How to Set Up an Offshore Company in Panama: What You Need to Know Before You Start

More and more entrepreneurs operating internationally are asking how to set up an offshore company in Panama and what that decision actually involves. Rather than simply being a way to operate from another jurisdiction, an offshore company can form part of a broader corporate structure designed to manage international business activities, investments, or assets in an organized and efficient way.

Whether that structure makes sense, however, depends on the goals of the business, where its activities will take place, and the legal and tax obligations that may apply.

Before incorporating a company, it is therefore important to look beyond the formal requirements and understand what an offshore company in Panama actually is, what it can be used for, and what ongoing obligations come with it.

At Legal Solutions Panama, we advise entrepreneurs and investors on structuring international operations in accordance with Panamanian law and the specific needs of each project. Below, we explain the main points you should understand before starting the incorporation process.

What Is an Offshore Company?

An offshore company is generally understood as a company incorporated in a jurisdiction other than the one where it primarily conducts its business. How the company is used will depend on its activities, expansion strategy, ownership structure, and the jurisdictions involved.

These companies are commonly used for international trade, holding investments or assets, participating in international business ventures, and organizing certain cross-border corporate structures.

Under Panamanian law, however, there is no separate legal entity formally called an "offshore company." The term describes how an ordinary Panamanian company — most commonly a corporation (sociedad anónima, or S.A.) — is used when its income-generating activities take place outside Panama.This distinction is important because it affects the company's tax and operating obligations.

Why Is Panama a Well-Established Jurisdiction?

Panama has a long history as an international center for corporate and commercial services. Its legal framework allows companies to be incorporated through relatively streamlined procedures and has been used by international entrepreneurs and investors for decades.

The country's strategic location, international connectivity, dollarized economy, and established corporate legislation have also made it possible to structure companies around a variety of international business models.

Two elements are particularly relevant.

First, Panama's principal law governing corporations, Law 32 of 1927, has been in force for nearly a century.

Second, the U.S. dollar is legal tender in Panama, reducing foreign-exchange exposure for businesses whose transactions are primarily denominated in dollars.

Panama also follows a territorial tax system, under which the source of income is a central factor in determining whether that income is taxable in the country.

Article 694 of the Panama Tax Code establishes:

"The object of this tax is taxable income produced, from any source, within the territory of the Republic of Panama, regardless of where it is received."

Panama Tax Code, Article 694. Unofficial translation.

At the same time, today's offshore structures operate within a substantially different international regulatory environment than they did decades ago. Companies must take into account transparency, due diligence, beneficial ownership, accounting, and other compliance requirements.

In this context, Law 526 of May 28, 2026 introduced economic substance rules for certain categories of foreign-source passive income.

Law 526 of May 28, 2026 does not apply to every Panamanian company. It applies to entities that form part of a multinational group and receive specified categories of foreign-source passive income, such as dividends, interest, royalties, or capital gains.

The regime applies beginning with the 2027 tax year and was implemented through Executive Decree 32 of September 2, 2026 (Official Gazette 30603-B). Entities that fall within its scope should therefore evaluate whether they meet the applicable economic substance requirements.

Among other requirements, the regulations require the board of directors to meet in person in Panama at least twice per tax year. A company that is not part of a multinational group remains under the territorial regime.

This makes proper structuring from the outset increasingly important, not only from a legal perspective but also when dealing with banks, clients, investors, and international counterparties.

If your company will conduct business with European counterparties, Panama's status on international regulatory lists is also worth considering:

Law 526 introduces new economic substance rules that apply to certain multinational groups and should be considered alongside Panama's broader international tax and compliance framework.

How to Set Up an Offshore Company in Panama

Although every project should be assessed individually, the process of setting up an offshore company in Panama generally involves the following stages:

1. Define the purpose of the company and the activities it will carry out.
2. Choose the corporate structure that best fits the business.
3. Prepare the documentation required for incorporation and due diligence.
4. Formally incorporate the company under Panamanian law.
5. Identify and comply with the legal, tax, accounting, and regulatory obligations that apply based on the company's activities and the countries involved.

Obtaining legal advice at the beginning of the process can help ensure that the chosen structure is appropriate for the intended activity and avoid decisions that could later create unnecessary costs or operational limitations.

For a Panamanian corporation, the process generally looks like this:

Documents typically requested:

The documents commonly required include:

• A valid passport for each shareholder, director, and beneficial owner.
• Recent proof of address.
• A completed due diligence or Know Your Customer (KYC) form.
• Information about the source of funds and the company's intended activities.
• For banking purposes, additional financial, banking, or professional references may be requested depending on the institution.

