How to Incorporate Company in Panama?

Narendra Kumar

02 Sep, 2020

Panamanian Corporations are incorporated under the law no. 32 of the year 1927 and the Commercial Code. In terms of offshore company incorporation of Panama being the most desirable jurisdictions. The Republic of Panama, located between Costa Rica and Colombia has a population of approximately 2.4 million. English is widely spoken in urban areas and used daily in commerce and international trade. In this article we will discuss how to incorporate company in panama?

What are the Market Opportunities in Panama?

Panama is a proud member of a select group of Latin American countries. Panama is quite frequent to foreign investment. Panama is a trade and distribution center. Panama^[1] is not only used for trade and distribution but also serves as a financial center and suitable jurisdiction to establish regional offices for multinationals as well as other types of businesses and of course, tourism.

What are the advantages of Incorporation in Panama?

• It is exempted from all local taxes if the income is received from outside of Panama.
• There is no requirement of minimum paid up capital
• It has inexpensive annual support
• The information relating to the shareholders and beneficial owners remains confidential that is it is not filed with the Public Registry office and thus is not available to the public.
• There remains no foreign exchange control
• Any individual or legal entity can become a shareholder.
• Beneficial incorporation laws.
• It has government stability.
• Good infrastructure
• Reputed banks

What is the Type of Companies can be Incorporated in Panama?

• Panama Corporations:

The basic features of Panama corporations are that there lies no corporate tax for the profits sourced outside of Panama. These Companies function outside of Panama and requires a minimum of three Directors. There are nonresident directors who are allowed to function and also corporate directors can be appointed. There is no requirement of annual accounts filing or keeping requirements. The standard share capital is 100 shares of US dollar of 100 each.

• Panama Foundations:

This is mostly used for asset protection purposes which separate the Founder from its property, once and for all and guarantees the interests of the beneficial owner(s). There lies no corporate tax in such type of foundations and the names are disclosed in public records. There are no shareholders in private foundations and nonresident foundation council members are allowed. Also, there are no annual return filing requirements.

What are the Mandatory Requirements for Incorporating a Company in Panama?

• Corporate Name: the name of Panama IBC can be of any language and it should include one of the words at the end such as Incorporated, Corporation, Inc, Corp, S.A. Also, in particular, the name must be different and unique from already existing or reserved corporate names in Panama.
• Registered office and local agent: the registered office of the company should be a Panamanian registered office and should have a Panamanian agent, who shall be the attorney or a law firm. Although the principal office address (business address) of the corporation may be in any country.
• Shareholders: the shares of Panama IBC may be issued to individuals or companies, who can be the residents of any country and not compulsorily be of Panama. There is a requirement of one shareholder at least. The minimum of one share of US dollar 100 must be issued to the shareholder.
• Directors and officers of the Company: every Panamanian corporation can be managed by the Board of Directors. There is a requirement of a minimum of three directors that is required. Corporate directors are not permitted. The directors shall be individuals who have attained 18 years of age. The residents of any country can be the directors of the company. The board of directors is responsible for the appointment of Secretary, President, Treasurer, officers, and other individuals as well.
• Authorized Capital: the standard authorized capital is US dollar 10,000 divided into 100 registered shares of US dollar 100 each. It is allowed to issue up to 100 registered shares. Panama Corporation is not supposed to issue all its shares for a total amount of authorized capital in any mandatory time.
• Taxation: In case the Company in Panama conducts business outside Panama then it is exempted from all the local taxes including income tax, dividend tax, capital gain tax, stamp duty on transfer of corporate shares and other property.
• Annual fees: the Company in Panama needs to pay an annual renewal fee which starts from the second
• Public records: Information about the shareholders and other beneficial owners doesn’t need to be filed with the Public Registry Office and is not available to the public. In the Articles of Incorporation, the company needs to mention the names and addresses of Directors and officers.
• Accounting and audit requirements: there lie no statutory requirements for accounting and audit of Panama offshore It is at the discretion of the corporate directors to maintain the records or not.
• Annual General meeting: there is no requirement of Annual General Meetings. The Board of Directors may decide to conduct an annual meeting of the shareholders.

Conclusion

In general, Panama offers great opportunities to all areas of business is it in trade, manufacturing, services, and tourism with an overall advantage that it is politically stable, tax incentives are there for the investors and also there is a sense of protection of investments through special laws.

Panama also has opportunities for business such as those offered at the Colon Free zone or the Panama Pacific Economic Area. Both have certain incentives involved, but the notable one is the exemptions in the taxes (except the 5% tax on dividends generated from foreign income) and there are multitude businesses that can be done.

It is easy and cost effective to set up a new corporation or company while having the option to create the entities anonymously allowing total privacy to the investors in their financial affairs. Along with this Panama is considered s a tax haven because it does not generate taxable income outside of Panama. In the case of the incomes generated inside Panama, all of the normal business deductions are available (such as rent, utilities, wages, equipment, business entertainment, etc) while income tax rates are low. Thus, Panama is a favorable location for investors to invest in because of its flexible and easy going policies.