How to Set Up an Entity in Panama

Setting up a business entity in Panama is an attractive option for companies seeking a strategic gateway between the Americas with a business-friendly regulatory system and a territorial tax regime. Panama’s stable legal framework, use of the U.S. dollar, and flexible corporate structures have made it a long-standing hub for both domestic ventures and international operations, whether for local activities or structuring cross-border commerce.

The process to open an entity in Panama is generally efficient compared to many other countries, especially when supported by knowledgeable local counsel. Some of the main challenges include navigating Spanish-language documentation, appointing local agents, and ensuring compliance with ongoing tax and corporate filing requirements. The key benefits include limited liability for owners, streamlined registration, and access to Panama’s banking and logistics infrastructure.

Disclaimer: This content is for informational purposes only and does not constitute legal, tax, or financial advice. Always consult official sources before acting.

What does “opening an entity” mean in Panama?

Opening an entity in Panama means legally registering a business structure—most commonly a corporation (Sociedad Anónima or S.A.)—with the Public Registry so it can enter contracts, hire employees, open bank accounts, and operate commercially under Panamanian law. Registration confers formal legal status and requires compliance with tax and corporate governance obligations.

Entity overview in Panama

Below is an overview of the key features of setting up an entity in Panama, tailored for business leaders evaluating expansion:

Step-by-step guide: How to open an entity in Panama

Step 1: Choose the right structure

Panama’s most common structure for foreign investors is the Sociedad Anónima, offering limited liability and flexibility for commercial activities. Smaller or closely held companies may prefer a Sociedad de Responsabilidad Limitada. The right structure depends on your liability preferences, governance, and growth plans.

Step 2: Verify business name availability

Before incorporation, choose a unique company name and verify availability with the Public Registry of Panama. You can search the registry’s database to confirm that your desired name isn’t already in use, helping avoid delays.

Step 3: Prepare incorporation documents

Required documents typically include:

• Articles of incorporation/bylaws detailing the company's purpose and share structure
• Identification for directors and shareholders (passport copies)
• Registered office address in Panama
• Appointment of a local registered agent (lawyer or law firm)

These documents must be notarized in Panama and, where applicable, translated into Spanish.

Step 4: Register with the Public Registry of Panama

Submit the notarized incorporation documents online or in person. Upon successful filing, the entity is officially created, and the registry issues a certificate of incorporation and related filings.

Step 5: Register for tax and social security

After incorporation, register the entity with the Dirección General de Ingresos (DGI) to obtain a Registro Único de Contribuyentes (RUC)—Panama’s tax-identification number used for corporate tax and VAT obligations. This can be done via the DGI’s online portal.

Employers must also register with the Caja de Seguro Social (CSS) to comply with social security obligations for employees.

Step 6: Open a corporate bank account

With corporate registration and tax ID in hand, approach local or international banks to open a corporate account. Expect KYC documentation, proof of incorporation, and beneficial-owner details. Panama’s financial sector is sophisticated, but account opening may take several weeks.

Step 7: Set up payroll and employment compliance

Before hiring, ensure registrations with tax and social security authorities are complete. Draft compliant employment contracts under Panamanian labor law and establish payroll processes that account for employer and employee social contributions.

Discover how Elemental Enzymes accelerated regulatory approvals and market entry with Deel.

Post-registration obligations

After incorporation, companies in Panama must:

• Tax and financial reporting: File corporate tax returns with the DGI and comply with VAT filing if applicable
• Corporate registers: Maintain updated records of directors, shareholders, and beneficial owners with the Public Registry and internal governance documents
• Compliance tracking: Track deadlines for annual reports, tax filings, and renewals through a compliance calendar or service provider
• Licenses and renewals: Obtain relevant operational or municipal licenses where required
• Recordkeeping: Retain corporate, financial, and payroll records as required under Panamanian law
• Employment law compliance: Stay current with labor and benefits obligations under local regulations

Taxes and financial considerations

You are responsible for:

• Corporate income tax: Panama applies a territorial tax system, taxing only Panama-sourced income at a standard corporate income tax rate of 25%. Foreign-sourced income is generally not subject to Panamanian tax.
• VAT/GST: Panama’s VAT (ITBMS) applies at a standard rate of 7% on most goods and services. Reduced rates of 10% (hotel accommodation and alcohol) and 15% (tobacco) also apply.
• Payroll/social contributions: Employers must contribute approximately to social security and educational insurance, as well as professional risk insurance, depending on the activity.
• Accounting standards: Companies must maintain accounting records in Spanish in accordance with Panamanian accounting and tax regulations, which are largely aligned with IFRS, and retain records for at least five years.

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Expand internationally with Deel

Whether you’re hiring through an EOR or establishing your own local entity, Deel’s all-in-one platform gives you everything you need to expand into the United Kingdom—quickly, compliantly, and with confidence. From market entry to ongoing operations, Deel helps you hire, onboard, and manage teams seamlessly from day one.

With Deel, you can:

• Test new regions using Deel’s local entities through our Employer of Record service—hire employees compliantly, delegate payroll and taxes, and access localized employment contracts.
• Open entities with Deel Entity Setup, where our team manages everything—from incorporation and tax registration to coordination with local experts.
• Centralize your compliance and records with Deel Entity Management, including automated filings, calendar reminders, and visibility across all entities.
• Integrate with Deel Payroll and Deel HR for compliant payments, benefits, and workforce oversight—all in one platform.

For companies transitioning from the EOR model to owned entities, Deel ensures a smooth handover and consistent compliance every step of the way. Enter new markets, onboard talent, and manage your global workforce—all through one unified platform.

FAQs

How long does it take to open an entity in Panama?
Incorporation processes can often be completed in 1–3 weeks, depending on document preparation and registry processing. Find out how long setup takes with our Entity Setup Calculator.

What is the minimum capital required?
There is generally no mandatory paid-in capital requirement, though an authorized capital is typically declared (often USD 10,000 for planning).

Can foreign companies own 100% of an entity in Panama?
Yes. Foreigners can own 100 % of Panamanian entities, and there are no residency requirements for shareholders.

Do I need a local director or representative?
A local registered agent (usually a lawyer) is required for registration; however, directors and shareholders can be non-residents.

How much does it cost to register an entity?
Costs vary by service provider but typically encompass registry fees, notary fees, and legal services—often equating to USD 1,200–2,000 or more. Find out the setup cost with our Entity Setup Calculator.

Can I hire employees before the entity is fully registered?
Typically, no. However, Deel’s Employer of Record (EOR) lets you hire and pay talent immediately while your entity setup is in progress.

Can Deel help me open an entity in Panama?
Yes. Deel Entity Setup manages the end-to-end process — from registration to payroll compliance—in over 100 countries. Deel’s local experts handle documentation, filings, and legal requirements on your behalf.

Does Deel offer ongoing compliance and payroll support?
Yes. Deel offers both managed services and self-service tools to help you stay compliant.

If you’re using Deel Entity Management, Maintenance, EOR, or Payroll, our team handles payroll, benefits, filings, and compliance obligations on your behalf.

For teams managing their own entities, Deel Compliance Hub makes staying compliant simple by providing real-time regulatory updates, risk alerts, and workforce insights across 150+ countries. Proactively manage compliance with our Compliance Monitor, Workforce Insights, and an AI-powered Worker Classifier, staying ahead of changing employment laws.

Can I switch from Deel EOR to my own entity later?
Yes. Deel supports seamless transitions when you’re ready.