Registration of an offshore company in Panama allows its beneficial owner to carry out business activities with zero taxation, while benefiting from the owner’s privacy protection.

In accordance with the provisions of Law 32 On Corporations dated February 26, 1927, the structure of the company must provide for at least three directors of any nationality, even though not domiciled in the Republic of Panama. As established in the aforementioned law, the names of the directors of the company must be registered in the Public Register.

The Law On Corporations does not require to list the names of beneficial owners of a business, which secures their anonymity and privacy.

The Law On the Registry of Final Beneficiaries came into force in the territory of the jurisdiction of Panama in 2020. According to it, the information on the identities of the final beneficial owners of legal entities must be submitted to the registered agent. It is important to note that such information is not public and is not subject to disclosure. Access to the information about the final beneficiaries is restricted to the legal entity in question, its registered agent, and state regulatory authorities.

Offshore legal entities are not required to conduct audits and submit financial statements to Panamanian tax authorities. However, the legal entities must maintain accounting records. The accounting documents must be kept at the registered agent's office for five years. Corporate books of a legal entity can be stored in the territory of any jurisdiction.

Requirements and restrictions to the capital of a legal entity in Panama

It is important to note that a legal entity registered in Panama has the right to issue bearer shares, as well as those with or without par value. The legal entity must comply with the established rules for the storage of bearer shares.

The legal entity must register this type of shares in the State Registry, withdraw them from circulation, and deposit them with an authorized custodian (Panama banking institution, law offices, or trusts).

Under the current Panamanian legislation, legal entities do not have to present or prove the authorized capital during the incorporation. There are no mandatory requirements for the contribution of the authorized capital or the time frame for it.

The standard authorized capital of a corporation in Panama is $10,000; it is divided into shares of various values. This amount is sufficient for the beneficial owner of the legal entity to spend the funds on the annual maintenance of the legal entity at minimum rates.

It is also important to note that the US dollar is the official currency in the jurisdiction of Panama, and local legislation does not provide for currency control and any restrictions either on the inflow or on the outflow of funds.

Domestic business activities of companies in Panama

Registration of an offshore company in Panama allows its beneficial owner to carry out business activities at the international level.

The local legislation also allows offshore legal entities to conduct business within the state. As such, foreign-owned companies can be tax residents of Panama and carry out business activities in the domestic market.

It is not required to register a corporate bank account in Panama; the legal entity can open an account in a banking institution of another jurisdiction. The legal entity can act as a holding and provide consulting services within the country.

The legal entity must obtain a state license in order to carry out entrepreneurial activities in the banking or insurance sector, provide trust or trusteeship services, or manage funds.

Taxes and liabilities of legal entities in Panama

A territorial concept of taxation is in force in Panama, according to which all income obtained from business activities within the country is subject to taxation. However, zero taxation applies to non-resident companies making profits from doing business outside the jurisdiction. There are no requirements for obtaining a license for the activities of an offshore legal entity either.

There is an annual fee for offshore companies. The legal entities registered in the first half of the year are required to pay this fee no later than on June 30, while those registered in Panama in the second half of the year are required to pay this fee no later than December 31.

Failure to meet the deadline for the payment of the annual fee will entail a fine. Repeated failures to meet the deadline will affect the business reputation of the offshore company.

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