Incorporate in Panama
Last updated: July 2026
Panama remains an Americas hub: corporation or LLC, territorial principle on foreign income, 25% CIT on Panama-source profit. Offshore reputation still precedes the file: expect cautious banks and moderate paperwork.
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Who it fits
- Holding or services with non-Panama revenue and assumed territorial logic
- Founders tied to Latin America seeking moderate cost and no notable local CFC
- Structure complementing life or assets in a dollarized zone
When to skip
- Activity generating Panama-source income without a 25% CIT plan
- Urgent banking without local network or KYC patience
- Expecting EU tech-startup branding. Panama is a regional hub, not e-Residency
Business scores
See the numbers
| Criterion | Panama |
|---|---|
| Setup | 6.5 |
| Banking | 5.5 |
| Labour | 6.5 |
| Reputation | 4.5 |
| E-gov | 5.5 |
| Holding | 8.0 |
| CFC | 9.5 |
| Substance | 8.0 |
| Rates | Value |
|---|---|
| Corporate tax | 25% (territorial) |
| Exit / distribution | ≈10% (territorial) |
Scores 0–10: higher is more favourable. CFC: high score = low risk the state taxes your foreign companies if you reside here. Detail: Ranking methodology. Compare this hub in Ranking.
How to read scores here
Panama: 25% CIT on Panama-source income; foreign income outside company scope under territoriality. Little notable CFC for local residents on abroad entities. Ease 6.5/10: local counsel, public registry, resident agent required. Less smooth than Estonia. Banking 5.5/10: local banks strict post-Panama Papers, slow onboarding for foreigners without ties. Enforcement 8/10. DGI and compliance tightened; the country hardened without becoming Singapore. Cost moderate: formation ~$1.2–2.5k, $300/year franchise tax, resident agent. Business score penalizes banking; it rewards structures with a real territorial story. The 25% rate hits Panama-source only if you document source well. Banking 5.5 reflects post-2016 caution, not the old easy-offshore myth. Enforcement 8 shows DGI and banks aligning expectations. Regional holdings use Panama for dollarization and limited treaties, not for EU tech branding. Liberty Stack penalizes banking more than tax because account opening is the practical bottleneck for foreign founders. Founders with existing Latin American clients extract more value than Europeans seeking a generic offshore wrapper.
Cost of operating
Band: Moderate
- Setup (USD): $1200–2500
- Annual (USD): $450–2000
Formation packages often ~$1.2–2.2k in year one (registry + resident agent). Then: $300 franchise tax + agent/secretarial: roughly $450–975/year before real bookkeeping. Fine for a light shell/holding; local activity or picky banks need more budget. Not “free” despite the offshore reputation.
Incorporation packages commonly $1.2k–2.5k year one (registry, bylaws, agent). Recurring: $300 franchise tax, resident agent and secretarial $450–975 before real bookkeeping. Accountant for inactive or light holding: a few hundred USD; more with payroll or Panama VAT. No mandatory free zone for a classic corporation. Hidden costs: legalizations, translations, banking trips, premium registered agent renewal. Panama is not Paraguay-low if you want serious banking and counsel, not Dubai-high either. Budget moderate and transparent. Legalizations, apostilles, and bilingual counsel for regional contracts. Local payroll triggers social charges. Premium registered agent fees pay off if you are absent all year. Accounting for an active company with local employees is a separate budget from an inactive holding shell. Annual legal retainer for corporate maintenance and registered agent coordination is typical for absent owners.
Substance, banking, enforcement
Post-scandals, Panamanian banks want declared beneficial owners, source of funds, and credible Panama or regional ties. A shell may survive on paper but struggles for accounts. Territorial substance means documenting taxable income as Panama-source and foreign income as foreign. Resident agent and current books are the floor. For Panama tax residents, personal territoriality adds appeal; for non-residents, the Panama company is mainly a regional vehicle with heightened compliance. Banks want Panamanian or Latin American professional references. A holding must show why Panama, not Delaware. Dollarized flows ease regional treasury. Panamanian public registries expose directors: transparency is part of the new normal. Corporate books in Spanish with English summaries help foreign founders pass bank and DGI review. A resident agent who responds quickly to bank queries is worth prioritizing over the cheapest annual fee.
CFC and tax residence
Panama does not apply ATAD CFC: a Panama tax resident may, under territoriality, not tax foreign income of a foreign company. Remain a French or US tax resident and domestic rules prevail. A Panama company does not automatically make a European a territorial resident. Panama income dressed as foreign is a red flag; DGI looks at the real source. Home-country CFC plus Panama company without substance equals double friction. Panamanian personal territoriality does not equal a Panama company for a non-relocated European. DGI scrutinizes the substance of declared foreign income. An EU resident with an undeclared Panama company stacks criminal and CFC risk: territoriality does not save you.
Practical setup path
Typical path: SA or LLC via agent, registered agent, bank account (the real delay), then annual maintenance and economic substance if the activity qualifies. Panama territoriality mainly protects documented foreign-source income. Expect long banking KYC and recurring agent fees. Do not sell Panama as “secrecy”. CRS and information exchange are the baseline.
Living here
Main cities
- Favourable weather
- Sea access
- Mid cost
- Car useful
- Favourable weather
- No sea access
- Low cost
- Car useful
Liberty scores
Overall score (equal weights) : 6.3/10
See the numbers
| Criterion | Panama |
|---|---|
| Tax | 6.5 |
| Money | 6.5 |
| Economy | 7.0 |
| Property | 4.5 |
| Self | 6.0 |
| Space | 8.0 |
| Infra | 5.5 |
Ranking Liberty-mode scores 0–10. Higher is more favourable for that criterion.
Personal taxation
| Income tax | 0–25% |
| Inheritance | 0% |
Indicative Ranking labels: verify local law.
Homeschooling
Grey area
Neither clearly legal nor banned; informal practice.
Indicative status (self axis): verify local law.
Real estate
| Gross rental yield | 6.5 % |
| Entry ticket (30 m² studio) | 60,000 € |
| Rental income tax | jusqu’à 25% |
| Property capital gains | 10% (pas d'exonération durée) |
| 5-year price trend | +10 % |
| Listings | Encuentra24 |
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Compare with
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FAQ
Is all income of a Panama company exempt?
No. Only foreign-source income sits outside corporate tax under territoriality. Panama-source income: 25%. Qualify the source of each flow. Cross-check Liberty Stack Business scores and cost bands before you commit to formation fees.
LLC or classic corporation?
Both exist; offshore packages often sell a corporation. For a modern holding, compare governance, agent cost, and your target bank’s expectations. Cross-check Liberty Stack Business scores and cost bands before you commit to formation fees.
How long for a bank account?
Plan weeks to months with a complete file and sometimes interviews. Timelines lengthened after compliance tightening: avoid 48-hour promises. Cross-check Liberty Stack Business scores and cost bands before you commit to formation fees.
Panama or Paraguay for territoriality?
Both use territorial personal logic, with 25% vs 10% corporate tax. Paraguay cheaper, Panama more dollar hub and holding history. Banking is hard in both without presence. Cross-check Liberty Stack Business scores and cost bands before you commit to formation fees.
Sources (cost)
- https://www.bcincorp.com/company-services/company-formation.html
- https://www.globaloffshorecompany.com/company-services/company-formation.html
How to read scores and cost bands: Ranking methodology.