Doing business in Panama

Panama is a unitary republic with a civil-law system. Key authorities for an incoming business are the Dirección General de Ingresos (tax), the Registro Público (companies), the Ministry of Commerce and Industries (Panamá Emprende and DIGERPI), the Superintendencia de Bancos and Superintendencia del Mercado de Valores (financial sector), the Ministry of Labour, the Caja de Seguro Social (social security), the Autoridad Nacional de Aduanas (customs), ACODECO (competition) and ANTAI (data protection).

Key facts

Corporate income tax

25% on Panama-source income

Tax system

Territorial: foreign-source income generally exempt

ITBMS (VAT)

7% general rate

Foreign ownership

Retail trade reserved to nationals and companies they own

Currency and exchange

US dollar legal tender; no exchange controls

Data protection

Law 81 of 2019; regulator ANTAI

New York Convention

Acceded in 1984; in force since 8 January 1985

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The sociedad anónima is the traditional Panamanian company and is registered with the Public Registry through a resident agent, who must be a Panamanian lawyer or law firm. Corporations report their beneficial owners through the resident agent to a confidential central registry. Retail trade is reserved to Panamanian nationals and companies they own, which shapes how foreign retailers can enter.

Key facts

• Most investors use a sociedad anónima or a limited liability company, registered with the Public Registry.

• Obtain a notice of operation (aviso de operación) or commercial licence, depending on the activity, before trading.

• Foreign investors cannot carry on retail trade directly, because it is reserved to nationals and companies they own.

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Panama taxes on a territorial basis: only Panama-source income is subject to income tax. The corporate rate is 25%, with an alternative minimum calculation (CAIR) for companies with taxable income above USD 1.5 million, and dividends are taxed at 10% or 5% depending on the source of profits. ITBMS has a general rate of 7%. From fiscal year 2027, Law 526 of 2026 requires multinational group entities to show economic substance to keep foreign-source passive income at 0%.

Key facts

• Only Panama-source income is taxed, so the source of each income stream is the first question.

• Multinational group entities earning foreign passive income need economic substance in Panama from 2027, or that income is taxed at 15%.

• The corporate rate is 25%; companies with taxable income above USD 1.5 million must compare it with the CAIR presumptive base of 4.67% of gross taxable income.

• Dividend tax is 10% for local-source profits and 5% for foreign-source or export profits.

• ITBMS is 7% (10% on alcohol and hotel stays, 15% on tobacco), and payments abroad for services, royalties and interest bear an effective 12.5% withholding.

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Key facts

• The maximum daytime working week is 48 hours.

• Employer CSS contributions rise from 13.25% to 14.25% on 1 March 2027 and to 15.25% on 1 March 2029; employees pay 9.75%.

• Termination triggers a seniority premium, plus compensation if the dismissal is unjustified.

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Panama offers special regimes for regional headquarters (SEM), manufacturing services (EMMSA), the Colón Free Zone and the Panama Pacífico special economic area. A moratorium on new metal mining concessions has applied since 2023.

Key facts

• Regional headquarters can use the SEM regime for a fixed 5% income tax rate and immigration and labour benefits.

• The Colón Free Zone and Panama Pacífico offer zone benefits for logistics and services.

• Banking requires a licence from the Superintendencia de Bancos.

• Government contracts are tendered on PanamaCompra.

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• New metal mining concessions are suspended under the 2023 moratorium.

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Panama has no central bank and uses the US dollar as legal tender alongside the balboa, which is fixed at par. There are no exchange controls and profits can be repatriated freely. Banks apply strict know-your-customer checks under the anti-money laundering law, and account opening can take time.

Key facts

• The dollar economy and absence of exchange controls make cash management simple.

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• Expect detailed KYC under Law 23 of 2015, including beneficial ownership and source of funds evidence.

• The FATF removed Panama from its grey list on 27 October 2023, and it was not on the June 2026 list, which helps correspondent banking relationships.

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Panama's trade role is built on the Panama Canal, the Colón Free Zone and its logistics sector. Its trade promotion agreement with the United States has been in force since 31 October 2012, and the trade pillar of the EU-Central America Association Agreement has applied to it since 1 August 2013. Customs is administered by the Autoridad Nacional de Aduanas.

Key facts

• Customs is handled by the Autoridad Nacional de Aduanas.

• Trade agreements with the US and the EU give preferential access for qualifying goods.

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• The Colón Free Zone supports regional distribution, with exemptions on imports and re-exports.

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Law 81 of 2019 is Panama's personal data protection law and is enforced by ANTAI through its Directorate for the Protection of Personal Data. It sets consent-based rules, data subject rights and conditions for transfers abroad.

Key facts

• Law 81 of 2019 applies to processing in Panama, with ANTAI as regulator.

• Transfers abroad need adequate protection, safeguards or another legal basis.

• Review consent practices and data subject rights processes against Law 81 of 2019 and its implementing rules.

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Industrial property is registered with DIGERPI, part of the Ministry of Commerce and Industries, and copyright with the national copyright office. Panama is a party to the Paris Convention and the PCT, but WIPO Lex does not list it as a Madrid Protocol member.

Key facts

• File trademarks and patents with DIGERPI.

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• Patents can enter via the PCT national phase.

• Trademarks last 10 years and can be renewed.

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Competition law is enforced by the Autoridad de Protección al Consumidor y Defensa de la Competencia (ACODECO), and merger notification is voluntary. Securities are supervised by the Superintendencia del Mercado de Valores, and insolvency is handled under a 2016 law with reorganisation and liquidation procedures.

Key facts

• ACODECO is the competition authority and merger notification is voluntary; consider whether a pre-merger review is advisable.

• Listed company deals fall under the Superintendencia del Mercado de Valores.

• Distressed companies can reorganise under the 2016 insolvency law.

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Panama's anti-money laundering framework covers banks and a wide range of non-financial businesses, including resident agents. The beneficial ownership system and AML supervision of non-financial sectors were strengthened as part of the work that led to its removal from the FATF grey list. Corruption offences are set out in the Criminal Code.

Key facts

• Check whether the business is a designated non-financial reporting entity with AML duties.

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• Expect resident agents and banks to ask for detailed beneficial ownership and source of funds information.

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• Panama participates in the UN anti-corruption framework.

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Panama has a unified court system headed by the Supreme Court, with specialised maritime courts. International commercial arbitration is governed by a 2013 law based on the UNCITRAL Model Law, and Panama is a party to the New York Convention. Foreign judgments are enforced through exequatur before the Supreme Court.

Key facts

• Panama is a Model Law seat and a New York Convention state.

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• Foreign judgments need exequatur from the Supreme Court.

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• Maritime claims go to specialised maritime courts.

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• CeCAP administers domestic commercial arbitration and conciliation.

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