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Panama

Global Upside helps businesses expand into Panama by providing talent acquisition, human resources, accounting, payroll, tax, incorporation, and professional employer organization (PEO)/employer of record (EOR) services. Our comprehensive offerings create an end-to-end solution that helps you establish your business and optimize your operations, all while maintaining compliance with Panamanian laws and regulations.

The hiring and incorporation processes in Panama are often complex, time-consuming, and involve numerous legal and compliance challenges. Global Upside simplifies these processes and lifts the compliance burden from your business. Our teams have the experience and expertise required to help you establish a legal entity in Panama. We also offer PEO/EOR solutions to companies interested in hiring employees quickly, without setting up a legal entity in the country.

Capital City

Panama City

Currency

United States Dollar ($), Panamanian balboa (B/.)

Language

Spanish

Government

Presidential Representative Democratic Republic with Multi-Party System

Country Overview

Panama’s economy is dollar-driven, highly diversified, small yet open, and majorly service-driven from commercial activities around the Panama Canal for manufacturing.

  • In Panama, the service sector employs the majority of the workforce.
  • Panama’s major exports consist of coffee, bananas, clothing items, and shrimp.
  • The principal imports are fossil fuels, chemicals, machinery, and transportation equipment.

Legal Entity Setup

Options for setting up a legal entity in Panama include:

Limited Liability Company (SRL)

A limited liability company, also referred to as Sociedad de Responsabilidad Limitada (SRL), is a form of an entity set up that requires at least 1 investor. The details of the investors and directors need to be publicly disclosed in an LLC.

Corporation

A corporation, also known as Sociedad Anonima (SA) is the most common form of incorporation used by foreign business owners. This form of establishment requires at least 1 investor and the liability is limited to the shared capital.

Private Interest Foundation

A private interest foundation, also called Fundacion de Interes Privado, is a form of an establishment that is subject to government approval and is a non-profit organization. This kind of structure is usually formed between a Corporation and a Trust.

It takes a minimum of two to four weeks to establish a legal entity set up in Panama.

Human Resources

The Panamanian Labor Code regulates the employer-employee relationship. According to the Labor Code, all agreements should be in written format and they must be signed before the Ministry of Labor.

The terms that need to be stipulated in a Panamanian employment contract are:

  • Name and address of the employer and establishment
  • Nationality, age, gender, and identification number of the employer
  • Name, nationality, age, gender, address, and identification number of the employee
  • Names of the employee’s dependent
  • Job description
  • Job location
  • Contract duration
  • Working hours
  • Remuneration
  • Probationary period
  • Termination

There are 10 statutory national holidays in Panama and they are:

  • Jan. 1: New Year’s Day
  • Jan. 9: National Sovereignty Day
  • Mardi Gras
  • Good Friday
  • May 1: Labor Day
  • Nov. 3: Separation Day
  • Nov. 10: Los Santos Uprising Day
  • Nov. 28: Independence Day
  • Dec. 8: Mothers’ Day
  • Dec. 25: Christmas

Payroll

The payroll frequency, in Panama, is twice a month.

The 13th-month salary, that is equal to one month’s salary, is paid out in 3 installments:

  • 15 April
  • 15 August
  • 15 December

Accounting

The IFRS standards are followed to maintain financial reports and accounting in Panama.

Tax & Compliance

Corporate Tax

The corporate tax rate in Panama is 25%.

Value Added Tax (VAT)

The VAT rate in Panama is 7%.

The other rates are 10% and 15% on a few services and products.

Data Privacy

The law that monitors data protection in Panama, also known as Ley Sobre Protección de Datos Personales in Spanish; the Data Protection Law is Law No. 81 of March 26th, 2019, published on Official Gazette 28743-A on March 29, 2019.

Anti-Bribery & Anti-Corruption Law

Under an array of Articles of the Criminal Code of Panama, it has been established that bribery and corruption are criminal offenses. The Articles that govern corruption are:

  • Article 345 Criminal Code administers bribery of public officials
  • Article 253 Criminal Code administers bribery of private officials
  • Article 51 Criminal Code administers bribery of legal entities
1. Bribery of Public Officials

For Individuals:

i) Imprisonment for 2 to 4 years

For Businesses:

i) A monetary fine of a minimum of 5000 Balboas

ii) Suspension of the entity for at least 5 years

iii) Dissolution of the legal entity

iv) Ban on advantages received by the government for a minimum of 5 years

2. Bribery of Private Officials

For Individuals:

i) Imprisonment from 2 to 4 years

ii) Monetary fine

For Businesses:

i) A monetary fine of € 30,000

ii) Ban on public bidding

iii) Dissolution of the legal entity