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Advantages of Panamanian Corporation

ADVANTAGES OF PANAMANIAN CORPORATIONS

Panama is one of the most popular countries for setting up offshore corporations. This is because it offers many benefits to both local and international business owners. Below are the main advantages of forming a corporation in Panama.

Tax Benefits

No Tax on Foreign Income

Panama only taxes income made inside the country. If your business makes money from outside Panama, that income is not taxed.

No Tax Filing for Offshore Income

You don’t need to file tax returns in Panama for income earned outside the country. The only requirement is an annual government fee of $250 to keep your company in good standing.

Financial Freedom

No Currency Controls

There are no limits on currency exchange in Panama. The US dollar is widely used and accepted.

No Capital Requirement

There is no need to pay a minimum capital when forming a Panamanian corporation. You can also take as much time as you need to pay the full capital.

Easy Company Setup

No Need to Be in Panama

You can form a Panamanian corporation without visiting Panama. Our law firm can act as nominee incorporators and handle all legal paperwork.

Fast Incorporation

With our help, your corporation can be set up quickly using a simple document called the Articles of Incorporation.

Privacy and Flexibility

No Nationality Limits

Anyone can be a director, shareholder, or officer — from any country.

Use of Nominee Directors

We offer nominee directors for privacy. When you want to take over, you can replace them easily by providing new directors.

Meetings Anywhere

Meetings of directors or shareholders can be held anywhere in the world, not just in Panama.

Flexible Share Options

Nominative or Bearer Shares

You can issue shares in either your name (nominative) or bearer form.

With or Without Par Value

Shares can be issued with or without a fixed value.

Directors and Officers

Directors or officers do not need to be shareholders.

No Business License Needed (for Offshore Activities)

If your corporation operates only outside Panama, it doesn’t need a local business license.

What’s Required to Form a Corporation

The Articles of Incorporation Must Include:

  • Names and addresses of the people forming the company

  • Company name (must be unique and include “Corp.”, “Inc.” or similar)

  • Purpose of the corporation

  • Capital amount and number of shares

  • Domicile of the company and name of the Resident Agent (must be a Panamanian lawyer)

  • Duration (can be permanent)

  • Names and addresses of at least three directors

  • Any other legal clauses agreed by the founders

Powers of a Panamanian Corporation

A Panamanian corporation has the right to:

  • Own and manage property

  • Sign contracts and agreements

  • Borrow money and issue debt

  • Sue and be sued

  • Operate internationally

  • Create and change bylaws

  • Guarantee or buy shares in other companies

  • Dissolve itself legally

  • Carry out any legal business

Shareholder’s Meeting

Limited But Important Role

Shareholders don’t manage the day-to-day business, but they hold the highest authority in a corporation.

Key Powers:

  • Appoint directors

  • Change the Articles of Incorporation

  • Approve sale or transfer of company assets

Meetings can be held anywhere and at any time, unless otherwise stated in the company bylaws.

Board of Directors

The Board of Directors manages the business and operations of the corporation.

  • Must have at least three adult individuals

  • They don’t have to be shareholders

  • Can be represented by proxies (if allowed in the bylaws)

Company Officers

Every corporation must have a:

  • President

  • Secretary

  • Treasurer

These are chosen by the Board of Directors and can be replaced at any time.

Registered Agent

Every Panamanian corporation must have a Registered Agent — a licensed attorney or law firm based in Panama. The agent can be changed by amending the Articles of Incorporation.

Corporate Books

If your corporation does not operate in Panama, it only needs:

  • A Minute Book

  • A Stock Registry Book

These can be stored anywhere in the world.

Tax Rules in Panama

No Tax on Foreign Business

Even if your company has an office or staff in Panama, as long as the business activities happen outside Panama, it won’t pay income tax.

No Tax on Dividends from Foreign Activities

You can share profits with shareholders without paying taxes in Panama if the income came from foreign business.

