Registering a legal entity: the benefits of Panama for business in 2023
Panama, situated in Central America, lies betwixt Costa Rica and Colombia. Spanish stands as the official tongue, with English serving as the secondary tongue for commercial dealings. It boasts an advanced banking network, and its gross domestic product (GDP) has experienced unwavering growth, elevating it to the status of a high-income nation. The latest annual World Bank assessments position Panama at the 86th spot out of 190 global economies concerning business conduct ease.
Foreign investors harboring ambitions of inaugurating enterprises in Panama bask in myriad advantages. This nation touts a robust, unbarred economy that vies competitively among fellow Caribbean nations. Panama aspires to establish itself as a premier regional hub for logistics and the import/export domain. In the realm of commerce commencement, the Panamanian government extends a warm welcome to foreign capital infusion. Foreigners and joint ventures can typically own businesses here sans substantial constraints. Beyond the private sector, government-sanctioned investments are feasible unless expressly forbidden by statute.
Political stability characterizes Panama, rendering it enticing for foreign enterprises and individuals, especially when juxtaposed with the broader regional landscape spanning Central America, South America, and Mexico. It flaunts a well-honed infrastructure and boasts excellent aerial links with key business hubs in the United States, Mexico, the Caribbean, and South America. Panama City, a bustling commerce epicenter, houses a formidable financial infrastructure and thrives on a service-oriented economy. The nation hosts multiple ports.
Enrolling a company in Panama entails a brief timeframe. Transactions predominantly employ the US dollar as the official fiscal medium, thus mitigating the jeopardy of adverse fiscal ramifications on the nation's economy. Consequently, in contrast to Latin American counterparts like Venezuela, Brazil, and Argentina, Panamanian companies evade currency controls.
Panama has inked multiple free trade pacts and houses a free trade enclave. Renowned for cultivating one of the most fortified e-commerce juridical frameworks globally, Panama elevates online privacy defense to a zenith, surpassing regional peers.
Company registration for foreigners: choosing a corporate structure
When founding a corporation in Panama, it is paramount to select a framework that aligns with the particular endeavor and fulfills the requisites of the enterprise. The legal configurations frequently employed by international companies and investors are delineated as follows.
A comprehensive association is acknowledged in Panama and is denominated a "Universal Consortium." The jeopardy of this consortium category resides in the circumstance that all associates can be exposed to juridical accountability if one associate conducts business negligently or fraudulently on behalf of the consortium. Furthermore, all associates partake in collective and individual liability for the enterprise's indebtedness.
Restricted accountability partnerships can be instituted by a minimum of 2 and a maximum of 20 associates from any nation. The capital can span from 2,000 to 50,000 USD. The appellation of each member is recorded in the Public Registry of Panama, alongside their capital contribution. The accountability of the associates is confined to the capital contribution.
Partners possess immeasurable liability for the obligations of the enterprise. This is a partnership tailored for professionals like physicians, attorneys, or architects.
Company registration procedure in Panama
The following are the basic steps required to register a business:
- Selection of corporate structure (SA or SRL stand as amongst the most prevalent and applicable for a multitude of commercial objectives).
- Validation of the corporate designation of the enterprise (it is advisable to furnish at least 3 designations).
- Formulation and endorsement of corporate inauguration records.
- Deposition of the petition, inauguration records, and corporate strategy with the Public Registry.
- Commencement of a banking account (if requisite, this phase can be executed antecedent to incorporation) with a domestic corporate bank.
- Enrollment for fiscal and social security intentions.
- Procurement of permissions (certain undertakings necessitate supplementary authorizations reliant on the specific sector of commerce).
In Panama, a restricted accountability partnership, recognized as Sociedad de Responsabilidad Limitada (SRL), stands as a juridical entity permitting the advancement of nearly any category of commercial enterprise.
Please be cognizant that the accountability of SRL associates in Panama fluctuates in accordance with the sum each associate furnishes to the capital.
Fundamental prerequisites for SRL enrollment:
- a minimum of two participants (natural persons or juridical entities, devoid of domicile constraints);
- all participants must validate their identity and juridical residence;
- the registered domicile of the SRL and the corporate objective of the entity must be articulated;
- an executive, juridical agent, and principal must be designated;
Requirements for registration of a corporation in Panama
The Codes of Incorporation and the Mercantile Regulation of Panama administer a prevalent manifestation of mercantile entity in Panama - businesses or Sociedades Anonimas (SA). Erecting such businesses necessitates the presence of no less than two stakeholders. The communal articles of inception of such an institution must experience enrollment with the Public Repository of Panama. It should encompass the names and abodes of the initiators, the character, site, and ambitions of the nascent entity, the comprehensive quantity of the capital stock and the methodology by which it is distributed among the stakes, minutiae of the stakes and the prerogatives concomitant to them, the character and abodes of the administrators (obligatorily a minimum of three), and the character of the registered agent in Panama.
