How to Register a Sole Proprietorship (Empresario Individual) in Panama

Working as an independent contractor or freelancer in Panama is appealing because of its flexibility, straightforward tax system, and low startup costs. You can operate legally without forming a full company, and Panama’s territorial tax regime means foreign-sourced income is often exempt.

That said, bureaucracy still exists—registration, tax filings, and compliance can be confusing for newcomers, especially if you don’t speak Spanish. The main challenges are navigating official portals, managing invoices, and staying compliant with social security or municipal licenses. The benefits are independence, low fixed costs, and one of Latin America’s most favorable environments for entrepreneurs and remote professionals.

Disclaimer: This article is for informational purposes only and is not a substitute for legal advice. Please always check official sources or seek professional guidance before taking action.

What is a sole proprietorship in Panama?

In Panama, a sole proprietorship is officially called an “empresario individual”. Depending on the context, it may also be referred to as:

• Sole trader
• Self-employed worker
• Independent contractor

All of these terms describe a single individual operating a business without creating a separate legal entity.

How does a sole proprietorship (empresario individual) work in Panama?

Empresario individual vs. other business structures in Panama

There are alternative business structures in Panama for those seeking liability protection or planning to scale. Many entrepreneurs choose to incorporate as a Sociedad de Responsabilidad Limitada (S.R.L.) or Sociedad Anónima (S.A.). These entities offer limited liability, better access to credit, and options to bring in partners or investors.

Below is a comparison of a sole proprietorship versus these alternatives:

Step-by-step guide: How to register a sole proprietorship in Panama

Step 1: Check your eligibility

Panamanian citizens can freely register as sole proprietors by applying through the Registro Único de Contribuyentes (RUC) for natural persons. Legal residents are also eligible, provided they hold a valid residency permit or national identification card. Foreign nationals without permanent residence can register as well, but they must present valid migration documents such as a passport, visa, or immigration card when completing the RUC process.

Step 2: Choose your business name

You can use your legal name or a commercial trade name. If you choose a trade name, it is advisable to verify that it isn’t already in use through Panama’s public registry.

Step 3: Gather required documents

Before registering, prepare:

• Copy of your national ID (cédula) or passport
• Proof of address (such as a utility bill)
• Migration documentation for foreign nationals
• Declaration of your business address and tax domicile

Foreign documents must be apostilled and translated into Spanish before submission.

Step 4: Register with the MICI

You can register online through the online portal or in person. Complete the Solicitud de Inscripción de RUC para Persona Natural form and upload your documents. Registration is free, and once approved, you will receive your RUC, which is required for all invoices and tax filings.

Step 5: Pay registration fees and contributions

The registration fees are B/. 15.00 for a Persona Natural (sole proprietor) and B/. 55.00 for a Persona Jurídica (company), payable online when you submit your application.

Sole proprietors are not required to make fixed monthly contributions unless they employ staff. Your ongoing financial obligations depend on your business activity — including municipal permits, VAT (ITBMS) filings if applicable, and income tax payments on local profits.

Step 6: Complete post-registration obligations

After registration, you must issue compliant invoices, maintain accurate accounting records, and file annual tax returns. You should update your RUC whenever your business details change and obtain any required Aviso de Operación (commercial license) from the MICI or local municipality. If you employ staff, you must register with the Caja de Seguro Social (CSS) and comply with labor and social security obligations.

Financial and tax obligations for sole proprietors in Panama

You are responsible for:

• Income tax: Panama’s progressive income tax applies only to income earned within the country. Rates are (0%–25%) and returns are filed annually through the DGI portal.
• VAT (ITBMS): The standard rate is 7%. Reduced rates apply (10 % for hotels and alcohol; 0 % for medicines and food). You must register for ITBMS if your activity is taxable or annual revenue exceeds B/.36,000.00. Returns are usually filed monthly by the 15th of the following month.
• Social security contributions: Sole proprietors contribute only if they hire employees. Employers must register with the CSS and pay contributions on behalf of staff.
• Record-keeping: You must retain accounting records, invoices, and supporting documents for at least five years (for VAT) and up to seven years (for income tax). Records must be accurate and available for inspection if requested by the DGI.
• Invoicing: Every invoice must include your RUC, business name, client details, date, description of goods or services, and applicable ITBMS. Invoices must be sequentially numbered and stored for at least five years. Panama’s electronic invoicing system also requires XML files to be kept by both the issuer and certified provider.

Launch your contracting career and stay compliant with Deel

Registering as a sole proprietor gives you independence, but it also means handling taxes, invoices, and records on your own. Deel’s all-in-one platform helps you manage obligations without the stress. With Deel, you can:

• Automate invoicing and expense tracking with essential Bookkeeping tools
• Create, send, and sign localised work agreements
• Keep accurate records for tax season
• Access expert tax advice and compliance support
• Get paid through multiple payment and withdrawal methods
• Spend your earnings in USD with the Deel Card
• Access funds early with Deel Advance
• Enjoy contractor perks from 150+ partners

Stay independent, without the admin overload. Sign up to Deel for free today.

FAQs

What is the minimum capital required to start an empresario individual in Panama?
None. There is no legal minimum capital requirement to start.

Do empresario individual need to register for VAT (ITBMS)?
Yes, if your annual turnover exceeds B/.36,000.00 or your activity is subject to VAT.

How much are the standard monthly or annual contributions?
There are no fixed contributions unless you hire employees. In that case, you must make CSS payments based on employee salaries.

Can an empresario individual hire employees?
Yes. You must register as an employer with the CSS and make social security contributions for your staff.

How long does it take to register as an empresario individual in Panama?
Usually, within one to three business days if documents are complete.

Can foreign nationals register as empresario individual in Panama?
Yes, provided they have a valid migration status or residency and can provide identification and proof of address.

Do empresario individual need a separate business bank account?
Not legally required, but strongly recommended for accounting and compliance clarity.

What happens if I stop working as an empresario individual?
You must update or deactivate your RUC, file final tax returns, and cancel any active licenses or permits.

Are there any government incentives for new empresario individual?
There are no special startup incentives, but the territorial tax regime already offers significant benefits by exempting foreign-sourced income.

Can I use Deel as an empresario individual to get paid by international clients?
Yes. Deel enables freelancers and contractors to receive global payments quickly, securely, and in multiple currencies.

Does Deel generate compliant invoices for empresario individual?
Yes. Deel automatically generates invoices that meet Panama’s invoicing standards.

Can Deel help me with taxes as a sole proprietor in Panama?
Deel provides downloadable payment records and tax reports to simplify your filings.

Does Deel offer contracts for freelancers and empresario individual?
Yes. Deel offers compliant contract templates to help you work safely with clients worldwide.

Can I access benefits through Deel as an empresario individual?
Yes. Deel provides optional perks such as health insurance and retirement savings plans, helping independent professionals access benefits traditionally reserved for employees.