No Estate Tax

If the company has no business or property in Panama, its shares are not subject to estate tax when passed on after death.

Salary Payments

Panama income tax only applies if the person receiving a salary lives in Panama. Foreign residents don’t pay tax on salaries from a Panama company.

No Annual Filing

If your company earns no income within Panama, you don’t have to file income tax returns or any other forms.

Need Help Setting Up a Panama Corporation?

At Offshore High Risk Merchants, we help high-risk businesses protect their assets and grow internationally. Setting up a Panamanian corporation is one of the best ways to get privacy, tax efficiency, and flexibility.

👉 Contact us today to learn more or get started.

 

THE PERSONS DESIRING TO ORGANIZE A CORPORATION SHALL SIGN THE ARTICLES OF INCORPORATION (PACTO SOCIAL) AND SAID ARTICLE OF INCORPORATION SHALL STATE:

  • The name and domicile of each subscriber to the Articles of Incorporation.
  • The name of the corporation, which must not be same as, nor deceptively similar to the name of a pre-existing corporation.
  • The name must include a word, phrase or abbreviation indicating that it is a corporation, distinguishing it from any natural person or a company having any other character.
  • The name of the corporation may be expressed in any language.
  • The general purpose or purposes for which the corporation is formed.
  • The amount of the capital stock and the number and nominal (par) value of the shares into which it is divided or if the corporation is to issue shares without nominal value, shall apply the statements referred to in Article 22 hereof.
  • The amount of the capital stock and nominal value of shares may be expressed in terms of the legal currency of Panama, or the legal gold currency of any other country, or both.
  • If there are to be shares of more than one class, the number of shares in each class and designations, preferences, privileges and voting rights and the restrictions or requirements of each class, or a statement that such designations, preferences privileges and voting powers and restrictions or other requirements may be determined by resolution passed by a majority of the Directors.
  • The number of shares that each of the subscribers to the Articles of Incorporation agrees to take.
  • The domicile of the corporation, which may be in Panama or elsewhere, as well as the name and domicile of its Resident Agent in Panama, who must be an attorney or firm of attorneys in Panama.
  • The duration of the corporation, which may be perpetual.
  • The full names and addresses of at least three Directors.
  • Any other lawful clauses to which the subscribers may have agreed.

POWER OF CORPORATION

Every corporation, organized in accordance with this law shall have, in addition to the other powers herein bestowed, the following:

  •  To sue and be sued in any court.
  • To adopt and use a corporate seal and alter it at its convenience.
  • To acquire, purchase, hold, use and transfer real property and chattels of any kinds and to make and accept pledges, mortgages, leases, liens and encumbrances of all kinds.
  • To appoint officers and agents.
  • To execute contracts of all kinds.
  • To enact By-Laws (estatutos or statutes) not incongruent with any existing law or its Articles of Incorporation, for the management, regulation and administration of its affairs and properties, for the transfer of its shares of stock, for the calling of shareholders or directors meetings and for any lawful purpose.
  • To conduct its business and to exercise its powers in foreign countries.
  • To dissolve itself in accordance with the law, whether voluntarily or by other reason.
  • To borrow money and incur debts in relation or connection with its business or by any lawful purpose, to issue bonds, promissory notes. bills of exchange and other documents of obligation (which may or may not be converted into stock of the corporation) payable at a specified date or dates or upon the happening of a certain event, whether secured by mortgage, pledge or otherwise, or unsecured, for money borrowed or in payment for property purchased or acquired or for any other lawful purposes.
  • To guarantee, acquire, purchase, hold, sell, assign convey, mortgage, pledge or otherwise deal with or dispose of shares, bonds, or other obligations issued by other corporations or by any municipality, province, state or government.
  • To do and perform any and everything that may be necessary in carrying out the purposes enumerated in the Articles of Incorporation or its amendments thereof, or what ever becomes necessary or convenient for the protection and benefit of the corporation and in general to carry on any other lawful business whether or not such business is set forth in its Articles of Incorporation or in any amendment thereof.

