Starting a business in Panama is becoming more and more of a lucrative idea with the abundance of entrepreneurship opportunities in the country. While it may be true that there are just as many opportunities in other parts of Latin America, Panama’s approach to both personal and corporate taxation makes this endeavour much more rewarding. Depending on what type of business you’re looking to set up, Panama could potentially be your best option for a country in which to start a business abroad. But how do you do it?
Types of Business Ownership
The first step is to decide what kind of business you’ll run. Your options are: partnership, corporation, or sole ownership.
The partnership is a business in Panama where you choose to team up with one or more people to run it. You’re all owners, but there are three different types of partnerships, and each one has some differences.
There’s the general partnership, in which every business owner is held liable for anything that happens within the company. This means that even if only one partner makes a mistake in the course of running the business, legal action can be taken against all business owners.
Anywhere from 2 to 20 partners can be involved in a limited partnership. The capital has to range from $2,000 to $500,000. In this type of partnership, there’s no restriction on nationality, but you will have to provide every member’s name to Panama’s Public Registry, along with their capital contribution. Civil liabilities aren’t as risky in this type of partnership, because they are limited to that capital contribution.
Within this partnership, the liabilities of the partners are unlimited. This type of partnership is usually chosen by professionals such as lawyers, doctors, and/or accountants.
In Panama, a corporation is formed by two people who have to file the Articles of Incorporation with the Panama Public Registry. Once the corporation is formed, however, you only need one shareholder. You must have a Panamanian lawyer for your corporation, and any changes to the Panamanian business must be filed with the Public Registry. Maintain a Board of Directors consisting of at least three members, and you’ve got what you need to run a corporation!
Pretty self-explanatory, a business in which you have sole ownership is just that. An individual or family owns the business in Panama and all assets entirely.
After choosing which type of business you will have, the next step is to register it with the Panamanian government. There are six steps involved in this process:
- Income Tax Registry
You have to register your business with Panama’s Revenue Service and receive an income tax ID number. You’ll keep records of your income and expenses and file your return much like you’d probably do in your home country.
- Commercial License
This license is obtained at the Ministry of Commerce & Industry. It’s a business license, and all businesses must have one.
- Municipal Taxes
Just as you set up your national income tax registry, you must register with your local municipality so that you can pay your municipal taxes. Do this after gaining your commercial license.
- Social Security Number
You’ll need to get this for both your business in Panama and yourself. You can do so at the registration office for employee social security. It’s called the Patronal de la Caja de Seguro Social in Spanish and is abbreviated CSS.
- Sanitary Permit
This one is only necessary if your new business in Panama is dealing with food or beverages. For this, you’ll need a health certificate from the Ministry of Health. That grants permission to operate a clean business.
- Fumigation Certificate
All businesses open to the public must be fumigated. Hire a private company for this and fumigate every four months. You can take your receipt to your local municipality to get a Fumigation Certificate showing that you’ve followed this requirement.
You could start a new business in Panama by following these steps, or you could try buying an existing business. You’d want the sale and purchase to be overseen by a lawyer that you trust, and you’d also want to hire an accountant to help oversee tax requirements and paperwork. You should really have an accountant either way – new business or bought business – simply because it’s helpful to have someone around who fully understands the ins and outs of the Panamanian tax rules and processes. For more information about taking your business offshore then read our Ultimate Guide To Going Offshore.
Interested in moving to Panama? Contact us here to apply for a residency visa in Panama