Your Offshore Company in Panama

Setting up an offshore company in Panama is a chance to establish a business entity in the Caribbean. You can either buy or register a company in this jurisdiction regardless of your nationality, as the Panamanian government has created highly favorable conditions for running a business and foreigners are fully entitled to own local legal entities. Belize, the British Virgin Islands, and Panama share similar geographic locations, but Panama surpasses Belize and the BVI in terms of its economic performance. Over several decades of a tax-free regime, Panama has transformed into an influential business hub.

Key facts about Panama as an offshore zone

Panama is a popular offshore jurisdiction, located in Central America. It has a highly favorable geographic position that is strategic for trade operations. Its capital, Panama City, is a major port city—a modern metropolis filled with skyscrapers, shopping centers, and bright lights. The country has two official currencies: the Balboa (PAB) and the US dollar (USD). Their exchange rates are linked, and they are interchangeable, which simplifies all financial transactions both within and beyond the country.

Offshore company registration isn’t the primary source of government revenue, and that’s actually a positive thing. It means that the country’s economy is more independent, as it relies on the construction sector and international trade. Nevertheless, the government pays close attention to the offshore sector, makes the country an attractive place for investment, and offers excellent conditions for foreign business owners.

10 Key advantages of the jurisdiction

Besides being the best-known and reliable offshore zone always in the spotlight, Panama has other significant benefits including the following ones:

• Zero taxation – no taxes at all under certain conditions;
• No currency control;
• No accounting requirements;
• Low company registration costs;
• Confidentiality of company ownership (a closed register, information can be disclosed to third parties only by court order).

Moreover, company registration requires minimal paperwork, and most processes are extremely simple:

• No requirements for paying up the share capital;
• Bearer shares and no-par shares are allowed;
• No nationality requirements for company directors or shareholders;
• No bookkeeping or audit obligations for offshore companies;
• Nominee services are officially allowed.

Your offshore company in Panama can be involved in any type of business activity: international trade, e-commerce, real estate operations, consulting services, intellectual property management, stock trading, and so on.

Characteristics of offshore companies registered in Panama

Companies registered in this jurisdiction are freed from filing any financial statements and are not subject to income tax on earnings outside of Panama. However, they have to have a registered office and agent. The minimum number of company shareholders is one, and at least three directors are required. Panama is one of the most confidentiality-focused jurisdictions: the use of nominee directors and shareholders allows for complete anonymity—even the extracts from the commercial register will not contain the name of the real company owner.

Panama is also an ideal jurisdiction if you want to register a ship. The country is a leader in this area, offering the most favorable conditions to ship owners. In addition, Panama is attractive for businesses related to international transportation, especially maritime, thanks to its favorable geographical location. This jurisdiction can be used to establish a branch for transportation or trading enterprises, simultaneously  providing opportunities for tax optimization.

The territorial taxation principle in Panama means that only income earned within the country is taxed. Foreign income is not subject to taxation, which allows foreign companies to avoid paying the 25% income tax and the 7% VAT.

Types of Panamanian companies

Panama offers a wide range of business entity types available to foreigners:

• Sole proprietorship;
• Simple or limited partnership;
• Civil partnership;
• Closed joint-stock company;
• Limited partnership.

A closed joint-stock company, or Sociedad Anónima (SA), is generally the best choice for foreign businesses. You can choose any available name as long as it doesn’t directly or indirectly refer to an activity that requires additional licensing. For example, words such as ‘Bank’ or ‘Insurance’ shouldn’t be included in the company name.

Offshore companies registered in Panama can use endings such as Corporation, Incorporated, Société Anonyme, Sociedad Anónima, Gesellschaft mit beschränkter Haftung, Corp, Inc, GmbH, S.A., and AG.

Company owner document package

Whether you register independently or with professional help, you’ll receive a set of company documents, including the following ones:

• Certificate of Incorporation in Spanish;
• Memorandum of Association;
• Minutes of the first meeting;
• Share Certificate;
• Declaration of Trust for Directors;
• Declaration of Trust for Shareholders;
• Resolution of Director(s) to Issue Power of Attorney;
• Power of Attorney under apostille;
• Resignation letters of nominee directors.

The first two documents (Certificate of Incorporation and Memorandum of Association) have to be apostilled. The company seal also has to be made to complete the company setup.

Cost of buying or setting up a company in Panama

It’s important to remember that the purchase cost is just one part of the overall expenses. Ongoing costs for annual company maintenance of the legal entity have to be taken into account too. When buying a company in Panama, you can expect an initial cost of around €1,500–€2,000.

Annual expenses for renewing company registration include:

• Government fees;
• Office rent or a legal address;
• Nominee director and shareholder services;
• Services of a registered agent.

Panama offers foreign businesses that earn income outside the country the privilege of not paying taxes. Instead, there is an annual fee (included in the company’s initial cost and renewal), which is:

The territorial taxation system allows you to significantly reduce the tax burden on an existing business by relocating its activities to an offshore zone such as Panama. Buying a ready-made company in Panama is one of the most efficient ways to achieve this goal.

However, keep in mind that purchasing a ready-made offshore company comes with potential risks. For instance, fraudsters might try to sell the same ‘shelf’ company to multiple buyers. There could also be unpaid debts or other liabilities attached to the company. Worse still, you might end up buying a company facing a lawsuit from creditors.

For these reasons, always seek professional assistance when buying or registering an offshore company in Panama. Sure, it means extra payments for expert services but the fee is relatively small compared to the time and peace of mind that you’ll save.