Should the articles be inscribed in a language distinct from Spanish, they necessitate an authenticated translation. The nomenclature of such an establishment should comprise one of the ensuing contractions: Corp. (Corporation), Inc. (Incorporated), or SA (Sociedad Anonima). Firms classified as SA in Panama must elect a supervisory council, comprising no fewer than three overseers, accountable for all day-to-day resolutions pertaining to the enterprise's undertakings. Among the obligations of these overseers lies the appointment of the company's president, secretary, and treasurer. In certain scenarios, the appointment of officers and deputies necessitates the sanction of the supervisory council, albeit it is not compulsory. The most critical determinations must garner consent at a general assembly of shareholders, encompassing issues associated with capital reduction or augmentation, modifications to the Statutes of Incorporation, and the verdict to amalgamate or dissolve the entity.
The sanctioned capital, following the registration of the establishment in Panama, is apportioned amid shares linked to the entitlements and commitments of the proprietor, encompassing suffrage prerogatives. Each shareholder is furnished with a share certificate revealing the date of enrollment in the Commercial Registry, the capital, the quantity of shares in possession, whether said shares have already been discharged or not, the sum paid, the entitlements and duties, and the classifications of held shares.
Business in Panama: taxation system
Prior to instituting a corporation in Panama, it is prudent to acquaint oneself with the tax levies pertinent to entities incorporated within this jurisdiction.
- Panamanian revenue levies are predicated upon the principle of territoriality. Income stemming from Panamanian origins is susceptible to taxation, whether it is acquired by a denizen or a non-resident. Residency solely pertains to ascertaining the liability of an entity for income taxation or otherwise. Corporations are liable to income tax at a uniform rate of 25%.
- The municipal tax at the local level is imposed upon the gross earnings accrued by the corporation for the pertinent accounting interval. This is contingent on the genre of undertaking conducted by the corporation.
- The impost on the conveyance of mobile chattels and amenities (ITBMS) represents Panama's value incremented toll (VAT). The prevailing tax rate presently stands at 7 percentage points. Exports remain unburdened, and the ITBMS remunerated for exports is subject to potential reimbursement. Transactions involving commodities like pharmaceuticals, victuals, and specific infant merchandise evade taxation. Medical amenities and conveyance, amidst other amenities, elude tax liability.
- The whole of the wares imported into the dominion of the Republic from foreign nations incur customs levies. The percentages of the duties are ascertained by the Panama Customs Tariff Service.
- Indirect tax. Depending on the category of amenity or commodity, distinct tax percentages are imposed: a minimum of 5% and a maximum of 100%. In Panama, every landholder is obligated to remit an annual land tax, with rates fluctuating from 0% to 1.0%, contingent upon the worth and purpose of the property. Imprint fee is solely imposed on particular business accords.
- Gains on capital. When an immovable asset is transferred, a 2% tax on real estate transfers and a 3% preliminary income tax payment must be disbursed. Transfers of securities incur a 5% levy, with a 10% capital gains tax rate. Every corporation is obligated to remit an annual franchise tax (amounting to 300 USD per annum). The deadline is contingent on the company's incorporation date. Non-profit entities, cooperatives, and civic collaborations are exempt from franchise tax.
- Pension levy is assessed at a percentage of 9.75 on remuneration and supplementary recompense disbursed, encompassing remuneration in kind, for workers and 12.25 for employers.
How do I open an account in Panama?
Initiating the establishment of a banking account in Panama can prove to be rather formidable for an international individual, notably when their mastery of the Spanish language is limited. We shall elucidate the requisite documentation for inaugurating a bank account in this nation, as well as the pivotal benchmarks for the selection of a banking institution.
Documents obligatory for the commencement of a banking account. In the realm of banking, each financial institution upholds its distinctive prerequisites. Ordinarily, all financial establishments within the Republic mandate an overseas individual to compile the ensuing dossier of credentials:
- Valid passport or Panamanian National Identity Card (cedula).
- A letter of commendation from a financial institution, not surpassing 30 days in antiquity.
- Verification of habitation within Panama, exemplified by a notarized duplicate of a lease pact.
- Substantiation of the provenance of pecuniary resources, akin to a financial statement or tax declaration.
Key criteria when choosing a bank
If you are deciding which bank to open a panama account with, there are a few important things to consider:
- Number of branches.
- Foreign bank transfer fees.
- Internet banking and other features
- Whether it is possible to open an account for a foreigner.
The pros of Panamanian banks are as follows:
- Higher interest rates on your dollar deposits than in other countries.
- Fully dollarised economy.
- Low barriers to entry.
- No capital controls.
If one seeks to seize opportunities and extend their enterprise in Latin America, Panama ought to be a paramount deliberation. Frequently denominated as the "nexus of the Americas" by virtue of the Panama Canal, Tocumen Airport, and its strategic geographic locale, the nation has observed a significant upsurge in the presence of global corporations in recent years, owing to its propitious commercial milieu. The most auspicious avenues for overseas investors lie within the domains of logistics, maritime conveyance, and transnational commerce.
The subsequent varieties of commercial entities subsist in Panama:
- solitary proprietorship;
- corporations (the preeminent commercial configuration, the entity stands as an autonomous legal person);
- Limited Liability Company.
The customary assortment of records for establishing a corporation in Panama ought to encompass:
- the designation of the corporation;
- designations and domiciles of all originators;
- designations and domiciles of governors/officials;
- identification or duplicates of passports of originators and governors;
- verification of concrete domicile;
- capital particulars.