Getting Started - Setting up your Business in Panama
If you decide to set up your business in Panama City, there are a number of steps you will need to follow: incorporate the company; tax registration; register with the Ministry of Commerce; register with the Social Security Board; register with the Ministry of Labour; and register with the local City Council. See our Schedule of Fees for a local company.
First, incorporate the company. Maybe that's a little too obvious a requirement. But I would recommend that if you intend on having an active business in Panama that you incorporate a separate company from any investment company you have.
The most common type of corporation in Panama is the Sociedad Anonima. Most people think that there is a difference between onshore and offshore companies in Panama - this is a misconception. The reality is the tax system used in Panama is territorial - therefore income earned outside of Panama is not taxed. It is possible for a company to earn both onshore (Panamanian-source) and offshore income in the same company. [For more information, see Tax Services].
Second, registration with the Ministry of Economy & Finance (MEF - this is commonly known as the IRD or IRS in other countries). We automatically register all corporations formed in Panama with MEF upon incorporation and payment of the Government Franchise Tax. This registration is simply so that you get a Tax Registration Number - this number is actually made up of the registration details from the Companies Registry Office, but they add on 2 digits at the end, called the verification digits.
Third, registration with the Ministry of Commerce & Industry (MICI). Foreigners that own companies in Panama can only obtain Type A Licenses. This is because there is a restriction on some types of business activities, which are reserved for Panamanian citizens. Obviously, after you obtain citizenship, you will also be eligible to obtain Type B Commercial Licenses.
**Please note, that in the Commercial License application they actually request a permanent address for where the business will be located, so it is necessary to have already identified (and rented) the offices/building where the business is to be located.
The General Office of Internal Commerce is the entity responsible for the preparation and execution of laws that develop, regulate and supervise commercial activities in Panama through its Office of Internal Commerce. This office also protects, nationally and internationally, patents, trademarks and commercial registrations, through the General Office of Industrial Property Registration.
The Application Form for a License or to Register a legal entity (provided by the Ministry of Commerce and Industry) must be submitted by the law firm, along with the following documents:
Upon submission of these documents, the Ministry of Commerce and Industry will issue a Provisional License, which allows the company to do business.
After approximately ten (10) working days, and following verification by the MICI of the information provided in the Application Form such as consultations and physical inspections to the business’ office, The General Office of Internal Commerce authorizes the issuance of the Commercial License.
You will need to put the Commercial License up on the wall in a prominent place, where it can actually been seen (should inspectors come into the office). The Commercial License basically contains the following information: Company Name, Trade Name (if different from the company's registered name), Principal Business Location, details of the Legal Representative/CEO of the business, and a brief description of the business activities of the company. This application does need to be presented by the law firm, since it is one of the legal requirements.
Fourth, registration with the Social Security Board. If you intend on applying for either of the following immigration programs: Immigrant Investor or Micro Investor, you will need to have at least 3 Panamanian employees on the payroll. It is necessary to register all employees with the Social Security Board, as well as making the statutory Social Security contributions and deducting their quota from their wages before paying them. We would be more than happy to help you with filling in the application forms for registering the company and the employees.
Fifth, registration with the Ministry of Labour. What is necessary to do here is to actually provide the Ministry of Labour with copies of the employment contracts of your employees. When you hire an employee, three originals of the Labour Contract should be made - one for the business, one for the employee, and one for the Ministry of Labour. If you need assistance with drafting the Labour Contracts (which must be in Spanish - although you can make them bi-lingual), please do not hesitate to let us know.
Just a word of caution: When someone resigns - please make sure that their resignation letter is actually stamped by the Ministry of Labour (the employee should personally take their resignation letter to the Ministry of Labour and have it stamped BEFORE they deliver it to you).
Sixth, registration with the City Council - Panama City. All business in Panama City pay a certain amount of municipal tax on a monthly basis (and then a second type of tax on a yearly basis - which is for signage). This tax is set by the City Council, and depends upon the size of the offices, the amount of employees, and the type of business operation. After you have registered with the Ministry of Commerce you have 20 days in which to present the registration papers to the City Council.
For this purpose, the Commercial License has to be registered at the Panama Municipality and the following documents must be submitted:
Following submission of the registration papers, inspectors will visit your offices to verify the location and the type of business. At this stage they will set the monthly/yearly municipal taxes.
Last modified 08-May-2009 12:07 -0400
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Last modified 14-Apr-2011 10:06 -0400