SHAREHOLDER’S MEETING

Generally, the management of the affairs of a corporation is vested in a Board of Directors and the shareholders are attributed few administrative functions, however, the shareholders constitute the supreme power of the Corporation.

The main functions of the Shareholder’s Meeting are as follows:

  1. To appoint the Directors.
  2. The amendment of the Articles of Incorporation.
  3. The sale, lease, exchange or disposal of capitals assets.


The holding of Shareholder’s Meeting at certain date or within affixed time is not required by law. This is to be provided by the Articles of Incorporation if it is not so therein provided; the shareholder’s meeting may be held any time and place, within or outside the Republic of Panama.

THE BOARD OF DIRECTORS

The management, administration and business of the Corporation is vested in a Board of Directors, composed of at least three natural person of full age, and subject to that which is prescribed by law and provisions to that effect in the Articles of Incorporation, the Board of Director has absolute control and management of corporate affairs, including the adoption, amendment and repeal of By-Laws.

In absence of a provision to the contrary in the Articles of Incorporation, it is not necessary that the members of a Board of Director be shareholders. Additionally, if expressly authorized by the articles of incorporation, it is possible for directors to be represented at meetings of the Board of Directors through proxy holders, who need not be directors, and who must be appointed by public or private instrument, with or without power to substitute.

THE SHARES AND CAPITAL

Corporations shall have power to create and issue one or more classes of shares of stock, with designations and preferences, privileges, voting powers, restrictions or qualifications thereof and other rights as may be provided by the Article of Incorporation.
OFFICERS

Corporations must have a President, a Secretary and a Treasurer, who are elected by the Board of Directors. In absence of a provision to the contrary in the Articles of Incorporation or the By-Laws, such officers may be replaced at any time by, resolution adopted by the majority of the members of the Board of Directors or stockholders.

REGISTERED AGENT

The Panamanian corporations must have a registered agent in the Republic of Panama. According to the Panamanian Law, the Registered Agent must be an Attorney or a Firm of Attorney. The Registered Agent may be replaced by means of an amendment to the Articles of Incorporation.

BOOKS

When the corporation operations are not performed in Panama, it requires only a minute Books and a Stock Registry Book, which may be kept in any part of the world.

TAXATION

  • Income tax in Panama is levied upon net Income derived from operations within the territory of the Republic of Panama.
  • Profits and dividends arising from activities outside of Panama are not subject to taxation by Panamanian law.
  • Even if a Panama corporation has an office in Panama, employees in Panama, and a license to engage business in Panama, it still does not pay a Panama income tax if the transactions out of which the income arose were consummated outside of Panama. In other words, a Panama corporation with Directors and Officers and an office and employees in Panama does not pay income tax in Panama if the office conducts its business outside of Panama.
  • A Panama corporation not operating in Panama may distribute all or part of its assets to its stockholders without any obligation to declare such distribution. This is the case even though the assets distributed to the shareholders may have a value at the time of distribution which is greatly in excess of their value when originally transferred to the corporation.
  • No estate tax will be imposed on the transfer causa mortis of shares of a Panama corporation which have no business within Panama or which owns no real estate in Panama.
  • As to individuals who receive salaries, wages or any other compensations from Panama corporation, such individuals are subject to the Panama income tax only if they reside in the Republic of Panama. Thus, if a Panama corporation pays a salary to a resident of a foreign country, that individual does not have to pay a Panama income tax on this salary, nor is there any withholding tax on such salary.
  • Only individual or corporations with taxable income, that is, income obtained within Panama as herein above explained, are required to file yearly income tax returns. Accordingly, corporations organized in Panama with no income obtained within the Republic of Panama are not required to pay any tax to the Government of Panama nor are they required to file income tax returns or any other forms with any governmental authority of the Republic of Panama or seek a tax exemption.

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