Panama company formation is back on the radar for international entrepreneurs. On October 9, 2026, EU finance ministers removed Panama from the EU list of non-cooperative tax jurisdictions. The decision followed a new economic substance law passed earlier in the year.
For founders, that change matters. A blacklisted country makes banks, clients and partners nervous. Removal may improve how banks and business partners view a Panama company.
The rules have also become stricter. A Panama company still offers a territorial tax system, but it now comes with real reporting duties. Owners who plan for both get the most from it.
Why Panama company formation draws international entrepreneurs
Panama sits between North and South America, next to one of the world’s busiest trade routes. Its pull for founders, though, comes from three practical features.
A territorial tax system
Panama generally taxes only income from Panamanian sources. The standard corporate income tax rate is 25% of net taxable income.
Income from work done or assets held outside Panama is generally not taxed there. A company that serves clients in Colombia, Mexico or Europe, with the work done outside Panama, can owe no Panama income tax on those sales. Where the work happens matters more than where the client sits.
There is one new exception. From the 2027 fiscal year, some foreign passive income earned by companies in multinational groups can become taxable in Panama under the new substance rules.
That does not make the income tax-free everywhere. Your home country can still tax you. Canada, the US and the UK all have rules that tax residents on foreign company profits in many cases.
The US dollar and full foreign ownership
Panama uses the US dollar alongside its own balboa. You invoice, bank and report in dollars, which can cut conversion costs if your business already trades in US dollars.
Foreigners can own 100% of most Panama companies. You do not need a local partner, and you do not need to live in Panama to be a shareholder or director.
Better standing with global regulators
Panama left the FATF grey list in October 2023. In October 2026, the EU removed Panama from Annex I of its tax blacklist, clearing a second label that worried banks.
One step remains. Panama stays on the EU’s Annex II watch list until an OECD Global Forum review confirms it shares tax information properly. Expect some banks to keep asking detailed questions until then.
How Panama company formation works in 2026
The process is quick on paper. Your choices before filing decide how smooth the first year runs.
Choose the right structure
Most founders pick from four options:
| Structure | Governing law | Best fit |
| Corporation (sociedad anónima) | Law 32 of 1927 | Trading, services and holding companies |
| Limited liability company (SRL) | Law 4 of 2009 | Small teams that want partner-style ownership |
| Private interest foundation | Law 25 of 1995 | Asset protection and family succession |
| Branch of a foreign company | Commercial Code | Existing companies entering Panama |
The corporation is the most common choice. A Panama corporation needs at least three directors, plus a president, secretary and treasurer. One person can hold more than one of those officer roles.
Follow the formation steps
Panama law requires a resident agent, a Panamanian lawyer or law firm, to file your company. A typical formation runs in five steps:
- The agent checks and reserves your company name.
- The agent drafts the articles of incorporation, naming directors and officers.
- The articles are notarized and filed with the Public Registry.
- The company receives its registry number and a tax ID from the tax authority (DGI).
- The company applies for a bank account and any licences its activities need.
Most formations finish within a few business days to two weeks. Banking takes longer, and approval is not guaranteed. Banks review your owners, your source of funds and your business plan. Some still ask for an in-person meeting.
Know the real costs
Every corporation pays a fixed annual fee, the Tasa Única, of US300.FoundationspayUS400. Agent fees, a registered address and bookkeeping are paid on top, and prices vary by provider.
Timing matters for that annual fee. A company registered between January 1 and June 30 pays by July 15 each year. One registered between July 1 and December 31 pays by January 15. A late payment adds a US$50 surcharge.
Compliance after Panama company formation
The old picture of a Panama company with no paperwork is out of date. Three sets of rules now shape every year you own one.
Accounting records and beneficial owners
Panama’s accounting records rules cover two groups: companies that operate outside Panama, and companies that only hold assets, in Panama or abroad. Covered companies must give their resident agent the previous year’s records, or copies, by April 30 each year.
The rules come from Law 52 of 2016, as amended by Law 254 of 2021. Executive Decree 177 of 2024, as amended by Decree 42 of 2025, sets out the details.
What you submit depends on your activity. A trading or services company provides full financial statements. A holding company provides a shorter report of its assets, income and liabilities. Inactive companies still have to report.
Your resident agent also files your beneficial owners in a private government registry under Law 129 of 2020. A beneficial owner is generally anyone who owns or controls 25% or more. The registry is not public, but authorities can access it.
Economic substance from 2027
Law 526 of 2026, enacted on May 28, 2026, is the law behind the EU decision. It applies from the 2027 fiscal year.
The law targets Panama companies that belong to a multinational group and earn foreign passive income. That covers dividends, interest, royalties and capital gains. To keep that income untaxed, the company must show:
- Enough qualified, paid staff and suitable premises in Panama
- Strategic decisions and risk management carried out in Panama
- Adequate operating costs paid in Panama
Qualifying holding companies, and some property-holding companies, face lighter requirements if they meet the law’s conditions. Certain regulated financial businesses and ship operators fall outside the rules. An implementing decree issued in September 2026 sets out the details.
What non-compliance costs
Say your Panama holding company is part of a group and fails the substance test in 2027. It has US200,000ofnettaxableforeignpassiveincome.Attheflat15%rate,thetaxisUS30,000 before any allowable foreign tax credit.
Missing records carry their own penalties. Under the accounting records rules, authorities can suspend a company’s corporate rights, start a forced liquidation or impose fines.
The annual fee has its own trap. After three unpaid years, the tax authority suspends a corporation. Reactivation costs a US1,000fineplusaUS25 registry charge, on top of every overdue fee, followed by a reinstatement filing.
Planning Panama company formation the right way
The founders who do well in Panama treat the company as a real business, not a mailbox. Before you file, settle three questions:
- Where is the income earned? Panama’s territorial system only helps if the work or assets truly sit outside Panama.
- How will your home country tax it? Your own residency and foreign-company rules decide your real tax bill.
- Who keeps the books? The April 30 records deadline arrives every year, whether the company traded or not.
Getting these answers early matters because a Panama company touches law, tax and banking at once. Many founders now pick advisers who cover all three together, not a filing agent alone.
Company Formation in Panama, a project by Bestax Accountants, is one example of that approach. Its team pairs incorporation and resident agent coordination with bank account preparation, accounting records and annual fee tracking.
Panama’s 2026 reforms raise the bar, but they also make a well-run Panama company easier to defend. For entrepreneurs weighing the move, the details are worth getting right from day one.
Entrepreneurs comparing international business locations may also explore business opportunities in Al Sajaa, Sharjah, where industrial infrastructure and regional connectivity support different types of commercial operations.