If you are looking to enter the Panamanian market, you may find that your best option is to form a branch. Because not only can you form a branch in Panama faster than you can complete full company incorporation, but you will also retain much more control over the entity than if you register a subsidiary.
A branch is a legal body located in one jurisdiction, but connected to a head office in another location, meaning that the branch is treated in many ways as an extension of that head office. That means that the head office maintains considerable control over the branch and can intervene and influence day-to-day activities and strategy. It also means that the head office assumes a significantly higher level of responsibility for the actions of the branch than it would for a subsidiary, meaning a greater level of financial and legal liability in the event the entity is not fully compliant with local regulations.
For anyone planning a short-term or limited-scale engagement with the Panamanian market, another option available is to hire staff via a professional employer organization (PEO) in Panama. In that instance, the PEO firm will be the official employer of those employees and manage their payroll, while those employees report directly to the client, who manages their schedules and workloads.
However, for those businesses and investors planning a market entry that warrants establishing an entity, choosing to form a branch offers a range of benefits that go beyond the speed with which it can be carried out. Below, some of the benefits of forming a branch in Panama are considered, while the process subsequently laid out.
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Form a branch in Panama: the Benefits
When you form a branch in Panama, it is obligatory to trade under the same name as the head company, as well as to have the same — or equivalent — structure. For example, if your head office is a limited liability company (LLC), when you form a branch in Panama, you must also constitute it as an LLC.
As long as meeting those requirements is not problematic for you, the benefits when you register a branch in Panama include:
Brand recognition: While you may not already be trading in Panama, in the event you have a brand that is recognized in the market, you will be able to capitalize on that recognition by trading under the same name or offering the same product.
Shared resources: When you form a branch in Panama, you benefit from the opportunity to share resources, be that products or marketing efforts due to the similar branding, or administrative functions due to the branch being run with the same systems as the head office.
Reduced administration: On top of being able to share administrative resources, another advantage when you register a branch in Panama is the reduced burden related to the likes of tax filing and other administrative necessities.
Greater control: As mentioned above, when you form a branch, you retain greater control than if you register a subsidiary, meaning that while you carry more liability, you also have greater ability to guarantee compliance and avoid any regulatory inconveniences.
Increased opportunities: Another advantage when you register a branch in Panama is that your increased liability reduces the risk government entities face when considering you for government tendered projects. That puts you in a strong position to win contracts with state entities.
Rapid entry: The process to form a branch is rapid and straightforward, taking approximately five to seven days. However, it is worth keeping in mind that almost all aspects of the process will be in Spanish.
How to form a branch in Panama
To form a branch in Panama, you must follow the following three steps:
1. Legalize key documents
When you register a branch in Panama, you will need to have the following documents legalized by notarization or an equivalent process:
- Document of incorporation of the company and any amendments that may exist.
- Document issued by the corresponding government entity in the company’s country of origin, by means of which the legal existence and validity of the company can be accredited.
2. Submit minutes to the Public Registry
Next you must provide Panama’s Public Registry with the minutes or resolution of the Board of Directors — or an equivalent corporate body — in which the following is agreed:
- Establishment and opening of the branch in Panama.
- Availability of a minimum of $10,000 of its authorised capital for operations in Panama (all figures in USD).
- Designation of the Resident Agent of the branch and granting of the corresponding authorisation so that he/she may appear before a Panamanian Notary Public to legalize the documents established to set up the branch.
- Appointment of a legal representative in Panama to attend to the operation of the branch.
- Balance sheet of the company certified by an authorised public accountant of the country of origin.
Note that Panamanian law requires that all aforementioned documentation must be in Spanish and legalised by means of a Hague Apostille.
3. Complete the process to form a branch in Panama by obtaining a local Tax ID
The final step in the process to form a branch in Panama is to obtain a local Tax identification number from the national tax authority. This will be used for filing taxes as well as for identifying the entity on the likes of invoices. With this step complete, your branch is ready to begin trading.
Form a branch in Panama with the help of Biz Latin Hub
At Biz Latin Hub, our team of multilingual company formation experts is equipped to help you establish yourself in the Panamanian market. With our complete portfolio of corporate support and back-office solutions, including legal, accounting and recruitment services, we can be your single point of contact to enter and operate in Panama, or in any of the other 17 jurisdictions around Latin America and the Caribbean where we have teams in place.
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