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Panama Key Offshore Services Survey – 2022

An excerpt of the key elements of Panama and its international legal services sector specifically on its main legal structures; Corporations (known as IBCs or “offshore companies”) and Private Interest Foundations.

Main changes impacting offshore companies and foundations.
Panama has reinforced through laws and regulations the requirements for due diligence and KYC for its corporate and banking services to prevent money laundering, terrorism, and use of its service platform for illegal activities of any kind.

Among the main changes are the following that we will also detail below:

— Registry of Final Beneficiaries of the entities — Which will be strictly guarded by a Superindency in Panama.

— Obligation to maintain and send Accounting Records — Companies and foundations with operations/assets outside Panama are required by law to keep accounting records detailing their assets and supporting documentation, which the client may maintain outside of Panama; however, the client must send a copy to the Resident Agent each year of such records, and they will be presented if a Panamanian authority requests it from the Resident Agent.

Panama Corporation / Private Foundation Law:
Law 32 of 26 February 1927 on Corporations, complemented by Decree Law No. 5 of 2 July 1997.

Law 25 of June 12, 1995 for the Panama Private Interest Foundations.

Type of structures preferred for international transactions:
Corporations (IBC) and Private Interest Foundations.
Capital requirements:
No minimum paid-in capital and no time limit in which said capital must be paid up.
Costs to incorporate, excluding government fees:

Very competitive costs compared to other Jurisdictions.

Annual fees paid to authorities:
US$ 300 (Annual Franchise Tax), for corporations, irrespective of the level of the authorized capital
US$ 400 for the Panama Private Foundations.
The taxation of companies:

No tax on any transactions or business activities carried on outside Panama; no tax on any foreign source income.

Note: The above refers to Panama taxes only, the client must consult with a legal or tax specialist in his country of residence or nationality to comply with his local tax responsibilities.

Method of Incorporation:

Notary authentication and registration at the Panama Public Registry of Articles of Incorporation (for companies) and Foundation Charter (for the Private Foundations).

Who may incorporate?

Two persons, either individual or corporate, of any nationality, usually a lawyer or one of their staff members. One person in case of a Private Foundations. Standard practice to facilitate and speed up the incorpoation procedures is to use nominee subscribers.

Procedure for making changes in the corporation?

Company name, directors, officers and foundation council members can be changed in three to five business days. All changes shall be recorded at the Panama Public Registry.

Length of time to incorporate a new company?

Time frame for incorporation is 4 to 5 business days.

Minimum shareholders:
One
Registered office:
Registered agent is compulsory, but registered office is not.
Can the registered agent be a bank/ lawyer/ accountant’s office?

Registered agent must be a Panama Lawyer or a Panama Law Firm.

Directors and Secretary:

Our law requires a minimum of 3 Directors – Officers. The client could appoint the directors as they do not need to be Panama nationals or residents; however, said directors’ identities would be recorded at the Panama Public Registry.

For Private Foundations a foundation council with a minimum of three members shall be appointed. (or one corporate entity).

Must a director/ secretary be resident from Panama?
No.
Are Corporate Directors allowed?

Yes. Worldwide corporate entities are allowed to be appointed as Directors.

Appointee directors/ secretary possible?

Yes, as there are no nationality requirements or restrictions. Directors could be appointed by the client.

Beneficial Owner Registry:

There is an approved law for the registry of final beneficiaries of companies and private foundation; when in application, the beneficial owner identities will remain private but guarded by a Panama superintendence in case they are required by a Panamanian authority.

Meetings:

Shareholders / Board meetings – as established in the articles of incorporation. May be held anywhere in the world. No periodic meetings are required by law.

Annual returns / Accounting Records:

Annual returns filing not required for offshore companies and Private Foundations. Required only of entities operating inside the Panama territory.

However, Panama Offshore companies and Private Foundations are obligated by law to keep accounting records detailing its assets and support documentation, which could be held by the client outside Panama; however, the client shall send us a copy each year of said accounting records and shall be presented if a Panama authority requests them from us as Resident Agents.

Must financial statements of a company be audited?

Not for offshore companies and Private Foundations. However, Panama Offshore companies and Private Foundations are obligated by law to keep accounting records detailing its assets and support documentation.

Legal entities engaged exclusively in holding assets. — Please note that in the case of legal entities that do not engage in acts of commerce, and that are engaged exclusively in holding assets, regardless of their type, must provide information that demonstrates the value of the assets held and the income received from such assets. In this case said records do not require to be certified by an accountant. A scanned copy via email to us will suffice.

Legal entities that do engage in acts of commerce. — If the corporation carry out acts of commerce outside Panama, you must provide accounting records as follow: Data that accurately indicate the assets, liabilities, business operations, and net worth of a legal entity and which make it possible to determine the financial situation as well as financial statements of the same, according to International Financial Reporting Standards (IFRS). For companies that engages in acts of commerce, said accounting records and/or financial statements must be countersigned by a Certified Public Accountant, as established in Articles 3 and 4 of Executive Decree 258 of September 13, 2018. A scanned copy via email to us will suffice.

Is disclosure of profits required by filing balance sheets with annual returns?

Not for offshore companies and Private Foundations. Only if the company / private foundation operates inside the Panama territory.

However, Panama Offshore companies and Private Foundations are obligated by law to keep accounting records detailing its assets and support documentation, which could be held by the client outside Panama; however, the client shall send us a copy each year of said records and shall be presented if a Panama authority requests them from us as Resident Agents.

Privacy of the information / Disclosure of company or foundation information.

Panama, as a financial center values and fights for privacy in business, however, is committed to preventing its legal and financial services platform from being used for illicit acts of any kind. It has therefore signed tax information exchange treaties with a large number of countries and is part of the OECD CRS.

Therefore, international standards must be complied and Panama must provide information about the companies and their beneficiaries in the event that international cooperation for any investigation or crime such information is requested from a Panamanian authority.

How, if any, is migration into and out of the jurisdiction achieved?

Migration of foreign companies and Private Foundations to Panama is allowed. Migration out of Panama depends on new jurisdiction. Companies and Private Foundations remain effective in Panama if not dissolved in Panama.

An excerpt of the key elements of Panama and its international legal services sector specifically on its main legal structures; Corporations (known as IBCs or “offshore companies”) and Private Interest Foundations.

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