A cash contribution of the stated share capital is not generally required in order to incorporate the company. The authorized share capital is established in the articles of incorporation, but it does not need to be deposited as part of the incorporation process.

Do You Need to Travel to Panama?

Usually not. Your lawyer and resident agent handle the name check, the public deed and the registration in Panama, while you send the due diligence documents from your country. If a document issued abroad needs to take effect in Panama, it will normally require an apostille.

The stage that depends most on third parties is the bank account: each bank runs its own due diligence. Many applications can be started remotely, although depending on the bank and your profile, a one-time visit may be required at a later stage. That is why it pays to plan it from the start with a team that knows how to open a bank account in Panama.

Is Shareholder Information Public?

Not all of it. The Public Registry shows that the company exists, along with its directors, officers and resident agent. Shareholders are generally not listed there, and the beneficial owner is reported confidentially through the resident agent. That confidentiality toward the public does not prevent banks and authorities from accessing the information when the law allows it.

Who Should Consider an Offshore Company?

An offshore company in Panama may be worth considering for:

• Companies engaged in international trade.
• Investment or holding structures.
• Digital businesses serving clients in multiple countries.
• Consulting businesses providing international services.
• Investors seeking to organize assets or international business projects.

However, the fact that a business operates internationally does not automatically mean an offshore structure is the right solution.

Whether it is appropriate depends on the nature of the economic activity, where the income is generated, the objectives of the business, the residence of its beneficial owners, and the regulations that apply in each relevant jurisdiction.

When It's Not the Right Structure

An offshore company isn't a good fit if you plan to invoice clients in Panama, hire staff in the country, or provide services whose economic effect occurs within Panamanian territory. In those cases, an operating company is the right choice.

If You Live Outside Panama: What to Check in Your Country

Setting up the company and meeting its Panamanian obligations is only part of the picture. Your tax obligations depend mainly on where you are tax resident, and several countries attribute to the shareholder the income of a foreign company they control. These are the points worth reviewing in each market:

A sound structure is not about hiding income. It is about organizing an international business and complying in every country involved. That is why our analysis always starts with the country where the beneficial owner lives, and we recommend confirming with a tax advisor there how you will be taxed.

Choosing the Right Structure Makes All the Difference

Not all offshore companies serve the same purpose. Some function as holding companies, while others manage investments, assets, or international business activities.

Before making a decision, we recommend analyzing the economic activity, the jurisdiction where the business will operate, and the applicable regulatory obligations. Proper planning avoids mistakes that can later lead to costs or operational limitations.

These are the three Panamanian vehicles most commonly used for international structures:

Note: the annual franchise tax shown above is the official annual tax applicable to each entity type. Professional fees, registry costs, and other services associated with the structure are separate.

How Much Does It Cost, and What Are the Annual Obligations?

Legal Solutions Panama offers three plans for incorporating an offshore company (prices as of October 2026, including ITBMS (Panama VAT)):

Basic, USD 1,712.80. Includes drafting of the articles of incorporation, registration and the Public Registry certificate, first-year resident agent fees and annual franchise tax, and basic corporate documents.

Business, USD 2,200.00. Everything in Basic, plus share certificates and the share register, the share issuance minutes, additional documents for banking or corporate procedures, and legal guidance throughout the process.

Business Plus, USD 2,494.50. Everything in Business, plus apostille of the documents, translation if needed, a general power of attorney on request, and priority support.

Up-to-date details for each plan are available on our offshore company formation page.

After incorporation, the company has recurring obligations. Failing to meet them can lead to the suspension of its corporate rights, which prevents it from recording any act in the Public Registry.

First year and following years. Your plan covers incorporation, the resident agent and the annual franchise tax for the first year. From the second year on, the company pays the USD 300 annual franchise tax to the DGI and the resident agent's annual fee, which is USD 300 with us. Accounting, if you hire it, is quoted separately.

A Decision That Deserves Specialized Advice

Setting up an offshore company in Panama can offer significant advantages when it responds to a well-defined business strategy and is carried out in accordance with current regulations. Every project has its own characteristics that require prior analysis to choose the most suitable corporate structure. The tax residence of the beneficial owners, the source of the income, the jurisdictions where the activities take place, and whether the company forms part of a multinational group can affect the obligations that apply.

If you'd like to learn more about corporate structures, investment, and international business, visit the Legal Solutions Panama blog. And if you're considering setting up an offshore company in Panama, contact us for personalized advice and to determine the best option for your project.