How to set up a company in Panama (2026): steps, tax & cost

Overview

Panama is one of the oldest and best-known offshore corporate jurisdictions. Its flagship vehicle is the Sociedad Anónima (SA) — a corporation governed by Law 32 of 1927 — which a foreigner can own entirely, from anywhere, without setting foot in the country. The reason people choose it is Panama's territorial tax system: income earned outside Panama is not subject to Panamanian income tax, while income sourced inside Panama is taxed at the standard 25% corporate rate.

That makes Panama a genuine tool for holding and offshore structuring — but only for income that is genuinely foreign-source. Panama remains on the EU list of non-cooperative tax jurisdictions in 2026, and new economic-substance rules are tightening. The structure still works; the honest picture is that it now comes with real banking and reputational friction you should price in before you incorporate.

Who it's for

A Panama corporation suits people whose income is genuinely earned outside Panama and who want a clean, well-understood holding or operating vehicle. It is a poor fit for anyone trying to hide income from their home tax authority, or who expects it to make locally-taxed profits disappear — it won't, and modern reporting makes that a fast route to trouble.

• Holding companies for foreign real estate, shares, IP or investment portfolios
• Consultants and online businesses whose clients and work are outside Panama
• Asset-protection and estate-planning structures (often paired with a Panama Private Interest Foundation)
• Groups that want a stable, English-friendly Latin American base with USD as legal tender
• NOT for you if your customers or activity are inside Panama — that income is taxed at 25%
• NOT for you if you'll manage it from a high-tax country with CFC rules (see the reality section below)

Types of company

Foreigners overwhelmingly use the Sociedad Anónima. The LLC-style Sociedad de Responsabilidad Limitada (SRL) exists and is useful in specific cases — notably for US owners who want pass-through / check-the-box treatment.

Corporate tax & key taxes

The headline is territorial: only Panama-source income is taxed. A corporation with purely foreign-source income files, but owes no income tax on it. These are the 2026 rates — verify the current figure with the DGI before you rely on it.

How to set it up, step by step

1. Appoint a Panama resident agent — a licensed Panamanian attorney or law firm. This is mandatory: no corporation can exist or be registered without one.
2. Complete KYC / due diligence. The resident agent must identify the directors, shareholders and ultimate beneficial owner (UBO) and keep that information on file.
3. Reserve and clear a company name at the Registro Público (Public Registry).
4. Draft the Articles of Incorporation (Pacto Social) — name, purpose, authorized capital, the three directors/officers (president, secretary, treasurer) and the resident agent.
5. Notarize the Pacto Social before a Panamanian notary, then file it with the Public Registry to bring the corporation into legal existence.
6. Register the beneficial owner in the RUBF (Registro Único de Beneficiarios Finales) via the resident agent — a private register held by the authorities.
7. Obtain the RUC (tax ID) from the DGI and, if you'll have Panama-source activity, an Aviso de Operación (operating notice).
8. Open a corporate bank account — plan for this to be the slowest, hardest step (see below).

Costs & timeline

Substance, banking & the reality

Two realities matter more than the tax rate. First, where a company is managed and controlled is usually where it can be taxed. If you run your Panama SA from a high-tax country, controlled-foreign-company (CFC) and place-of-effective-management rules can pull its profits into that country's tax net regardless of Panama's territorial system. Second, Panama tightened economic-substance requirements with Law 526 of 2026 (effective from fiscal year 2027): certain entities in multinational groups must prove genuine local activity to keep the exemption on foreign-source passive income, or face a definitive tax on it. And opening a corporate bank account is now the real bottleneck — Panama's presence on the EU tax list means many banks worldwide apply enhanced due diligence, and some decline Panama companies outright.

Common mistakes

• Assuming foreign-source income is tax-free everywhere — it's tax-free in Panama, but your home country may still tax it under CFC rules.
• Skipping the RUBF beneficial-owner filing — the resident agent can resign and the company can be struck off for non-compliance.
• Forgetting the USD 300 annual franchise tax — arrears trigger penalties and eventual suspension at the Registry.
• Expecting anonymity from bearer shares — bearer shares are immobilised and must be held by an authorised custodian; the UBO is recorded.
• Underestimating the bank account — budget weeks, real documentation, and the possibility of a rejection tied to Panama's grey-list status.
• Ignoring the new economic-substance rules if your structure holds foreign passive income within a multinational group.