Panama is a popular offshore jurisdiction for companies, offering tax benefits, solid privacy laws, and a stable business environment for international investors.
This post will explore how to open an offshore company in Panama.
The Panama Corporation Law of 1927 provides the legal framework for offshore entities, making it one of the most business-friendly jurisdictions for asset protection, international trade, and investment holding.
If you are looking to invest as an expat or high-net-worth individual, which is what I specialize in, you can email me (advice@adamfayed.com) or WhatsApp (+44-7393-450-837).
This includes if you are looking for a second opinion or alternative investments.
Some of the facts might change from the time of writing, and nothing written here is financial, legal, tax or any other kind of individual advice, nor a solicitation to invest.
Notably, there are things that have changed in recent years that expats wishing to make an offshore company in Panama should know.
This guide outlines the step-by-step process, legal requirements, and compliance obligations for setting up an offshore company in Panama.
Why Open an Offshore Company in Panama
Panama Offshore Company Benefits
A Panama offshore company offers several advantages, making it an attractive choice for international entrepreneurs, investors, and high-net-worth individuals.
One of the primary benefits is 100% foreign ownership, meaning there is no requirement for a local shareholder or director, allowing full control over the business.
Additionally, income generated outside of Panama is completely tax-exempt, as the country operates on a territorial tax system, ensuring that offshore companies are not subject to local corporate taxation.
Another significant advantage is strong privacy protection. Shareholder identities are not publicly disclosed, offering a high level of confidentiality for business owners.
Unlike companies in other jurisdictions, Panama offshore entities do not have mandatory financial audits or tax filings, reducing administrative burdens.
The setup process is also fast and straightforward, with company registration typically completed in 5 to 10 business days.
It is important to note that maintaining proper accounting records is still required under Law 52 of 2016. These records must be available if requested.
Furthermore, businesses will need to meet tax reporting requirements in their home country related to your ownership of a foreign corporation.
Panama offshore companies have no minimum capital requirement, allowing for flexible capital structuring based on business needs.
Furthermore, they provide global banking access, meaning companies can open multi-currency corporate bank accounts in Panama or internationally, facilitating seamless financial transactions across borders.
Choosing the Right Business Structure
The most common legal entity for offshore business in Panama is the Sociedad Anónima (S.A.), which is equivalent to a corporation (Inc.) in other jurisdictions. This structure is widely used due to its flexibility, legal protections, and ease of incorporation.
A Panama Corporation (S.A.) can engage in any lawful business activity, with the exception of banking, insurance, or trust services, which require special licensing.
One of its key advantages is no nationality restrictions for shareholders or directors, allowing full foreign ownership without local participation.
Panama corporations can issue both registered and bearer shares, though bearer shares must be held by an authorized custodian due to anti-money laundering regulations. These are no longer very practical for many businesses.
Additionally, there is no requirement to hire local employees or maintain a physical office in Panama, making this structure ideal for holding assets, international trading, wealth management, and other offshore business activities.
How to Set Up an Offshore Company in Panama
Step 1: Choose a Company Name
The company name must be unique and comply with Panama’s corporate naming regulations. It can be in any language but must include a suffix such as:
- “Corporation” (Corp.)
- “Incorporated” (Inc.)
- “Sociedad Anónima” (S.A.)
Restricted terms such as “bank,” “insurance,” or “trust” require special licensing. The name must be verified and approved by Panama’s Public Registry before incorporation.
Step 2: Appoint Directors and Shareholders
A Panama offshore company requires at least three directors, who can be of any nationality and reside anywhere in the world. The directors’ names appear in the public registry, but nominee directors can be used for confidentiality.
Shareholders are private, and there is no limit to the number of shareholders. A single person can act as both the sole shareholder and beneficial owner. Shareholder information is not publicly accessible.
Step 3: Draft and Execute the Articles of Incorporation
The Articles of Incorporation outline the company’s purpose, structure, share capital, and management rules. This document must be notarized and registered with the Panama Public Registry. The Articles must include:
- Company name and business purpose.
- Details of directors and registered agent.
- Authorized share capital and types of shares issued.
- Voting rights and corporate governance structure.
Step 4: Appoint a Registered Agent and Office
Every Panama offshore company must have a registered office and a registered agent within Panama.
The registered agent must be a licensed Panamanian attorney or law firm responsible for handling official correspondence and ensuring compliance with Panamanian corporate law.
Step 5: Determine Capitalization and Share Issuance
There is no minimum capital requirement for a Panama offshore company. The standard authorized share capital is USD 10,000, divided into 10,000 shares of USD 1.00 each, but no actual capital deposit is required.
Shares can be issued as:
- Registered shares (shareholder names recorded in corporate books).
- Bearer shares (highly restricted, must be held by a custodian due to updated compliance laws).
Step 6: Submit Registration and Pay Fees
The incorporation documents must be submitted to Panama’s Public Registry, along with the applicable fees. The total cost for company registration typically ranges between USD 1,500 and USD 3,000, depending on legal and administrative fees.
Processing time is 5 to 10 business days from the date of submission.
Step 7: Open a Corporate Bank Account
Once the company is registered, a corporate bank account can be opened in Panama or internationally. Panamanian banks conduct strict Know Your Customer (KYC) checks, requiring:
- Company incorporation documents (certificate of incorporation, Articles of Association).
- Beneficial owner information (passport copies and proof of residence).
- Business plan or description of activities (for compliance screening).
Some banks may require an initial deposit and proof of business activities before approving the account.
Requirements, Compliance and Ongoing Maintenance
Annual Requirements
Panama offshore companies are not required to file tax returns or financial statements, as long as they do not generate income within Panama. However, they must:
- Pay an annual renewal fee to the Public Registry (USD 300 to USD 500).
- Maintain accounting records under Law 52 of 2016. These records can be kept anywhere in the world, but must be available upon request.
Panama operates a territorial tax system, meaning that income earned outside Panama is not subject to taxation. However, companies engaging in domestic business must comply with local tax laws.
Confidentiality laws in Panama are strong, but global financial transparency initiatives (e.g., CRS, FATCA, AML laws) require that financial institutions report beneficial ownership details to regulatory authorities if requested.
Restrictions on Offshore Companies in Panama
Panama offshore companies cannot:
- Conduct business within Panama (except for holding local bank accounts).
- Engage in regulated activities (e.g., banking, insurance, investment funds) without special licensing.
- Issue bearer shares without a designated custodian (due to compliance laws).
Setting up an offshore company in Panama provides a strategic and secure platform for international business, but it’s essential to work with a qualified legal advisor, an expat financial advisor or registered agent to ensure full compliance with Panamanian regulations.
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