Panama City’s skyline reflects its growth as a major international business and financial hub. If you’re considering expanding your business internationally, incorporating an International Business Company (IBC) in Panama can be an attractive option. An IBC is essentially an offshore corporation that operates outside its country of incorporation.
Panama stands out as a jurisdiction for IBCs due to its tax-friendly laws, strong privacy protections, and streamlined company formation process. In fact, Panamanian IBCs enjoy tax-free income on foreign operations and strict confidentiality for owners.
Combined with a stable economy and modern financial infrastructure, Panama has become a popular haven for entrepreneurs seeking to protect assets and minimize taxes while doing business globally.
What Is a Panama IBC?
An International Business Company (IBC) in Panama is a type of corporation (locally known as a Sociedad Anónima) geared toward international commerce. It is a legal entity separate from its owners, providing limited liability and asset protection. Panama’s IBCs are governed by the country’s General Corporation Law (Law 32 of 1927), a longstanding legal framework that has been tailored to streamline incorporation for both locals and foreign investors.
Under this framework, a Panama IBC can be formed quickly and operate with flexibility: it may conduct any lawful business worldwide and is not subject to local taxes as long as it earns income abroad (thanks to Panama’s territorial tax system). In essence, a Panama IBC offers entrepreneurs the ability to hold assets or run international operations under a Panamanian corporate umbrella, benefiting from Panama’s business-friendly laws while keeping business activities offshore.
Benefits of Forming a Panamanian IBC
Panama is often chosen for IBC formation because of the significant advantages it offers. Here are some of the key benefits of setting up a Panama IBC:
Tax-Free Foreign Income
Panama follows a territorial taxation system, income earned outside of Panama is not subject to Panamanian taxes. This means your IBC pays 0% corporate tax on foreign-sourced profits (no income, capital gains, or dividend taxes on offshore earnings). This can dramatically reduce the tax burden for international businesses.
Strong Privacy and Asset Protection
Panama provides robust confidentiality for company owners. Shareholder identities are not publicly disclosed in Panama, and the Public Registry does not list the beneficial owners of an IBC.
Directors are published, but nominee directors can be used to shield the real owners’ identities. This, coupled with Panama’s strict banking secrecy laws, means your personal information and assets are well-protected. Additionally, an IBC legally separates your personal assets from the company’s liabilities, offering an extra layer of asset protection.
Ease of Incorporation
Setting up a Panama IBC is a fast and straightforward process. It typically takes just a few business days (around 5 days) to incorporate a new company. You don’t even need to travel to Panama to get it done.
Local law firms can handle the incorporation on your behalf, and personal presence is not required to form the company. The paperwork and regulatory hurdles are minimal, making Panama one of the more convenient jurisdictions for offshore incorporation.
Minimal Maintenance and Reporting
Ongoing compliance requirements are very light. Panama does not require annual tax returns or financial statements from purely offshore IBCs.
There is a simple annual franchise fee (USD $300) to keep the company in good standing, and no onerous audits or complex filings in Panama. This low-maintenance regime saves time and money over the life of the company.
No Currency Restrictions
Unlike some countries, Panama imposes no currency exchange controls. The economy effectively runs on the U.S. dollar, so your IBC can freely transact in USD or other currencies without government interference. Funds can move in and out of Panama without restrictions, which is ideal for international trade and banking flexibility.
Flexible and Foreigner-Friendly
Panama places no nationality or residency restrictions on who can own or manage a Panama IBC. 100% of the shareholders and directors can be foreigners or non-residents.
Moreover, there is no minimum paid-in capital requirement, while the standard authorized capital is typically USD $10,000, you are not required to deposit this amount when setting up the company. This makes incorporation accessible and cost-effective, without a need to lock funds in a local bank.
In summary, a Panama IBC offers tax efficiency, privacy, ease of use, and low costs, a combination that has made Panama one of the top choices for entrepreneurs and investors looking to operate internationally while minimizing red tape and taxes.
