It is very easy to start a business in Panama.
Your first task is to decide what type of business you’re going to start. Then you talk to a lawyer to set up a corporation to develop that business. The consultation with the lawyer normally takes between two to three hours.
For your Board of Directors, you will need three people, who can be from any country in the world.
Your attorney should take about half of a day to get the paperwork ready to submit to the Registrar Publico. The fees for the Registrar Publico are around US $1,500. In three to four working days, you will have your corporation established. So, in about 7 working days total, you can have your corporation legally established in Panama.
Then, you will need an office, which could be a virtual office. For example, a lawyer could allow you to use his address.
About a year and a half ago, it became necessary (with a few exceptions) to run all your invoices through an “impresora fiscal”, which creates a serial number for each invoice and is connected to the Panamanian government. To get this machine takes about another four working days. So, within 15 days or so to a month, you will be able to be a fully functional business. The only thing that may take more time would be setting up the corporation’s bank account. However, you can use your existing US or other bank account while your bank account in Panama is being set up.
There are a few restrictions as to the type of business you could start in Panama as a foreigner. For example, if you were a lawyer, you would have to go through university in Panama. Of course as a doctor, you would have to have a Panamanian license.
As another example, ownership of real estate sales firms are restricted to Panamanians. However, there are ways as a foreigner to set up a company to advise the real estate sales firm, instead of acting as a broker. There are other examples as well.
Relative to hiring employees, the labor laws in Panama are very strict. These laws protect the employee, but also, if the employer properly complies with the labor laws, they protect the employer as well. As an employer, you must set up the contracts properly in the beginning. Otherwise, the employees will have the advantage.
If you set up your labor contracts properly, you will be able to enjoy the benefits of much, much lower labor costs in Panama. For example, the minimum wage is about $400 / month and highly trained people get paid between $2,000 to $4,000 per month, which is considered a good salary, because in Panama, with this salary, you can have a good life.
As a corporation in Panama, you pay a flat corporate fees annually called “tasa unica” of $350. Plus, you will need to pay an agent resident, which is a legal fee because each corporation has to have a lawyer as part of the corporation. This will cost you between $250 - $350, depending on what you agree with the law firm.
Your corporate income tax is determined by your profit for the current year and a projection of how much profit you will make in the upcoming year. The tax rate is different for different types of businesses, on account of government incentives. In addition, Panamanian corporations do not pay taxes on income generated outside of Panama. For example, if you have a Panamanian corporation that generates its income in the US, your Panamanian corporation pays zero taxes on that US-generated profit.