How Digital Nomads and Startups Are Leveraging Panama Corporations

Panama has become a leading destination for digital nomads, remote entrepreneurs, and startups seeking a flexible, internationally recognized corporate structure. With its territorial tax system, stable legal framework, and strategic location, a Panama corporation offers significant advantages for global businesses looking to expand and operate efficiently.

Why Panama? Key Advantages

• Territorial Tax System: Panama taxes only income derived from Panamanian sources. Foreign-sourced income remains tax-exempt, making it highly attractive for global entrepreneurs.

  Official Reference – Dirección General de Ingresos (DGI)

• Corporate Privacy: While beneficial owners are not publicly disclosed, they must be recorded in Panama’s private UBO registry (Law 129 of 2020), accessible only to competent authorities. This balance provides confidentiality while ensuring regulatory compliance.

• International Banking Hub: Panama is home to a robust banking sector and remains an important financial hub. However, international account opening has become more stringent under global compliance standards, even though Panama was removed from the FATF grey list in October 2023.

• Strategic Location: Situated at the crossroads of the Americas and home to the Panama Canal, the country offers a central gateway for trade and logistics.

• Payment Gateways: Platforms like Payoneer are accessible. For Stripe, entrepreneurs generally need to establish an entity in a Stripe-supported jurisdiction (such as the US or EU). Panama-registered corporations cannot directly register with Stripe.

Legal Requirements for Incorporation

Establishing a Panama corporation is straightforward but subject to specific legal requirements under Law 32 of 1927:

• Directors and Officers: At least three directors/officers (any nationality).

• Resident Agent: A licensed Panamanian attorney or firm must act as the registered agent.

• Authorized Capital: Commonly set at USD 10,000 for standard incorporation (no statutory minimum; no paid-in capital required at formation).

• Accounting Records: Corporations must maintain accounting records and provide the resident agent with details of the record custodian (Law 52 of 2016).

• Registered Office: Must maintain a registered office address in Panama.

Official Reference – Public Registry of Panama

Timeline and Process

Incorporation typically takes 10–15 business days, depending on document preparation and registry processing. Once incorporated, the company can begin operations, subject to bank account opening and compliance checks.

Fees and Ongoing Compliance

• Government Annual Franchise Tax (Tasa Única): USD 300 per year, payable to the tax authority (DGI).

  • Due January 15 if incorporated between July–December.

  • Due July 15 if incorporated between January–June. Official Reference – DGI Panama

• Resident Agent Fees: Ongoing annual service fee charged by the licensed attorney or law firm.

• Annual Maintenance: Companies must keep accounting records and may be required to submit information to their resident agent for compliance.

Why Startups Are Choosing Panama Corporations

Startups, especially in fintech, SaaS, and e-commerce, often seek jurisdictions that provide flexibility and global credibility while minimizing costs. Panama is increasingly considered by founders for several reasons:

1. Low Operational Costs: Registering and maintaining a Panama corporation involves relatively low expenses compared to traditional hubs such as the US or UK. There is no obligation to maintain a physical office or local staff if the company does not conduct business within Panama.

2. Tax Efficiency: Under Panama’s territorial system, only Panama-sourced income is taxable. Startups earning revenue abroad can reinvest profits into growth without local taxation.

3. Speedy Setup: Incorporation usually takes 10–15 business days. The process is fully remote, with no requirement to travel to Panama, provided you engage a licensed resident agent.

4. Global Recognition: Panama corporations are internationally recognized and can be used in global structuring. However, it is important to note that venture capital and angel investors often prefer jurisdictions such as Delaware or Singapore for fundraising. Panama entities are more suitable for holding, operations, or structuring in a tax-efficient way.

5. Flexible Corporate Structure: Panama corporations allow wide flexibility in shareholding and board composition. Nominee directors or shareholders can be appointed, though under Law 129 of 2020 the beneficial owners must still be disclosed to the private UBO registry accessible by authorities.

Why Digital Nomads and Entrepreneurs Choose Panama

1. Global reach with local efficiency – Panama corporations can operate internationally with a low compliance burden.

2. Favorable tax regime – Only Panama-sourced income is taxable.

3. Professional image – A Panama corporation enhances credibility when dealing with international clients.

4. Strategic flexibility – Suitable as a holding company, service company, or global trade vehicle.

Conclusion

Panama corporations offer digital nomads and startups a legally robust, cost-effective, and internationally respected structure. With low annual maintenance (USD 300 government levy + resident agent fees) and straightforward compliance, they remain a popular choice for entrepreneurs seeking tax efficiency, privacy, and global reach.

For anyone considering establishing a Panama corporation, it is essential to work with a licensed service provider to ensure compliance with Law 32 of 1927, Law 52 of 2016 (accounting records), and Law 129 of 2020 (UBO registry), along with annual levy obligations set by the DGI.