Corporation (Sociedad Anonima)

The corporation limited by shares is the most frequently used corporate form in Panama, and is the usual choice for an offshore operation.

Corporations are formed under the Law No. 32 of 1927 and the Commercial Code (Decree-Law No. 5 of 1997, Article 5). A corporation is formed by two subscribers (or nominees in the case of absent foreign subscribers) who execute the Articles of Incorporation (Statutes) before a notary and then record them at the Public Registry Office, paying a capital tax (minimum US$60.20 on the usual capital of US$10,000). There is an annual registration fee of US$300. All commercial and industrial businesses must have a Notice of Operations in order to engage in business unless they are specifically exempt. The cost of a Notice of Operations is 2% of a company’s net worth up to a maximum of US$60,000. Companies operating in any of the Free Zones are subject to an annual license tax of 1% of net worth up to a maximum of US$50,000.

Following incorporation, only one shareholder is necessary. Shares can be of various classes, can have par value or not, may be registered or bearer. There is no minimum capital, and no paying-up rules, except that no-par-value and bearer shares must be fully-paid when issued. Strict regulations now apply to bearer shares: the registered agent must keep the bearer share certificate in safe custody and must notify the Registrar about such shares.

 

Offshore Business Introduction

Panama probably means shipping and the canal to most people, and indeed it is the world’s largest shipping registry; but it is also home to a substantial number of banks, with strong North and South American connections, as might be expected. The canal, and Panama’s Colon Free Zone, have established the country as a pre-eminent trading base, and an unknown but presumably high proportion of Panama’s registered companies are involved in trade.

Panama has a captive insurance sector, and through its stock exchange is attempting to encourage mutual funds; but neither sector has reached a great size.

This section of the site describes the most important types of offshore business activity carried out from Panama.

 

Corporate Taxation Introduction

In February, 2005, Panama’s unicameral legislature approved a major fiscal reform package in order to raise revenues from new business taxes, and reduce the country’s level of debt. The legislature voted 46 to 28 in favor of the measures, which included a 1.4% tax on companies’ gross revenues, and a 1% levy on firms operating in the Colon Free Trade Zone – the largest free port in the Americas.

 

The key advantages of Panama are

• - High level of asset protection
• - Financial privacy
• - No minimum capital requirements. A corporation may operate without any issued share capital requirements- All Panamanian companies must appoint a registered agent, but there is no requirement for a local registered office. This function more often is carried out by a local attorney or a firm of attorneys
• - No taxes on capital (stocks, bonds and other investments) held by Panamanian corporations
• - No bureaucracy
• - No annual tax return requirements
• - No requirements as to the number of shareholders, and no nationality restrictions

 

The biggest mistakes when starting a company abroad

Not all topics related to founding a company abroad are always free of prejudices and false information that have prevailed over the years. We give you an overview of the most important questions about founding a company abroad.

Founding a company abroad as a citizen of another country is legal?

Founding a company abroad as a citizen of another country is legal?

Yes, in most countries foreigners can be sole shareholder of a local entity.

Do you have to live in the country where you start a company?

Do you have to live in the country where you start a company?

No you can set up a company anywhere in the world, as long as the country in question allows you, as a foreigner, to acquire shares in local companies. If this is not the case, trustees can be used. Freedom of establishment applies within the European Union. However, it is important that the management takes place locally, in the country in which the company is registered. In addition, a permanent establishment must be set up. Without this, a German tax office will not recognize the company and, in the worst case, would demand back payment of corporate and trade taxes plus late payment penalties. We rent you a real office and set up a permanent establishment that meets all requirements without a doubt. In addition, we have real managing directors who run companies in the home country and are resident there.

Problematic law firms: closure is made more difficult

Problematic law firms: closure is made more difficult

Some law firms tie clients with gag contracts and apply pressure when the client wants to close their business. If you are a client of a law firm that has set up a legally unsound company for you, you make yourself vulnerable to blackmail. Because in the event of a tax problem, law firms without a license are not bound by a duty of confidentiality.

Changing offices is made more difficult

Changing offices is made more difficult

We receive many inquiries from customers who already own a foreign company and are looking for a new law firm. Switching to us is then often made more difficult. So horrendous final bills are made, which have to be paid before a change is possible. Therefore we have developed a trust principle. If you are not satisfied with us and want to switch, you can do so at any time. You will receive the necessary documents (resignation letter) from us in a standardized form after the foundation. This protects you from unexpected costs and you are free to go to another law firm at any time. So far we have not lost a client to another law firm.

Privacy Policy/Office Location

Privacy Policy/Office Location

Your accounting documents are safe with us. In addition, all electronic data is only stored in encrypted form and apart from us, who are bound by professional secrecy, no one has access. All accounting documents are also only stored locally. Neither authorities nor hackers can access this data.

No taxes?

No taxes?

There are certainly locations in the world that do not charge any taxes to companies and private individuals or only charge a very low flat-rate tax. However, this can rarely be used without a corresponding change of residence. If you are resident in Germany, the relevant double taxation agreement is decisive. Providers who promise otherwise will tempt you into tax evasion, which is usually severely punished if discovered. We advise you not to set up companies in countries that have already been blacklisted by the OECD. The foundation is usually very cheap, but the tax consequences in Germany can be devastating. Since the introduction of the automatic exchange of information between almost all major countries, an anonymous account or company no longer exists.