How to start a business in Panama? Requirements, taxes & more

When people think of Panama, the canal usually comes to mind. For thousands of entrepreneurs and international investors, it has become one of the most attractive business hubs in Latin America. A US dollar-based economy removes exchange rate concerns, a territorial tax system allows foreign-source income to remain outside the local tax net, and its unique location at the crossroads of the Americas makes Panama a natural gateway for global trade and commerce.

This guide covers everything you need to know before starting a company in Panama. You’ll learn how much it costs, which business structures are available to foreigners, what the requirements are, how the tax system works, and the steps to get your company up and running. If you’re planning to move your business to Panama or start a new one, keep reading.

How much does it cost to start a business in Panama?

One of the first questions foreign entrepreneurs ask is how much it costs to set up a company in Panama. The good news is that there’s no minimum capital requirement. While you’ll need to declare your company’s share capital, you don’t have to deposit or prove those funds when registering the company.

That said, there are still several costs you’ll need to budget for.

Setting up the company

The total cost of registering a Panamanian corporation typically ranges from $800 to $2,100, depending on the type of company you choose, the law firm you hire, and the services included in the package. Here’s a typical breakdown of the costs:

• Notary fees: Between $150 and $250 for drafting and signing the Articles of Incorporation.
• Public registry: Registration fees usually range from $250 to $400, depending on the company’s authorized share capital. Most companies register with an authorized share capital of $10,000.
• Single Annual Fee: A $300 annual franchise tax must be paid to the Public Registry of Panama to keep the company in good standing. If you miss the deadline, a $50 late fee applies. If the tax remains unpaid for a second consecutive year, additional penalties and a reinstatement fee are added, which can exceed $1,000.
• Resident Agent Fees: Required by law. The first year is usually included in the incorporation package. After that, annual fees typically range from $300 to $800, depending on the law firm you use.
• Operating Notice (MICI): The base fee for legal entities is approximately $55 through the Panamá Emprende platform.

If you decide to work with a specialized firm

Hiring a Panamanian law firm to handle the entire process typically costs between $1,500 and $2,100 for the first year. This usually includes notarization, company registration, corporate documents, apostilles, and the Registered Agent service. For an offshore company, some all-inclusive packages start at around $1,700, including VAT (ITBMS).

Recurring annual costs

After your company is registered, annual costs for a small business usually range from $1,500 to $3,000. These include the annual franchise tax ($300), Registered Agent fees (from $300), basic accounting ($100 to $500 per month, depending on your business activity), and the Business License Tax, which is 2% of the company’s net worth, with a minimum payment of $100 and a maximum of $60,000.

Optional services

If you don’t want your name to appear as a company director, you can hire nominee directors for an additional $300 to $500 per year for each director. It’s also common to set up a General Power of Attorney, which allows you to act on behalf of the company. This typically costs $100 to $450, depending on whether it needs to be apostilled.

What types of businesses can be established in Panama?

Panama has one of the most business-friendly legal systems in Latin America. Foreigners can start a company without a local partner or residency, and they can own 100% of the business.

Corporation (S.A.)

The Corporation (S.A.) is the most common choice for foreign entrepreneurs and one of the most flexible business structures in Panama. It is a separate legal entity that can own assets, sign contracts, open bank accounts, and operate both in Panama and internationally. Another key benefit is privacy, as shareholders’ names are not publicly available in the Public Registry.

It requires at least one shareholder and three officers: a President, Secretary, and Treasurer. The shareholder can be a person or a company of any nationality, and the same person can hold all three roles. None of them has to live in Panama. This structure is often used for local businesses, international companies, holding companies, and asset protection. It can continue to exist even if the shareholders or officers change.

Limited Liability Company (LLC)

An LLC is a good choice for small businesses, family businesses, and professionals. The owners are only liable up to the amount they invest. An LLC can have 2 to 20 members, with no nationality or residency requirements. It usually has a minimum capital of $2,000 to $5,000, and the names of all members are recorded in the Public Registry.

Single-Member Limited Liability Company

This option is designed for solo entrepreneurs who want the protection of a separate legal entity. It keeps your personal and business assets separate, although it’s less flexible than a Corporation (S.A.) if you plan to bring in partners or investors later on.

Branch Office of a Foreign Company

If you already have a company in your home country and want to do business in Panama, you can register a branch office. You’ll need a notarized Spanish translation of your company’s Articles of Incorporation and a Board Resolution approving the registration in Panama. The parent company remains responsible for the branch.

Holding or Offshore Corporation

A Panamanian Corporation (S.A.) can also be used as a holding company. It can own assets, manage investments, and hold shares in other companies. If it doesn’t do business in Panama, it generally doesn’t need a local business license, and its tax obligations are limited.

Requirements to start a company in Panama

You don’t need to live in Panama or have a local partner to start a company there. Foreigners of any nationality can open a business, and in many cases the entire process can be completed remotely. Here are the main requirements:

• Personal documentation: A valid passport for all shareholders and directors. Under Law 23 of 2015, you’ll also need to complete a Know Your Customer (KYC) process to verify your identity and the source of your funds.
• Company name: It must be unique and verified in the Public Registry before drafting the Articles of Incorporation.
• Articles of Incorporation: The founding document that sets out the company’s name, business activities, share capital, and directors. It is formalized before a notary and registered with the Public Registry.
• Resident Agent: A Panamanian attorney or law firm required by law. It acts as the official representative before the authorities, not as a partner.
• Tax address: Registered address in Panama. If you do not have a physical office, you can set up a virtual address through any legal firm.
• RUC: Tax identification number issued by the DGI. Required for invoicing and filing tax returns.
• Operating Notice: MICI permit processed through Panamá Emprende. Without it, you cannot operate legally, even if the company is already registered.
• Ultimate Beneficial Owner (UBO): Must be registered in the centralized system. Failure to do so may result in the suspension and dissolution of the company.
• Corporate bank account: Opening a bank account usually takes between one and three months, as Panamanian banks have strict due diligence requirements.

