Panama Corporation

The Panama S.A. (Sociedad Anónima) has been around since 1927 and remains a well-known international structure. Panama generally taxes Panama-source income, so ordinary foreign-source income is usually outside the local income-tax base. This is not absolute: Law 926 of 2026 adds an economic-substance regime for specified passive foreign income of multinational-group entities. The annual franchise tax remains a core maintenance cost.

That said, Panama is not the frictionless offshore haven it used to be. The Panama Papers triggered a decade of compliance reform, banking tightened dramatically, and the FATF grey-listed the country in 2019. Panama was removed from the FATF list in October 2023 and from the EU's AML high-risk list in June 2025 — real progress, but not a full reset. You can form a Panama S.A. in under a week. Opening a bank account that actually works is a different problem entirely.

Panama's territorial tax system is the foundation: ordinary income not sourced within Panama is generally outside Panamanian income tax. Law 926 of 2026 creates an exception for specified passive foreign income of entities in multinational groups unless the economic-substance conditions are met.

For a non-resident Panama corporation operating entirely outside Panama, the tax picture is:

• Corporate income tax: 0% on foreign-source income
• Capital gains tax: 0% on gains from foreign assets
• Dividend withholding: generally 5% on distributions from foreign-source or export income; 10% commonly applies to Panama-source profits, subject to treaty rules
• Annual franchise tax: $300 flat, regardless of revenue or profit
• Tax return filing: confirm the company’s filing status and current DGI obligations with a Panamanian CPA or resident agent

If the company has any Panamanian-source income — selling to Panamanian customers, operating in Panama, employing staff locally — then the 25% corporate income tax rate applies on net income, plus a 10% dividend withholding tax when profits are distributed. The line between "Panamanian source" and "foreign source" matters enormously, and companies operating in grey areas should get a Panama tax opinion before assuming they're fully exempt.

One underappreciated obligation: if you're not registered as a fully offshore, non-operational entity, you may need to file a non-operational tax declaration annually, typically requiring a Panamanian CPA signature and costing around $65–150 per year. This is separate from the annual franchise tax.

Your home country tax is the real variable. Panama not taxing you does not mean your home country won't. Most high-tax countries have Controlled Foreign Corporation (CFC) rules that are designed precisely to catch offshore companies owned by their residents. Under CFC rules, passive income earned by your Panama S.A. may be attributed directly to you and taxed at your personal rate, regardless of whether you take any distributions. The territorial tax benefit in Panama can be completely negated by CFC legislation at home. Before forming a Panama S.A. for tax reasons, get advice from a tax professional in your country of residence — not just a Panama formation agent.

Banking is where Panama's real friction sits, and it's worth being direct about it.

Opening a corporate bank account in Panama itself requires an in-person visit to most banks, significant documentation including bank reference letters, source of funds explanations, and a clear business plan. Panamanian banks have tightened KYC requirements substantially since the Panama Papers, and many declined foreign-owned companies for years during and after the FATF grey-listing period. The situation is improving as Panama's compliance reputation recovers, but it's not easy.

The more practical route for most non-resident founders is not to bank in Panama at all:

• Wise Business — works with Panama corporations in many jurisdictions; useful for multi-currency operations and international transfers; doesn't require a physical Panama bank account
• Payoneer — accepts offshore entities from many jurisdictions, useful for receiving international payments
• Banistmo, Banco General, Global Bank, MultiBank — the main Panamanian banks; require in-person visits and substantial documentation; best suited if you have a local relationship or existing business history in Panama

Stripe does not list Panama as a supported business location. Payment-provider availability and onboarding for a Panama S.A. are provider-specific, so confirm PayPal, Wise and Payoneer eligibility directly before incorporating around them. Some founders use the Panama company as a holding entity with a separate supported operating company for payment processing.

Traditional European banking for Panama corporations remains difficult despite the EU AML delisting in June 2025. Compliance teams at major European banks move slowly, and Panama's association with offshore structures means enhanced due diligence is still common. If you need seamless Euro-denominated banking, a Panama S.A. is not the right tool.

The structure attracts three broad types of founders: those optimizing for tax, those optimizing for privacy, and those building holding structures across multiple jurisdictions.

Tax is a key draw. Ordinary foreign-source income is generally outside Panama’s income-tax base, but the source analysis, operations and the 2026 MNE passive-income substance rules all matter. The annual franchise tax (tasa única) of $300 remains payable to keep the company in good standing.

Privacy is where Panama has historically led. Beneficial owners of a Panama S.A. are not listed in the public registry. The public record shows only the directors and officers — and most founders use nominee directors, meaning even those names aren't the real owner's. Since Law 129 of 2020, resident agents are required to maintain a private UBO (Ultimate Beneficial Owner) registry with the Superintendence of Non-Financial Entities, but this registry is not public. Your name goes in a government database accessible to regulators, not into a searchable public record.

Holding structures are the third use case. A Panama S.A. can hold shares in companies in other jurisdictions, own real estate, hold investment accounts, or sit above an operating company in another country as the parent entity. The source analysis, dividend tax and 2026 MNE passive-income substance rules must be considered before treating foreign dividends or gains as tax-free.

1. Choose a resident agent — legally required; must be a licensed Panamanian attorney or law firm. This is your primary point of contact for formation and ongoing compliance. Reputable firms include Mata Pitti, Delvalle & Delvalle, and Morgan & Morgan, among others. Fees range from $300–800/year.
2. Prepare incorporation documents — the resident agent drafts the Articles of Incorporation (Pacto Social) in Spanish, which must include the company name, purpose, authorized capital, share structure, and names of the three directors/officers. Non-residents can use nominee directors here for an additional fee ($150–450/year depending on the firm).
3. File with the Public Registry — the Articles are notarized by a Panamanian notary and registered with the Public Registry of Panama. This is the only document that becomes public record. Standard processing takes 3–5 business days; expedited service is available.
4. Register UBOs — since Law 129 of 2020, your resident agent must register the ultimate beneficial owner(s) in the private registry maintained by the Superintendence of Non-Financial Entities (SSNF). This is not public, but it is a legal requirement.
5. Obtain corporate documents — you'll receive apostilled articles of incorporation, share certificates, corporate minutes, a certificate of good standing, and (if requested) a general power of attorney. These are typically couriered to you within 7–10 business days.
6. Open a bank account — the hardest step. Decision point: do you bank in Panama (difficult, requires in-person visit), or do you use international fintechs like Wise or Payoneer (easier but more limited)?
7. Set up compliance calendar — track the annual franchise tax deadline (due by June 30 each year to avoid penalties), resident agent renewal, and any local filings your agent advises.

Total time from decision to operational entity: 1–2 weeks for the company. Banking can add weeks to months depending on which route you take.