Legal Requirements and Structure of a Panama IBC
When forming an IBC in Panama, there are specific legal requirements and structural elements to be aware of. Panama’s corporate laws are quite straightforward, and below is an overview of the key formation requirements (covering company name, registered agent, shareholders, directors, and capital):
Company Name
The company must choose a unique name that isn’t already in use in Panama. The name can be in any language, but it must include a legal suffix indicating it’s a corporation, for example, “Inc.”, “Corp.”, “S.A.” (Sociedad Anónima), or similar.
Certain words (like “Bank,” “Insurance,” or “Trust”) are restricted and require special licenses if used, so most IBC names stick to general business terms plus the required suffix.
Registered Agent
Every Panama IBC is required to appoint a Panamanian Registered Agent (also known as a Resident Agent). This agent must be a licensed attorney or law firm in Panama.
The Registered Agent’s role is to act as the company’s local representative, they maintain the official registered office address in Panama, receive any legal notices, and liaise with government authorities on behalf of the company. (For example, NDM Law Firm often serves as the registered agent for clients’ IBCs, ensuring all local compliance matters are handled.) The registered office address is typically the law firm’s address in Panama.
Shareholders
A Panama IBC can be formed with as few as one shareholder, and there is no upper limit on the number of shareholders. Shareholders may be individuals or corporate entities from any country, Panama imposes no nationality or residency restrictions on ownership.
Shareholder information is kept private; unlike some jurisdictions, Panama does not record shareholder names in any public database. However, for regulatory purposes, the Resident Agent does maintain records of the actual owners internally.
(Panama has a confidential beneficial owner registry accessible only to authorities in special circumstances, but it’s not public.) This structure means you can enjoy ownership privacy while still complying with Panama’s laws.
Directors and Officers
Panama requires a minimum of three directors/officers for each corporation. In practice, this is usually satisfied by appointing a President, a Secretary, and a Treasurer, and these positions collectively fulfill the director requirement. (It’s common in Panama for the same three persons to be listed as both the directors and the officers of the company to meet this rule.) Directors can be of any nationality and do not have to reside in Panama. They can even be corporate entities.
The names and addresses of the directors are filed with the Public Registry when the company is formed, which makes them part of the public record. For those who desire extra privacy, nominee directors (often provided by the law firm acting as agent) are allowed and commonly used.
The use of nominees means the law firm’s affiliated persons appear as directors publicly, while you retain control through private arrangements (e.g. powers of attorney). This is a legal and accepted practice in Panama to enhance confidentiality.
Share Capital
There is no minimum paid-in capital required to form a Panama IBC. You don’t need to actually deposit any capital in a bank to start the company. Panama’s law typically authorizes a standard capital of US $10,000 for new corporations (this can be divided into shares of a set par value, e.g. 100 shares of $100 each, or some companies use 500 shares of no par value).
This figure is essentially nominal, it represents the maximum share capital the company could issue, but you are not required to pay this amount upfront or at any time. Shares in a Panama IBC can be issued as registered shares (in the owner’s name) or bearer shares.
Bearer shares are allowed under Panamanian law, but due to modern regulations, any bearer share certificates must be held in custody by an authorized custodian (like a bank or law firm) rather than freely carried by the owner.
In practice, most IBCs simply issue registered shares, as those are easier to manage under today’s compliance rules.
In summary, Panama’s incorporation requirements are flexible and investor-friendly: choose a unique name with the proper suffix, enlist a local law firm as your agent, have at least one owner and three directors (who can all be foreigners), and there’s no need to put up capital. These straightforward rules contribute to why incorporating in Panama is relatively hassle-free.
Legal Steps to Incorporate a Panama IBC
Forming an IBC in Panama is a step-by-step process that can be completed fairly quickly with the help of a local law firm. Below is an overview of the legal steps to incorporate a Panama IBC:
Choose a Company Name
Select a unique name for your corporation and ensure it meets Panama’s naming requirements. You can propose up to three name options (in case some are taken) and the names may be in any language as long as they include an approved suffix like Inc., Corp., or S.A.
It’s wise to have your attorney check name availability with the Panama Public Registry. Once you settle on an available name, it can be reserved for you for a short period (about 30 days) until you complete the incorporation process.
Panamanian Registered Agent and Prepare the Incorporation Documents
By law, you will need a Panamanian lawyer or law firm (Registered Agent) to handle the incorporation. After hiring your agent (for example, NDM Law Firm can serve this role), you’ll provide them with the necessary information to draft the Articles of Incorporation.
