicable regulations. Some activities may require permits, licenses, sector-specific authorizations or specific professional review before starting operations.

An operating company in Panama may be incorporated by national or foreign individuals, provided that they are of legal age and hold a valid passport. In certain cases, the process may be managed without an initial trip to Panama, provided that the required documentation and signatures can be completed correctly.

The main objective of an operating company in Panama is to carry out economic activity, provide services, issue invoices or generate income within Panamanian territory, while complying with the applicable legal, tax, municipal and documentary requirements.

• The tax treatment of an operating company must be analyzed according to the activity carried out, income generated and the applicable municipal, accounting and tax obligations.

• Panama’s dollarized economy and commercial activity may be relevant for certain projects, provided that there is a prior analysis of viability, market, permits and compliance.

• In some cases, an operating company may form part of the client’s immigration analysis, but any residence permit will depend on the applicable category, legal requirements, documentation submitted and approval by the immigration authority.

An operating company in Panama may own certain assets, trademarks, patents or other intangible assets, provided that the applicable legal, registry, contractual and documentary requirements are met. 

• Companies established in Panama must pay income tax at a rate of 25% on profits. They must also pay municipal taxes depending on the economic activities they carry out and the categories reported in their Notice of Operations, with a minimum of B/.12.00 per month. 

• They must also pay an annual flat fee of US$300.00, a resident agent fee (US$300.00 plus ITBMS), and a due diligence fee (US$75.00 plus ITMBS).

Companies operating in Panama, as well as non-operating companies, shall pay a single annual fee of three hundred US dollars (US$ 300.00) at the time of registration and in subsequent years to maintain full validity. 

The second and subsequent single annual fees shall be paid as follows:

1. By July 15 of each year, for legal entities whose date of registration of the articles of association or constitutive document in the Public Registry of Panama corresponds to the months from January to June, inclusive.

2. By January 15 of each year, for legal entities whose date of registration of the articles of association or constitutive document in the Public Registry of Panama corresponds to the months from July to December, inclusive.

In addition, they shall make an annual payment of three hundred US dollars (US$300.00) plus ITBMS (7%) to the law firm or attorney that constitutes their company for its services as Resident Agent of their company and for fulfilling its role as the point of contact between the Panamanian State and the company's shareholders. The law defines a resident agent as a lawyer or law firm that provides services as such and must keep the records required by law for legal entities incorporated under the laws of the Republic of Panama. In addition, Panamanian law requires that all companies must maintain a resident agent to ensure their validity.

Finally, with the approval of Law 254 of November 11, 2021, the Resident Agents of the incorporated company must submit, once a year, an Affidavit to the General Revenue Directorate of Panama, providing the company's accounting records and supporting documentation, as well as the general details of the public accountant who keeps them in custody, and complete the annual risk matrix that will guarantee due diligence of the Company. 

For this service, an annual fee of US$75.00 (seventy-five US dollars) plus ITBMS (7%) must be paid.