Taxes when starting a company in Panama

Panama uses a territorial tax system, which means only income earned inside the country is taxed. If your company operates from Panama but earns its income from clients abroad, that income is generally not subject to Panamanian tax.

For companies operating in the local market, the main taxes are:

• Income Tax (ISR): Companies with annual revenue below $1.5 million pay 25% tax on net taxable income. For companies earning more than $1.5 million, an alternative minimum tax may apply if it results in a higher tax bill. Corporate tax returns must be filed by March 31 each year.
• Panamanian Value-Added Tax (ITBMS): The standard VAT rate is 7%. It increases to 10% for alcohol and hotel services, and 15% for tobacco. Basic food, medicines, and public utilities are exempt. VAT registration is required once annual revenue exceeds $36,000, and returns must be filed monthly by the 15th.
• Single Annual Rate: A fixed annual fee of $300 is paid to the Public Registry and applies to all companies.
• Business Notice Tax: 2% of net capital, with a minimum of $100 and a maximum of $60,000. Companies with less than $10,000 in invested capital are exempt.
• Dividends: 10% if they come from local activities, 5% if they come from foreign sources.
• CSS (Social Security): If you have employees in Panama, you must contribute 12.25% of the monthly payroll.

For offshore companies, the only required payment is the $300 annual franchise tax, and they must maintain a Resident Agent. They do not need to file income tax returns or pay ITBMS, but they must keep basic accounting records.

Steps to open a company in Panama

Setting up a company in Panama is a clear legal process and, with proper legal help, it can be faster than expected. In most cases, a company can be registered with the Public Registry in less than a week. Here are the steps:

Step 1: Choose the type of company and define its business activity

Before you begin, choose the legal structure that best fits your business. For most foreigners, a Corporation (S.A.) is the best option because it’s flexible and offers shareholder privacy and asset protection. You should also decide what your business will do, as this determines the licenses you may need and whether you’ll operate in Panama, abroad, or both.

Step 2: Hire a Panamanian attorney and draft the Articles of Incorporation

A licensed Panamanian lawyer prepares the Articles of Incorporation, which is the document that creates the company. It includes the company name, directors, authorized capital, business activity, and operating rules.

The Articles of Incorporation must be signed before a Public Notary. If you cannot or do not want to travel to Panama, the lawyer can appoint nominee directors, and you will receive a notarized and apostilled Power of Attorney that allows you to act on behalf of the company once it is formed.

Step 3: Register the company with the Public Registry of Panama

After the Articles of Incorporation are signed and notarized, the lawyer submits them to the Panama Public Registry along with the applicable registration fees and the $300 annual fee. The Registry reviews the documents and issues the company’s registration certificate.

This process usually takes 1 to 2 weeks, depending on the Public Registry’s workload. Experienced firms may be able to speed it up to 3 to 5 business days.

Step 4: Obtain the RUC from the General Directorate of Revenue (DGI)

After the company is registered, you need to get a Tax ID (RUC) from the DGI. This number is needed to issue invoices and file taxes. The RUC is usually the same as the company’s registration number with the Public Registry.

Step 5: Apply for the Operating Notice through Panama Emprende

If your company will operate in Panama, you need an Operating Notice (Aviso de Operación), which is the business license that allows you to start activities. It is obtained through the Panama Emprende online platform from MICI.

The process is mostly online. You will need to provide the company name, Public Registry registration number, business activity, and pay the basic fee of $55 for legal entities.

Step 6: Open a corporate bank account

Most businesses in Panama will need a corporate bank account to operate. Banks have strict requirements and usually ask for: the company’s Articles of Incorporation, Public Registry certificate, RUC, passports of the legal representative and shareholders, bank references, and a description of the business. The process can take one to three months.

Step 7: Register with the Social Security Fund (CSS) if you hire employees

If your company will hire employees in Panama, you must register as an employer with the CSS before hiring anyone. Failing to do so can result in fines and legal responsibility for employee obligations.

Step 8: Obtain additional industry-specific licenses depending on your business activity

Depending on your industry, your company may need additional permits, such as health licenses, Ministry of Health approvals, or financial licenses from regulators like the Securities Market Superintendency or the Banking Superintendency.

Internet for business trips to Panama

When you travel to Panama for business, the last thing you need is an unreliable internet connection. Regular roaming is expensive, and buying a local SIM card every time you visit a new country is a hassle.

Holafly’s monthly plans solve this problem from the start. It’s a subscription eSIM that you install once on your phone and use in more than 160 destinations, without changing SIM cards or setting up a new QR code every time you travel.

There are two plans available:

• Light Plan: 25 GB of data per month, starting at $49.90/month. Includes a hotspot for sharing data with other devices.
• Unlimited Plan: It includes high-speed unlimited data starting at $64.90/month. You also get a phone number from the US, UK, or Canada to receive SMS and make or receive VoIP calls, which is useful for bank verifications and accessing business platforms from abroad.

Both plans include Always On: even if you cancel your subscription or your monthly plan ends, the eSIM still gives you 1 GB of free data every month.

Frequently asked questions about starting a business in Panama

Plans that may interest you

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Paula Henderson

Spanish-English Translator

Hi! I'm a Spanish-English translator working with Holafly, helping bring travel content to life for curious travelers. As a digital nomad with a passion for exploring, I'm always adding new spots to my bucket list. If you love to travel like me, stick around because you're in the right place to find inspiration for your next trip! ✈️🌍

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