The information typically includes: the approved company name, the names and addresses of the shareholder(s), the intended business activities or purpose of the company, the duration of the company (often perpetual/unlimited), the amount of authorized share capital and how it’s divided, and the names and addresses of at least three directors who will also hold the officer positions.
The Registered Agent will prepare the Articles of Incorporation (called Pacto Social in Panama) in Spanish, which is the constitutional document of the company.
Sign and Notarize the Articles of Incorporation
The founding subscriber(s) of the company (often provided by your law firm to expedite the process) will sign the Articles of Incorporation. These signed documents then must be notarized by a Panamanian notary public.
The notary will draft a public deed (escritura pública) of the incorporation. This step essentially formalizes the incorporation documents so that they can be filed with the Public Registry. (If you are not in Panama, your law firm will handle the signing via power of attorney or have their staff act as the initial subscribers to get the company formed. You can then take over as shareholder via a transfer afterward.)
Register the Company with the Panama Public Registry
The notarized deed is submitted to the Public Registry of Panama for official registration of the company. At this time, government fees and the first annual franchise tax are paid. Once filed, the corporation usually gets registered within a few business days.
In fact, standard incorporations in Panama take roughly 4–5 business days to be completed and recorded. (There is an expedited process available for an extra fee if one-day incorporation is needed, though most people find the standard turnaround quite fast.)
When the registration is complete, the Public Registry issues a certificate or reference number for the new legal entity, confirming that your IBC now exists as a legal person in Panama.
Obtain Corporate Documents and Commence Operations
After registration, your law firm will provide you with the full set of corporate documents. This typically includes a certified copy of the Articles of Incorporation (with the Public Registry stamp), the certification of incorporation, stock certificates for your shares, the company’s corporate books (Minute Book and Share Register), and any applicable resolutions (such as the appointment of the real directors if nominees were used initially).
At this point, your Panama IBC is officially incorporated and ready to do business. You can now open bank accounts, enter contracts, or conduct whatever legitimate business activities you planned, using your new corporation.
Note: If your IBC will **conduct business within Panama (as opposed to purely holding assets or operating abroad), there are a couple of additional steps to comply with local regulations.
Specifically, a domestically operating company would need to register with the tax authorities to obtain a Tax Identification Number (RUC), and obtain a commercial license known as a “Notice of Operation” (Aviso de Operación) through the Panama Emprende online system.
These steps register the company with the local tax office and municipality for any local tax obligations. However, if your Panama IBC will only do business outside Panama, these additional registrations are generally not required (since no local income will be earned).
Your legal advisor can guide you on whether these apply to your situation. In any case, maintaining the IBC going forward usually just involves paying the annual $300 franchise tax and keeping a local agent, a simple process compared to many other countries.
Tax and Compliance Overview for Panama IBCs
One of Panama’s biggest draws for IBCs is its favorable tax regime. However, it’s important to understand how taxation and compliance work for your Panama IBC, both in Panama and in the context of your home country. Below is an overview of the tax and compliance landscape:
Territorial Taxation – No Tax on Foreign Earnings
Panama operates on a territorial tax system, which means only income generated within Panama is subject to local tax. Any income your IBC earns from business activities outside Panama is exempt from Panamanian income tax.
In practical terms, a Panama IBC that conducts all its business abroad will pay 0% corporate income tax in Panama. (For reference, domestic Panama companies pay a standard 25% corporate tax on locally-sourced profits, but this does not apply to foreign-sourced income.)
Similarly, there are no capital gains or withholding taxes on income earned abroad. This territorial approach is what makes the Panama IBC a true tax-efficient vehicle for international business.
Annual Franchise Tax
The one tax that every Panama IBC must pay is the Annual Franchise Tax, often called the tasa única. This is a flat USD $300 fee paid to the government each year to maintain the company’s good standing. The amount is fixed, it doesn’t matter how much profit your company makes (or doesn’t make).
Payment is due semi-annually (typically $300/year, with deadlines in July and January depending on incorporation date). The franchise tax essentially substitutes for any other corporate taxes for offshore companies.
