Panama is one of the top countries foreigners start businesses in. This is because doing business in Panama is cost-effective, safe, private and offers an abundance of business opportunities for both the full-time entrepreneur and part-time retiree. If you’re looking to start a business in Panama’s great economy, there are simple, basic steps you must take.
The Panama Business Process
The first step in starting a business in Panama is determining what kind of business it will be. The Panamanian government recognizes three different business structures: Sole proprietorship, partnership and offshore corporation. The latter two involve the assistance of a Panamanian business lawyer as legal documentation will be required.
The next steps involve compiling the required documentation and getting familiar with the various Panamanian laws concerning business operation.
Government Permit and Licenses
Every business in Panama, regardless of business structure must be registered with the Panama government. There are six steps in the registration process and they are:
- Income Tax Registry
You’ll need to get a government issued tax ID number and file an annual income tax return as well as pay for other taxes owed.
- Commercial License
Before your business begins operation, you’ll need to obtain a business license from the Ministry of Commerce & Industry.
- Municipal Taxes
Besides paying annual income taxes, your business will also need to pay local municipal taxes. You’ll need to also register with your local municipality to pay these taxes.
- Social Security Number
You and your business will need to get government-issued social security numbers.
5. Fumigation Certificate
Every business which is open to the public must be fumigated. A private fumigation company will need to be hired. The receipt will need to be presented to your local municipality in order to obtain a fumigation certificate. This certificate must be clearly displayed by your business’ entrance.
Now that you have obtained all of the required government permits and licenses, you are now ready to hire employees. If your company plans to have more than 10 employees, Panamanian law requires that 90% of your employee workforce to be Panama citizens. To hire foreigner they should have an official work permit.
There are certain exceptions to this requirement including employing foreign managers if the company does business abroad or utilizes technology that citizens may not have experience or knowledge in.
Panama’s Labor Laws
There are some Panama labor laws you need to consider and implement in order to do business. Each employee is hired with a written employee contract. Other rights all employees are entitled to include:
- Minimum Wage
- Maximum Hours
- Paid Vacation Time
- Right to Join Unions
Leasing Office or Business Premises
When obtaining a lease for your Panamanian business, you’ll need a written lease contract that must:
- Properly describe the location of the business.
- State the amount and frequency of the lease payments, length of the lease period, whether there is a Security and/or Damage deposit, who pays for gas, water, electricity, and repairs.
- It must be signed by the property owners and the tenants.
- All signatures must be Notarized before a notary public.
Business Bank Account
After getting your business registered, hiring employees and securing a business office, you need to set up a business bank account.
To set up a business bank account, you’ll need to do/have the following:
- Participate in a phone interview with a bank representative. In most cases, an in-person interview is preferred. Some banks permit phone interviews.
- Provide a copy of your signature and each director’s and managers passport, along with their picture, an information page and an entry stamp.
- Provide a copy of a second form of identification such as a national ID card or driver’s license.
- Two bank references for each company director and account signatory.
- Two professional references for each company director and accounts signatory.
- Proof of Address: You must provide a copy of a utility bill (phone, water, electricity, cable TV, or Internet service) which contains your name and address.
- A brief letter or “company profile” detailing the type of business the account holder will participate in.
Starting a business in Panama is relatively easy and can happen smoothly and quickly with the help of a Panamanian business lawyer. The professional and experienced lawyers at Mata and Pitti Panama law firm can help you make your Panamanian business venture a reality. Contact us today to learn more.