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Panama
We have a team of experienced professionals dedicated to supporting all your business requirements—ensuring smooth operations and full regulatory compliance. This strong foundation enables you to confidently establish and grow your business in panama with efficiency and assurance.
WHY PANAMA?
Panama, officially the Republic of Panama, is a country located at the southern end of Central America, bordering South America. It is bordered by Costa Rica to the west, Colombia to the southeast, the Caribbean Sea to the north, and the Pacific Ocean to the south. Its capital and largest city is Panama City, whose metropolitan area is home to nearly half of the country over 4 million inhabitants. Revenue from canal tolls has continued to represent a significant portion of Panama’s GDP, especially after the Panama Canal expansion project (finished in 2016) doubled its capacity. Commerce, banking, and tourism are major sectors. Panama is regarded as having a high-income economy.
In 2019, Panama ranked 57th in the world in terms of the Human Development Index. In 2018, Panama was ranked the seventh-most competitive economy in Latin America, according to the World Economic Forum’s Global Competitiveness Index. Panama was ranked 82nd in the Global Innovation Index in 2025. Panama is a founding member of the United Nations and other international organizations such as the Organization of American States, Latin America Integration Association, Group of 77, World Health Organization, and Non-Aligned Movement. As of 2025 Panama had a GDP of 90.41 billion USD. This equated to 19,800 USD per capita.
ADVANTAGES
Territorial Tax System:
Panama does not tax income earned outside its territory, and businesses operating in free trade zones can enjoy significant tax incentives.
Dollarized Economy:
The U.S. dollar is the official currency, which eliminates exchange rate risks, reduces transaction costs, and stabilizes the economy.
Strategic Location & Logistics:
As a bridge between North and South America, Panama offers premier maritime (Panama Canal) and air connectivity.
Stable Business Environment:
Panama boasts a politically stable, democratically elected government, along with a strong, sophisticated banking sector.
Foreign Investment Incentives:
The country offers various investment, visas, including the “Friendly Nations Visa,” and encourages Foreign Direct Investment (FDI).
Corporate Structure:
It is easy to set up a company (Panama Corporation) for international, trade, asset protection, and, holding, which can also be used to obtain, residency.
TAX REGIME
Corporate Tax:
25% on net taxable income generated within Panama.
Territorial Principle:
Income from offshore activities, such as sales of goods that do not enter Panama or services rendered outside, is generally not subject to tax.
VAT (ITBMS):
Standard rate is 7%, with higher rates for alcohol/tobacco and exemptions for essentials.
Individual Income Tax:
Residents are taxed on Panamanian-source income, with a 0% rate on income up to PAB 11,000, 15% on PAB 11,001–50,000, and 25% on amounts above PAB 50,000.
Special Regimes:
Companies in Panama Pacifico, Colon Free Zone, and Multinational Headquarters (SEM) enjoy special tax, customs, and labour incentives.
Dividends and Withholding Tax:
Dividends derived from foreign source income or export operations are subject to a 5% withholding tax. Other dividends are subject to 10% (registered shares) or 20% (bearer shares).
PANAMA COMPANIES
Corporation (Sociedad Anónima – S.A.):
The most popular structure, ideal for commercial activities and holding assets. It requires at least one shareholder, and no minimum capital is required (though often $10,000 is used). Names must end in Corporation, Incorporated, or SA.
Limited Liability Company (Sociedad de Responsabilidad Limitada – S.R.L.):
Suitable for smaller businesses or partnerships, offering liability protection for members, with management often vested in one or more administrators.
Private Interest Foundation (Fundación de Interés Privado):
Used primarily for estate planning and asset protection rather than commercial activities. These do not have shareholders but rather founders, protectors, and beneficiaries.
Branch of a Foreign Company:
Foreign corporations can establish branches in Panama by registering with the Public Registry, allowing them to operate locally while maintaining their original legal structure.
Sole Proprietorship:
Suitable for individuals operating in their own name.
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Contact Us
Get in touch with the right people to get the right help in setting up your business in PANAMA.
enquiries@chandrawatpartners.com.