Failure to pay it on time can incur small penalties, but as long as you pay this fee and renew your registered agent service, your Panama IBC will remain active. Aside from this $300, there are no other routine taxes on a pure offshore IBC’s activities in Panama.
No VAT on International Services
Panama’s Value Added Tax (known as ITBMS) is 7% on most goods and services sold within Panama. However, IBC activities that are purely international are not subject to VAT. For example, if your Panama IBC is providing services to clients overseas or trading goods that never enter Panama, it does not need to charge Panamanian VAT.
Panama explicitly does not impose VAT on IBCs for their offshore transactions. This is another saving, as many other countries would levy VAT or GST on a company’s services regardless of client location. (Do note that if your company does sell goods or services inside Panama, local VAT would apply to those specific local sales, but an IBC by definition generally operates internationally.)
Minimal Reporting Requirements
Panama keeps compliance simple for IBCs. There are no annual financial statements or tax returns required to be filed for a purely offshore company. Unlike onshore companies, you don’t have to submit audited accounts to the Panamanian authorities.
However, Panama does have a basic record-keeping requirement: IBCs must maintain accounting records and books (which can be kept anywhere in the world) and provide copies to the Registered Agent upon request.
This means you should keep track of the company’s financial transactions and have invoices/receipts, but these records remain private unless Panama’s authorities (e.g. for an investigation) ask the agent for them.
The Registered Agent is responsible for holding a copy of such records in confidence. In summary, ongoing compliance mainly comes down to paying the annual fee and keeping basic books, no heavy audits or public disclosures of financial information.
Foreign (Home Country) Compliance
It’s crucial to remember that while Panama won’t tax your foreign income, you may have tax obligations in your home country. Panama’s IBC regime is not about evading personal taxes; it’s about optimizing the corporate level taxes.
For example, if you are a U.S. citizen or resident, the U.S. taxes its persons on worldwide income regardless of the Panama tax situation. You must report your global income (including income earned by your Panama IBC) to the IRS, and you may need to file forms like the IRS Form 5471 (for foreign company ownership) or FBAR for any foreign bank accounts.
Similarly, other countries may require declaring foreign companies or paying taxes on distributed profits. The good news is that using a Panama IBC is completely legal and transparent, with proper advice, you can meet all foreign reporting requirements.
Panama also has compliance measures in place (it has adopted international standards against money laundering and tax evasion), but these mostly affect banks and lawyers, not your day-to-day use of the IBC.
The bottom line is: enjoy the tax advantages in Panama, but make sure to consult your home-country tax advisors to remain fully compliant with any personal tax duties you have. When structured and reported correctly, a Panama IBC can be a powerful tool for international tax planning.
Confidentiality and Privacy Protections
Privacy is a cornerstone of Panama’s offshore business environment. When you form a Panama IBC, you can expect a high level of confidentiality, thanks to both legal provisions and optional services like nominees. Here’s how Panama safeguards privacy for IBC owners:
No Public Disclosure of Owners
Panama’s Public Registry does not record the names of shareholders or beneficial owners of IBCs. This means that if someone searches your company in the public database, they will see the company’s name, registration number, registered agent, and the directors/officers, but they will not see who the shareholders (owners) are.
The identities of shareholders are kept strictly private in Panama. Only your Registered Agent (law firm) and the company itself maintain that information. Even though Panama implemented a private “beneficial owner” registry for regulatory purposes, that registry is accessible only to government authorities under specific circumstances and is not open to the public or general banks.
In short, your ownership stake in a Panama IBC remains confidential, offering peace of mind to those who prioritize financial privacy.
Use of Nominee Directors/Officers
Because the names of a corporation’s directors are public in Panama, many IBC owners opt to use nominee directors, basically, stand-in directors provided by the law firm or service provider. Nominee directors have no real control; they act per the instructions of the beneficial owner under private agreements.
Using nominees is legal in Panama and is a common practice to enhance privacy. For example, NDM Law Firm can provide three staff members to serve as the nominal President, Secretary, and Treasurer of your IBC, so that your own name doesn’t appear in the public registry as a director.
You, as the beneficial owner, retain full control through private power of attorney or through being the shareholder who can replace directors at any time. This structure effectively keeps your involvement anonymous to the public, while still maintaining legality and control.
