Profile

The Republic of Panama is an independent sovereign state with an elected government, located between Columbia and Costa Rica. The Capital is Panama City and the country has the highest income per capita in Central America. It has a stable and free economy. Aside from the very significant revenue from fees paid to transit the Panama canal, Panama has modelled itself to attract international businesses, and has been successful in becoming a tax haven with a reputation as a low-maintenance and flexible jurisdiction. It is known for having strict privacy laws and a light tax regime which is a large part of its appeal.

Political

Panama was freed from military rule in 1989 and now has a democratic system with competing political parties, and a separate legal system. Elections are considered to be fair and there is no longer a military. There is active progress to reduce corruption.
Panama is considered to have a weaker reputation for compliance with international regulations and was placed under special monitoring arrangements twice by the Financial Action Task Force between 2014 and 2020 (the ‘Grey List’). This was due to weaknesses in its anti money laundering and anti-terrorism finance regimes. Although Panama was removed from the list in 2023, it remains listed as a ‘Non-Cooperative Regime’ for tax purposes by the EU. One of Panama’s features is its strongly-held belief in privacy in business. It is one of the most private jurisdictions in terms of company and asset owner details.

Tax

Tax is only payable on income within the country, overseas income is not taxed. There is no corporation, capital gains or income tax, withholding or estate taxes on any revenue arising outside of Panama. Unusually there is no ban on offshore companies doing business within Panama also, however that revenue would be taxed.

Legal

The legal system is derived from Spanish and civil law, and a legal industry has built up in line with the incorporation industry.

Privacy

Panama is one of the most private jurisdictions with no public registers of directors or shareholders. Banking is especially private, with significant legal measures to maintain anonymity of banking details. Bearer shares are permitted in Panama, further enhancing privacy.

KYC and AML Regulations

Panama does require the ‘Know Your Client’ (KYC) process to be followed when incorporating new entities. This is a key component in following the Anti Money Laundering regulations in force widely around the world. It is also a stage in the improvement of Panama’s reputation.