Thinking of Starting a Business in Panama? Here’s Everything You Need to Know

Panama is an attractive destination for entrepreneurs thanks to its dollarized economy, strategic geographic location, favorable tax regime, and solid banking system. However, launching a successful business requires more than a good idea — it takes knowledge of the legal framework, compliance requirements, and the local business culture.

Here’s a practical guide with the key steps and considerations for starting a business in Panama.

1. Define Your Business Idea and Study the Market

Before diving into paperwork, you need a clear business plan. Ask yourself:

   •   What product or service will you offer?

   •   Who is your target audience?

   •   Who are your competitors?

   •   Is the idea financially viable?

Market research — even a basic one — can help you validate your idea and position your business effectively.

2. Choose the Right Legal Structure

In Panama, there are several legal structures available for operating a business:

   •   Natural Person

   •   Panama Corporation ( S.A.)

   •   Branch of a foreign corporation, that must be registered in Panamá.

Panama Corporations (S.A.) are the most used structure for commercial operations. However, if you’re starting small or working independently, operating as natural person might be sufficient.

3. Register Your Business Legally

To formally establish your company in Panama, you’ll need to:

·       Incorporate the company: Draft the Articles of Incorporation and register them with the Public Registry.

·       Obtain a Business License (Aviso de Operación): Through the Panamá Emprende portal. It is very common that the attorney that prepares the Panama Corporation include this on their fees.

·       RUC. It is a Taxation register number Register and it is necessary to comply with the tax responsibilities.

·       Enroll with the Social Security Fund (CSS): If you’ll hire employees.

·       Apply for additional permits, if required by your business activity (e.g. health, food, construction, tourism).

4. Understand Tax and Accounting Obligations

Businesses in Panama must comply with the following:

   •   Annual income tax returns

   •   Monthly VAT declarations (7%)

   •   Payroll reporting (if applicable)

   •   Proper bookkeeping and accounting records

Hiring a local accountant and legal advisor will help ensure ongoing compliance and prevent future issues.

5. Open a Corporate Bank Account

Opening a corporate bank account is a crucial step and often takes time due to strict compliance standards. Most banks will request:

   •   Company incorporation documents

   •   Identification of shareholders and directors

   •   Proof of address and source of funds

   •   Business plan or description of activities

   •   Bank reference letters

Tip: Be prepared for due diligence (KYC procedures) and allow extra time for account approval.

6. Immigration Considerations for Foreign Entrepreneurs

If you’re not a Panamanian citizen, you’ll need legal residency to operate (work) on a business and work in the country. Options include:

   •   Friendly Nations Visa

   •   Qualified Investor Program

   •   Economic Solvency Residency

Each option depends on your nationality, business plan, and level of investment. Legal guidance is strongly recommended.

Please note that a foreigner can be the owner of the business, and incorporate a Panamanian corporation, but will need an immigration status and work permit if he/she is going to work in the business

7. Hiring Employees and Labor Law Compliance

If you plan to hire staff, you must:

   •   Register as an employer with the CSS.

   •   Provide written labor contracts.

   •   Respect minimum wage, vacation time, and other benefits.

   •   Comply with the Panamanian Labor Code.

8. Final Recommendations

   •   Get professional advice early (legal, tax, and banking).

   •   Explore special economic zones, such as Panama Pacifico or Ciudad del Saber.

   •   Stay updated on regulatory and tax changes.

   •   Build local relationships — networking is key in Panama’s business culture.

 Conclusion

Panama offers great opportunities for entrepreneurs ready to navigate its legal and business environment. With the right structure, a clear strategy, and expert support, your idea can grow into a successful and sustainable business in one of Latin America’s most promising economies.

Are you ready to start your business in Panama?

Contact me and I’ll guide you through every step of the process.