Similarly, nominee shareholders can be used if needed, though typically the non-public nature of shareholder registers makes that unnecessary for most.
Bearer Shares (Controlled Anonymity)
Historically, Panama was known for bearer shares, which are physical share certificates that grant ownership to whoever holds the paper. Bearer shares allow for anonymous ownership transfers. Panama still allows bearer shares, but with modern safeguards: under Law 47 of 2013, any IBC that issues bearer share certificates must appoint an authorized custodian to hold those certificates.
The company’s Articles of Incorporation must declare this arrangement, and the actual bearer certificates (along with a sworn declaration of the owner’s identity) are deposited with a licensed custodian in Panama (such as a bank, trust company, or authorized law firm).
What this means is that you can have anonymity from the public via bearer shares, but there’s still a record with a custodian to satisfy regulatory concerns. In practice, many new IBCs simply issue nominative (registered) shares to avoid the extra step of custodial arrangements. But if you do prefer bearer shares, Panama provides a mechanism to use them in a compliant way.
Banking Secrecy and Professional Confidentiality
Panama has long held a reputation for stringent banking secrecy laws. It is actually a criminal offense for a bank employee in Panama to disclose information about account holders without authorization.
This strong legal protection means that if your IBC holds a Panamanian bank account, the bank cannot freely share your financial details. On the legal services side, attorneys in Panama are bound by professional secrecy rules.
Your communications and information given to your Panamanian lawyer or Registered Agent are kept confidential by law, except in the event of a serious criminal investigation with a court order. Additionally, while Panama now cooperates with international transparency initiatives to prevent illicit activities, any exchange of information is done government-to-government, and not publicly.
Overall, these measures ensure that your Panama IBC’s affairs enjoy a high degree of privacy, comparable to other well-known offshore jurisdictions.
In summary, Panama strikes a balance between privacy and compliance. You, as an IBC owner, benefit from anonymity in public records and can use legal tools like nominees and bearer shares (with custodian) to further obscure your identity from prying eyes.
At the same time, Panama’s laws ensure that, should authorities legitimately need the information (e.g. for an investigation), the data can be obtained through proper channels from the registered agent or custodian.
For the law-abiding business owner, Panama offers one of the best confidentiality regimes in the world, allowing you to conduct business discreetly and securely.
Choose a Law Firm as Your Panama IBC Partner
Incorporating an IBC in Panama can unlock a world of benefits, from tax savings and asset protection to greater privacy and freedom in your international business.
As discussed, Panama’s legal framework makes it relatively easy to set up and maintain an offshore company, but having the right legal partner is key to navigating the process smoothly and in full compliance. This is where NDM Law Firm can help.
NDM Law Firm is a Panama-based law firm with extensive experience in corporate formations and offshore services. We have been guiding entrepreneurs, investors, and companies through Panamanian incorporations for years, ensuring that each client gets a structure tailored to their needs.
Our team is well-versed in Panama’s corporate laws and international requirements, from picking an optimal company name to handling all the paperwork and filings on your behalf. We also provide ancillary services like Nominee Directors, Registered Agent representation, and ongoing compliance support (e.g. paying annual fees, maintaining corporate records), so that your IBC remains in good standing year after year.
What sets NDM Law Firm apart is our commitment to a personalized, professional approach. We understand that every client’s situation is unique, so we take the time to understand your business goals and advise you on the best way to structure your Panama IBC (or even whether an IBC is the right vehicle for you).
Our lawyers and staff operate with the utmost confidentiality and diligence, you can trust us to safeguard your information and handle your company matters with care. We pride ourselves on being conversational yet professional in our client interactions, meaning we will explain legal complexities in clear, accessible language and make the process as straightforward as possible for you.
Ready to take the next step? If you’re thinking about forming an IBC in Panama to capitalize on its tax advantages and strategic benefits, reach out to NDM Law Firm for a personalized consultation.
We’ll happily answer your questions, provide expert guidance on incorporation, and outline a plan tailored to your needs. With our experience and dedication on your side, you can form and operate your Panama IBC with confidence.
Contact us today to begin your Panama IBC journey, and let NDM Law Firm be your trusted partner in achieving your international business goals.