Panama’s Offshore Companies
The term “offshore” is not used in Panamanian laws since taxes are only applied to “territorial bases”, that is to say, only earnings obtained in Panama are taxed and therefore, an entity that carries out its activities outside of the country’s territory is not obliged to pay taxes. More than 120 thousand corporate entities exist in Panama, most of which are “offshore”.
The anonymous association (corporation) is the most used form of company in Panama and is the most customary option when it comes to setting up an offshore operation. Companies formed in Panama are protected by Law 32 of 1927 and the Commercial Code (Executive Order N. 5, of 1997, art.5)
A company is formed by a minimum of two subscribers (or delegates, in case of the absence of the foreign subscribers) that carry out the Articles of Incorporation before a Notary Public and then register them in the Public Registry Office of Panama. All commercial and industrial businesses must keep an Order of Operations to be able to carry on the business. Once the company has been incorporated, you only need one shareholder. The shares can be of several types; they can be of equal value or not, they can be registered or they can be made out to the holder. There is no minimum capital requirement, nor liabilities, except with shares of unequal value and shares to the holder which must be completely paid when they are issued.
These days there is a tendency to apply very strict regulations on holders of shares made out to the bearer: the registered agent can keep the certificate for shares made out to the bearer in custody, and then issue a certificate to be deposited in banks that require one. Panamanian companies must have at least three directors whose names appear in the Public Registry of Panama; in addition, any change of director must also be registered. Each Panamanian company must have a resident Panamanian agent (lawyer). Beyond this, there is no need to comply with other requirements, unless you wish to change the Statute or if the Panamanian company merges or dissolves.
Law n. 2 of 2011 introduced new requirements for having a greater knowledge about clients. Starting with this, all registered agents that operate in Panama must keep information regarding their clients with the objective of being able to offer valid information if the authorities request data about the client. These new laws also provide for the identification and location of the holders of shares made out to the bearer.
Panamanian law also permits the formation of these types of companies:
Foreign Company: a foreign company can be registered in Panama by depositing the following documents at the Public Registry Office:
- A copy of the Association Articles, in Spanish and signed by a Notary Public
- A statement from the Board authorizing the public Registry of Panama
- A copy of the most recent financial statements
- A certificate from the Panamanian Consul confirming that the company was organized according to the laws in the place of incorporation
- Notification of the location of the capital for the Panamanian operation.
General or Limited Company: A general company is allowed under the Commercial Code. The parties have unlimited responsibility.
Civil Company: the Commercial Code and Law 24of 1966 also govern Civil Companies, which have a legal personality, even though the responsibility of the partners is unlimited. This type of company is often selected by professionals like lawyers and accountants.
Foundations: The Private Foundations Law of 1995 governs private foundations in Panama. The Foundation is an autonomous legal entity, without members or shareholders. It is generally used for protecting assets and permitted non-commercial activities.
Trusts: Panamanian law was updated with Law 1 of 1984. Panamanian trusts must be presented with a written statement, without which they cannot be created. Trusts can be established as revocable, or else in an irrevocable form. It’s not necessary that the person who establishes the trust, representatives and beneficiaries be Panamanian nationals or that they reside in Panama. A Panamanian lawyer must act as an agent for the trust. A trust can be established with regards to an existing or future property; additional properties can be included after its installation, either by the person that sets it up or by a third party. Unlike foundations, trusts are not protected by specific provisions against foreign inheritance laws, judges, or creditors.
Licenses for operating abroad are only necessary for financial institutions. Companies don’t have to reveal the name of the beneficiary, while neither Trusts and nor Foundations have to reveal the names of its beneficiaries; however, limited companies are obliged to declare the names of their members.