Panama has become one of the best options for foreign entrepreneurs who want to open or expand their business. Registering a business in this country can only take around two weeks without the need to set foot in the country. The most common reason it attracts many foreign investors is that it does not impose taxes on income earned outside the country. Below we have put together the steps to start a business in Panama.
Steps to establish your company in Panama:
• Hire a lawyer specialized in incorporating companies in Panama
• Choose a name for your company, then the lawyer will verify availability
• Choose at least 3 members for your board of directors
• Choose the dignitaries (president, treasurer and secretary) a person can occupy the 3 positions.
• Specify the activity to which the company will be dedicated, if it carries out said activity in Panama, it is important to verify if it requires any special permission
• Establish social capital
• Specify in how many shares the share capital will be divided, the type of shares and who will be the shareholders.
• Review the statutes of the company and sign the articles of incorporation, subscribers can be nominative appointed by the lawyer who will constitute the company
• Register the company in the Public Registry of Panama
• In the event that the activity takes place in Panama, a notice of operations must be requested (commercial license)
• Register the company in the social security , only in the scenario that hires employees.
• Open the company's bank account
• Deposit the minimum capital required to activate your business bank account
Important concepts of a Panamanian corporation
At the time of incorporating a Panamanian corporation, two subscribers (witnesses) who must be natural or legal persons, of legal age and authorized by the corporate bodies of the legal entity they represent, must meet and sign the articles of incorporation, these persons have the right to minimum a share of the company, but in practice these subscribers waive the right and assign it to the shareholders of the corporation.
The corporation must have a Resident Agent who must be a Panamanian attorney. Its only function is to serve as a link between the authorities or third parties and the corporation, without this constituting a mandate or granting it power to represent or manage the company, or as an agent to receive notifications: it is simply a facilitating entity. .
How to open a bank account for your business
The bank account is an important element when setting up your commercial operation in Panama, the banking offer in Panama is very wide and the requirements that the client may request vary according to the client's profile and the bank's profile. The documents usually required are the following:
• Bank references and scanned copies of personal documents of shareholders and the company's board of directors.
• Commercial references of the company's partners
• Due diligence forms
• Apostilled copy of the identification of the signer or signers of the account
• Income support
• Support of origin of the funds that will be entered into the account
What taxes does a company pay in Panama?
In Panama, with the sanction of Law 189 of December 17, 2020, the Tax Code is reformed and a special income tax regime is created applicable to micro, small and medium-sized enterprises, businessmen and entrepreneurs.
How much will be the tax to pay according to Law 189?
If the total income is, in the case of legal persons:
• up to B /. 11,000.00, the tax payable on the net taxable income will be 7.5%;
• of B /. 11,000.01 to B /. 36,000.00, you will pay 10%;
• of B /. 36,000.01 to B /. 90,000.00, 12.5%;
• of B /. 90,000.01 to B /. 150,000.00, 15%;
• of B /. 150,000.01 to B /. 350,000.00, 20%;
• and B /. 350,000.01 to B /. 500,000.00, you will pay 22.5%. In addition, they are exempt from the complementary tax.
In the case of natural persons, you will pay as net taxable tax in this way:
• Income of up to B /. 11,000.00 the tax payable on the net taxable income will be 0%;
• of B /. 11,000.01 to B /. 36,000.00, you will pay 7.5%;
• of B /. 36,000.01 to B /. 90,000.00, 10%;
• of B /. 90,000.01 to B /. 150,000.00, 12.5%;
• of B /. 150,000.01 to B /. 350,000.00, 17.5%;
• of B /. 350,000.01 to B /. 500,000.00, you will pay 22.5%.
• of B /. 500,000.01 to B /. 500,000.01 will pay 25% of the net taxable income.
• of B /. 1,500,000.01 onwards, will pay 25% of the net taxable income or 4.67% of the total taxable income.
On the other hand, incorporated offshore companies are exempt from paying taxes such as income tax, local tax, withholding tax and corporation tax.
Panama adheres to a territorial tax system that exempts offshore companies from paying taxes on income obtained outside the country. This is one of the main benefits that companies that apply to the Panamanian jurisdiction have to develop their commercial operation.
Establishing an offshore company in Panama is practical and wise, which is why it is and will continue to be an excellent center for foreign investment. There are fewer regulations to comply with when it comes to registering a business and the tax policy for all offshore income will allow entrepreneurs to increase their investment returns.
Until next time!