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Incorporating a Company
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Just a few years ago, villa, penthouse, apartment or condominiums in Panama have cost a lot of money. Today, however, the real estate in Panama dropped in price and local realtors have much more affordable deals. For the price of $100,000 today you can buy real estate in Panama of 80 square meters. Cost of penthouses and villas in Panama were also dropped, so today everyone has the opportunity to take advantage of enticing offers and buy property in the country that represents a pure democracy.

Business Panama
Panama Real Estate Articles: Incorporating a Company

Many foreign investors starting a business in Panama or merely purchasing real estate for investment purposes decide to use a corporate entity as the owner of such. This decision is a wise one.

Ownership through a corporation allows one to have flexibility in areas ranging from estate planning (if share ownership is properly structured the investor can avoid his heirs a painful and lengthy probate procedure), tax management (as an example, roles on corporate expenses are more flexible than the ones on personal ones), asset protection and representation (shareholders meetings can facilitate granting special powers of attorney or other types of authorizations for many actions thus not requiring local presence in the country).

The first question often asked by investors is whether to use (or form) a local Panama corporate entity or use one already existing and controlled by such individuals abroad. Our advice is, in most cases, the use of a local entity. Although foreign corporate entities can own land and engage in business activities in the country, registration procedures (both at the Public Register and with government entities) as well as negotiation of contracts with private parties can get complicated, delayed and/or find obstacles when thev are involved.

In any event, if a foreign entity will be used, note should be taken that we normally recommend registering the foreign entity in the Panama Register as a branch or, at least, to register specific powers of attornev for such also in the Panama Register. Both cases require a special and formal procedure that may take several weeks. As mentioned before, in the great majority of cases, the use of a local corporate entity is preferred. Although, Panama commercial law contemplates many types of corporate forms, only two of them offer the investor the comfort of having structures similar to the limited liability companies to which he or she may be used to in their countries of origin. Such corporate forms are the "Sociedad de Responsabilidad Limitada" and the "Sociedad Anónima". In both cases, the investors (shareholders) are only responsible for their participation on the company's authorized capital and their own personal assets are fully protected and out of reach from any potential creditor the shareholder may have.

The S.A. has many features, of which the most important are:No restrictions on nationalityNo requirements to disclose ownershipNo restrictions on foreign owned corporationsNo restrictions concerning ownership of sharesNo residence requirements for Directors/OfficersNo paid-in capital requirementsNo income tax is paid or reported if the corporation operate outside the jurisdictionNo exchange controlsNo restrictions on Mergers, Acquisitions or Joint VenturesNo requirements to file annual Financial StatementsNo requirement to hold annual General Meetings of Shareholders or DirectorsTotal Secrecy and AnonymityTotal tax exemption on all and any business activity or transaction carried on outside the jurisdictionReasonable Annual Registration Tax and Resident Agent FeesArticles of Incorporation may be done in any part of the world in any languageThe accounting books for the corporation could be kept in any part of the world and in any languageThe legal representatives (which could be our lawyers) holding powers of attorney to act on behalf of the company are able for any actions taken against the interest of the company and/or its shareholdersPolitical stability due to constitutional elected government.

Companies doing business in Panama must additionally register before the Tax Authorities. In the event, the company is not involved in business activities in the country for the specific fiscal year (for example, when it is solely used for holding assets), formal tax registration is not required.

The normal fiscal year for companies declaring taxes in Panama goes from January 1 to December 31 of each year; filings can usually be made until the end of March of the following year. A different fiscal year can be authorized for companies that are fully owned or related to foreign entities that have a different term in their countries of registration.

It is important to conclude that the choice of corporate structure must ideally be made at the time the investment or business project is being created. This decision will have a major impact and specific consequences on the implementation of said project and if taken wisely, it will be one of the foundations for its success.

Incorporation Procedure

It is not necessary that the client comes our offices for this purpose. The usual procedure is that our group, acting according to the information furnished by the client in the Incorporation Form sent by Fax or Email, will organize the corporation using standard articles of incorporation. For Panama, normally within 10-15 days thereafter, all the pertinent documents will be sent by courier to the address provided by the client, unless we are instructed otherwise.For immediate delivery, we also have Shelf or Ready Made Companies.


A corporation may adopt by-laws for the regulation of its internal affairs and procedures, but it is not compulsory. Should by-laws be in fact adopted, however, it is not compulsory that they be registered, but if they are registered, any amendments thereof must also be registered. By-laws may be adopted either by resolution of the shareholders or by resolution of the Board of Directors. Consequently, the by-laws may be amended by the corporate body which initially adopted them.

General Power of Attorney

The Board of Directors may grant a general power of attorney to any person, whether or not connected with the corporation. When said power of attorney is granted to be used abroad, it is possible not to register said power of attorney to maintain the confidentiality.

Resident Agent

By law every corporation must have resident or registered agent. Our fee for acting as resident agent is satisfactory. However, the first year of the resident agent’s fee is also included in the cost of incorporation.All annual fees and taxes must be paid promptly every year to maintain the company in good standing. Late payment will produce high penalties and strike off from the Register.

Annual Company Tax

Every Panamanian corporation has to pay an annual tax, imposed by law. The law requires corporations to pay said amount in order to remain in good standing. Good standing is taken to mean valid registration at the Public Registry of Panama.All annual fees and taxes must be paid promptly every year to maintain the company in good standing. Late payment will produce high penalties and strike off from the Register.
An additional penalty caused by non-payment is that documents subject to registration will not be recorded nor will any certification of good standing or others be issued, except when requested by a competent authority.


The income tax of Panama is levied only upon net income derived from operations within the territory of the country. Income obtained from operations consummated outside Panama is not income obtained from “sources within the jurisdiction” and, therefore, is not taxable under local law.
While not providing any specific legal or tax counsel, nevertheless for some individuals or companies, Panama companies may offer specific tax advantages over other jurisdictions. Any potential client seeking legal or tax advise should consult with our legal or tax advisors.
In the BusinessPanama Group, we have licensed real estate agents, lawyers, insurance experts and other professionals to assist you on all your real estate needs.

We can help you with:
  • Locating properties in Panama City, Beaches, Islands or Mountains
  • Forming a company and opening a bank account
  • Setting up a business or project
  • Legal services
  • Applying for visa & residence program
  • Second Passport
  • Other services

If you want to incorporate a company in Panama with bank account to invest in Panama, or any of our other services, please Contact Us.

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