Form A Business In Panama While The Iron Is Hot
Panama has been gaining a reputation worldwide for its respectable corporate and financial services. Experts attribute such progress in two factors: The government’s documented tax advantages and the nation’s promising economic performance. As a result, more foreigners have become more tempted to form a business in Panama.
As of today, Panama remains to be the nation with the lowest VAT and income tax rate in the Central American region. This attracts investors, especially from the North American and European continent.
If you wish to form a business in Panama, then allow us to discuss some crucial information regarding the types of companies you can find here. Each has its own characteristics, advantages, and requirements for setting up. It’s critical to determine these differences as early as now.
Offshore Companies in Panama
One of the reasons for Panama’s rise in the economy is the formation of offshore jurisdictions worldwide. In the future, this progress is expected to even upsurge, according to experts. If you are a foreigner who plans to form a company in Panama, you must take note of the characteristics of an offshore company in this nation:
- All shareholders have the right to confidentiality as to their personal information.
- Generally, offshore companies are exempt from tax.
- The government does not oblige Panamanian companies to declare offshore activities.
- An offshore company in Panama can have a single shareholder.
- Directors can organize meetings online or out of the country.
The incorporation of businesses in Panama is upheld at multinationals and transnational level. While offshore companies have tax exemptions, the law does not declare it as absolute. Only those earned as a result of operations carried out and perfected abroad shall be exempt from tax. All commercial operations within the country are not included.
To know more, you have to employ a qualified lawyer who will represent and assist you through the incorporation procedure.
Advantages of Offshore Companies In Panama
Offshore businesses in Panama have several advantages, being an International Business Company (IBC). As stated earlier, Panamanian government exempts taxes from operations overseas. However, there are more benefits when you form a company in Panama. Here are they:
- Panama is a multicultural transit country, due to being located at the center point of North and South American business operations.
- The major or commercial languages are English and Spanish. A huge portion of businesses fluently uses both, which minimizes any language barrier within the country.
- Panama has been continuously advancing its financial and infrastructure service industries.
- There is no limitation on foreign exchange.
- All shareholders enjoy a great deal of privacy.
- The IBC incorporation process is relatively quick, with the aid of trustworthy advisors.
Onshore Companies in Panama
Offshore and onshore companies in Panama are virtually the same. There are few differences, especially with tax regulations. These are the main characteristics of a Panamanian onshore company:
- Shareholders have a right to protection as to their confidentiality.
- Onshore companies must state all commercial activities and events settled within the country, except for companies established in duty-free zones.
- Companies must comply with accounting standards by having its own registry.
- Companies can have a single shareholder.
- The directors or shareholders of the company can be from any country.
- Directors can conduct meetings or conferences online.
Compared to offshore companies, onshore businesses are not tax exempt in most cases. However, due to Panama’s relatively low tax rates, the number of incorporation’s of onshore companies is still increasing. In fact, this nation has one of the highest numbers of business formations in Central America.
Incorporation in duty-free zones provides onshore companies a series of tax exemption benefits. This factor offers tumultuous opportunities to foreign investors who want to form a business in Panama. Having said so, these companies have to comply with the legal requirements as to executing permitted activities and investments within duty-free zones.
In addition, Panama’s stable economy provides all the necessary elements to establish a profitable base point. These include robust financial and banking service platforms that aid onshore companies in conducting business transactions with customers and suppliers.
The Process of Incorporating Businesses in Panama
Both offshore and onshore companies have their own set of characteristics and advantages. In any case, business incorporation is just the same for both company types. Here are the major requirements you need to fulfill before you form a business in Panama.
Basically, you need to draft a Social Pact which contains the following information:
- Names and addresses of all the shareholders
- A unique or original company name
- Address of the company
- Objectives of the company
- Amount of share capital, as well as the number and nominal value of the shares in which it is divided
- List of Board of Directors, along with their specific designations or positions
- Other stipulations, including preferences, privileges, voting rights, restrictions and other conditions set by the Board of Directors
- Number of shares that each shareholder agrees to take
- Name and address of your resident agent (it’s preferable to get a suitable Panamanian lawyer)
- Duration of the Company
Once the legal proxy has duly accomplished and registered the corporate agreement, the company will then obtain its legal personality. For the company’s commercial opening, the Commercial License and the RUC of the business must be issued in order to declare taxes. In addition, a company has to pay municipal taxes according to the location of its tax domicile.
Are You Ready To Form A Business in Panama?
Whether you aim to form an offshore on an onshore company in Panama, it’s still practical to study both types of business formation. Offshore strategies might be highly beneficial overall, but there are repressive measures to consider. Being knowledgeable in both aspects give you the best of both worlds.
We at Biz Latin Hub suggest you go halfway or apply a “midshore” strategy. We can provide you tailored advice about the best business expansion plans in Panama and in Latin America.