Biz Latin Hub announced the exciting opening of our new office in Panama last week. The growing importance of the small Central American nation has expanded rapidly in recent years, with major companies such as Sony and Nike attracted by the favourable tax rates and deciding to establish their headquarters for the region in the country. As well as the banking system, and being a globally famous offshore hub, there is a growing tourism and services sector which is providing exciting opportunities for foreign investors.
Panama is the registered domicile for over 500,000 Panama corporations & foundations, making it the second most popular jurisdiction to incorporate in the world, next to Hong Kong. In terms of key industries, the strategic importance of the Panama Canal, an influential spot for maritime trade, has made Panama a leader in exports to the northern tip of South America whilst also providing crucial access to the Pacific and Atlantic Oceans. The country is tiny, with a population of just over 4 million people, however, in 2016 it exported an impressive US$8.8 billion, with major beneficiaries, of course, being the United States (24%), as well as Venezuela and Ecuador (6.8%), neighbours Guatemala (6.2%) and Japan (4.4%). Major exports include chemical products such as oxygen compounds and sulfonamides (accounting for over 18% of exports), passenger and cargo ships (9.8%) and packaged medication (8.2%). Other exciting business prospects include a growing tourism industry in a country that boasts natural beauty in abundance and retail, with the largest commercial centre in Latin America, Albrook Mall.
This article will take you through the steps of how to register an onshore business in Panama; compared to other countries in the region, this process is relatively stress-free!
Steps to Register a Business
Step 1: Organise the name and structure of your company
As with most countries in Latin America, the first step to registering a business is to choose the name and legal structure of your company. The main types of company are:
- A Corporation/Joint Stock Company (Sociedad Anónima – S.A) – this is by far the most common type of company to form in Panama means that shareholders are only responsible for their own contributions and assets.
- A Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L) – This will help provide insulation to you as an investor and will mean you are not personally liable for the debts or funds of your company.
PRO TIP: It is very important you think about this decision carefully as it can limit the type of business you can legally engage in, and once you sign your documents, amending the structure can be a very long and complicated process.
Step 2: Draft and sign bylaws
The bylaws of a company can be simply described as the ‘constitution’ of a company. These documents will contain all the crucial information of the structure and ethos of the company, including:
- Information regarding the frequency and nature of shareholder/board meetings
- Documentation of all the details of the company (name, address, location, company type etc)
- Procedure for record keeping
- Company’s ‘objectivo social’ which identifies the company’s business activities
As part of the signing of the bylaws, it is necessary to appoint and disclose information to your shareholders. A new company must have 2 or more shareholders (natural or legal persons), and at least one must hold Panamanian nationality or residency. Equally, the board of directors and legal representatives must be appointed and the information about their residency. The legal representative must be a Panamanian national – finding the correct individual is important, many companies choose to work with a local group who can support in the appointment of a company legal representative.
Step 3: Register your company
The next process is the formal registration of your company. This step will ensure that the company is officially recognised in the country and that it is properly registered with the relevant tax authorities. This is the most complicated step in forming a company in Panama and has some sub-steps involved. These include:
- Presenting your company’s bylaws before a Public Notary in Panama in order to receive your company’s Public Deed. This is a process that typically takes 2 to 3 weeks.
- Once you have successfully received a Public Deed, you must register before the Public Registry of Panama. This again has a wait of approximately 2 to 3 weeks.
- Register the society before the General Office for Taxation (Ministry of Economy and Finance), before the District Municipality upon election and afterwards and before the Ministry of Commerce to provide notice of the operation. (2-3 weeks)
- Register the company before the Ministry of Labour; to be presented before the Social Security Fund of Panama (for the future employment of your staff). This will take 20-30 days.
DON’T FORGET: It is not necessary for you to be present in Panama to complete your corporation formation as we can handle everything for you via email and on the telephone!
Non-resident Panama Companies do not require a commercial business license to operate offshore businesses. Commercial licenses are only required for Panama corporations to do business within the territory of Panama (to sell a product or service to Panamanians within the territory of Panama).
Step 4: Open Corporate Bank Account
The final step is to open a Panamanian Bank Account for your company. There are three simple steps to this process:
- Partner with a local group in Panama
- Match your business needs with a suitable Panama bank
- Complete all required banking documentation
According to research from the Banker, 41 of the top 100 Central American banks are in Panama. The country boasts some of the best banks in the region in terms of attractiveness of investment and security for assets. Banco General, Bladex and Bancolombia Panama are all in the top 5.
DID YOU KNOW?: Panama does not impose any reporting requirements or offshore income taxes for Panamanian corporations (Panama has a territorial tax system and only taxes income produced from business activities conducted within the territory of Panama).
Need Support in Registering your Business in Panama?
With Panama being such an exciting business opportunity and only seeming to be growing in terms of economic stability and buoyancy, now is the perfect time to start a venture in the country and incorporate your company. Biz Latin Hubs new office will be directed by the hugely talented and competent Patrick Caunter and a dedicated team of accountants and lawyers.
If you have any questions, doubts or comments regarding any of the steps of the business registration process, do not hesitate to contact Patrick, our Country Manager at [email protected]
For more information on offshore companies, check out the video below: