Panama's company rules: quick facts
- Entity
- Sociedad anónima (S.A.), Panama corporation
- Tax model
- Territorial, 25% Source: taxsummaries.pwc.com, checked September 29, 2026. PwC Worldwide Tax Summaries, last reviewed August 4, 2026: corporations pay a fixed 25% on Panamanian-source income only (territoriality principle). Above PAB 1,500,000 ($1,500,000) of taxable income the base is the greater of net taxable income or 4.67% of gross taxable income (CAIR), which excludes foreign-source incomeHeadline corporate tax rate
- Tax on $100,000 of profit kept in the company
- 0% to 25% Source: taxsummaries.pwc.com, checked September 29, 2026. PwC, last reviewed August 4, 2026: resident companies are taxed on income generated within Panama, and income generated abroad is exempt from income tax. Services performed abroad for foreign clients give PAB 0 of tax on $100,000 of profit (PAB 1 = $1). If the profit were Panamanian-source: PAB 25,000, 25%
- Tax on $100,000 of profit paid out to a non-resident owner
- 0% to 32.5% Source: taxsummaries.pwc.com, checked September 29, 2026. PwC: dividend tax applies to entities that need an operating notice (Aviso de Operación), hold an operation key in the Colón Free Zone, operate in a free or special zone, or produce Panamanian-source taxable income. A corporation doing all its business abroad is none of these, so distributed equals retained: 0%. With an operating notice, foreign-source profit is taxed at 5% on distribution; Panamanian-source profit at 25% plus 10% of the remaining 75% is 32.5%
- Dividend withholding for a non-resident owner
- 0% to 10% Source: taxsummaries.pwc.com, checked September 29, 2026. 0% for a corporation with no operating notice and no Panamanian-source taxable income. Otherwise 10% on dividends from Panamanian-source profit, 5% from foreign-source or export profit, and 20% on bearer shares (PwC, last reviewed August 4, 2026)
- Formed without visiting
- Yes
- Stripe available
- No Source: stripe.com, checked September 29, 2026. Panama is not on Stripe's list of supported countries
- Bank or EMI account
- Hard
- Audit required
- Not stated
- EU list of non-cooperative jurisdictions
- Annex II (watch list) Source: data.consilium.europa.eu, checked October 12, 2026. Substance scope from PwC (last reviewed August 4, 2026)
- FATF grey list
- Not listed Source: data.consilium.europa.eu, checked October 12, 2026. Substance scope from PwC (last reviewed August 4, 2026)
- Economic substance rules
- No
Panama S.A.: the company a non-resident forms
The vehicle is the sociedad anónima, the Panama corporation under Law 32 of 1927. Its articles need at least 2 subscribers of any nationality and domicile and at least 3 directors, who must be different people. Officers such as the president, secretary and treasurer can be named later, and 1 person can hold several of those posts.
A solo founder cannot fill 3 director seats alone, so the law firm that forms the company usually supplies nominee directors and serves as its resident agent in Panama, which every S.A. must have. Bearer shares still exist, but only under a custody regime in which a custodian holds them, so they no longer hide who owns the company.
How a Panama corporation is taxed
Panama taxes companies only on income produced in Panama. Income generated from operations or services performed outside Panama is exempt, and Panamanian-source income is taxed at a flat 25%. A company whose founder works abroad for clients abroad pays nothing on $100,000 of profit; the same profit earned in Panama would owe PAB 25,000 ($25,000).
Dividends follow the same line. Dividend tax applies only to companies that need an operating notice (aviso de operación) to work in Panama, hold a Colón Free Zone operation key, sit in a free or special zone, or earn Panamanian-source income. A company doing all its business abroad is none of these and withholds nothing; one that is withholds 10% on dividends paid from Panamanian profit and 5% on dividends paid from foreign or export profit.
Panama's sales tax (ITBMS) applies to goods and services supplied in Panama, so a company that sells only to clients abroad normally stays outside it. Entities in multinational groups that earn foreign passive income such as dividends, interest and royalties keep the exemption only with real substance in Panama, a rule that does not reach a one-person company outside a group.
David's note
I would form a Panama S.A. only if you live in Panama or another country that taxes only local income, and your clients are not in the EU. Panama left Annex I for Annex II of the EU list on October 9, 2026 while it waits for a Global Forum review; a return to Annex I would mean EU clients face extra withholding or lose the deduction when they pay you. For a founder in a high-tax country the 0% buys nothing, because the rules at home tax the profit anyway.
Cost and timeline to set up in Panama
Official fees come from the government or registry schedule. Market ranges cover formation and yearly upkeep through a provider, including a registered agent and filings. Timeline: A Panamanian lawyer acting as resident agent prepares the articles of incorporation, has them notarized and files them with the Public Registry, so the founder does not need to travel. Timing depends on the law firm and the Registry.
How to register a Panama corporation from abroad
You do not travel for the company. The law firm acting as resident agent prepares the articles, has them executed as a notarized public deed and files them with the Public Registry, paying the registration fees and the first franchise tax at the same time. Timing depends on the firm and the Registry, and the slow parts for a founder abroad are usually the firm's due diligence and, later, the bank.
Forming a Panama S.A. as a non-resident
- Choose a Panamanian law firm as resident agent and pass its due diligence: your passport, proof of address, the source of your funds and what the company will do.
- Check or reserve the name: it must include S.A., Inc. or Corp. and cannot match or resemble an existing company's, and a 30-day reservation costs PAB 50 ($50).
- Settle the articles: 2 subscribers, the share capital and shares, the purpose, the duration, the resident agent, and 3 different directors with their names and addresses.
- Execute the articles as a public deed before a notary; the lawyer files it with the Public Registry and pays the registration fees and the first franchise tax.
- Appoint the officers and issue the shares to you; any bearer shares go straight to a custodian.
- Give the resident agent your beneficial ownership details, which it keeps in a private registry for the authorities.
- Keep accounting records from the first day, because the resident agent needs copies, or their location and custodian, every year.
- Open the account with the Registry certificate, the articles, the director and officer appointments, your passport and proof of address.
Panama corporation annual filings and deadlines
A Panama S.A. that earns nothing in Panama has 2 yearly duties: the franchise tax and its accounting records. The tax office (DGI) collects the franchise tax, the tasa única, and requires the resident agents of companies with no operations in Panama to file a sworn declaration on each client's accounting records under Law 254 of 2021.
Yearly duties for a Panama S.A. with no Panamanian income
| Filing | Filed with | Deadline | Cost of missing it |
|---|---|---|---|
| Franchise tax (tasa única), PAB 300 ($300) | DGI, usually paid by the resident agent | July 15 for a company registered January to June, January 15 for one registered July to December | A PAB 50 ($50) surcharge; after 3 unpaid years the company is suspended and pays a PAB 1,000 ($1,000) rehabilitation fine plus PAB 25 ($25) |
| Copies of the accounting records, or their location and custodian | Resident agent | Each year, in time for the agent's declaration | The agent can resign, and the company is in breach and faces sanctions under Law 254 of 2021 |
| Sworn declaration of accounting records (form 1054) | DGI, filed by the resident agent | July 15, for the previous fiscal year | Sanctions for the agent under Law 254 of 2021 |
| Dividend tax return (form 07), only for a company liable to dividend tax | DGI | 10 days after each distribution | Late-filing penalties, and the tax itself |
| Your own tax return, with the company's profit or dividends on it | The tax authority where you live | Your country's deadline | Your country's penalties and the tax itself |
Opening a bank account for a Panama corporation
Panamanian banks are cautious with corporations owned by non-residents that do business abroad. European banks and payment providers treat Panama companies as high risk, and Panama moved from Annex I to Annex II of the EU list only on October 9, 2026. Stripe does not serve Panama companies either.
Expect to explain where you live, who your clients are, where the first money comes from and why the company is in Panama at all. Nominee directors draw their own questions, because the bank wants to know who really controls the account.
Panama exchanges account information under the Common Reporting Standard, so every account form asks where the company's owners are tax resident, and that answer decides the tax question in the next section.
Where a Panama corporation's profit is really taxed
Panama's 0% covers only Panama. Most high-tax countries tax a foreign company's profit when it is managed from their territory, when the owner's work there creates a permanent establishment, or under controlled foreign company (CFC) rules that attribute low-taxed profit to the owner before it is paid out. At $100,000 of profit, this is where the tax lands.
Tax on $100,000 of profit in a Panama S.A. by owner situation (Panama column from the rules above)
| Owner situation | Tax in Panama | Where else the profit is taxed |
|---|---|---|
| Lives abroad in a high-tax country with CFC rules and runs the company from home | 0% | Your country, at its full rates: as the profit of a company managed there, or attributed to you under CFC rules, and again on the dividend |
| Lives in Panama and serves clients abroad | 0% if the work counts as foreign-source; whether work done from Panama does is unsettled | Nowhere else, as long as no other country treats you as resident |
| Has Panamanian clients or an operating notice | 25% on Panamanian profit, then 10% dividend tax on the rest: 32.5% in all | Also your country of residence, if it taxes worldwide income |
| Has no tax residence anywhere | 0% | No country claims the profit on paper, and every account form asking where you live becomes the problem |
The version that holds up is living in Panama with clients abroad. Panama taxes its residents only on Panamanian-source income and has no rule that attributes a foreign company's profit to its owner, but whether fees for work done at a desk in Panama count as foreign-source is not settled, so the company's contracts, invoices and payments abroad are what prove the 0%.
An EU client meets Panama's EU listing before you do
A founder in Spain who invoices Spanish and German clients through a Panama S.A. and runs it from Madrid is exposed on 2 sides. Spain can treat the company as managed in Spain or attribute its profit to the owner under CFC rules, and if a later revision returns Panama to Annex I, EU clients paying the company face defensive measures such as denied deductions or extra withholding, which is often why they refuse the invoice. Panama moved from Annex I to Annex II on October 9, 2026.
A non-resident's Panama S.A., set up right and wrong
Works
You live in Panama, sell to clients in the US and Latin America through the S.A., keep the contracts and invoices showing the work takes effect abroad, give your resident agent the records each year and pay the franchise tax on time.
Fails
You live in Madrid, bill EU clients through the S.A., let 3 nominee directors sign what you send, skip the accounting records and assume Panama's 0% is all you owe.
