Setting Up a Panama S.A. - A Practical Step-by-Step Guide

What is a Panamanian Sociedad Anónima and when should you use it?

A Panamanian Sociedad Anónima (S.A.) is a share-based corporation used for almost all private business and asset holding structures in Panama. It suits operating companies, real estate holding, vessel ownership, and international structures because it allows foreign ownership, flexible governance, and low capital requirements.

The S.A. is created by a public deed before a Panamanian notary and registered with the Registro Público de Panamá (Public Registry), under Law 32 of 1927 and the Commercial Code. It has legal personality separate from its shareholders, can enter contracts, own property, and is recognized internationally, especially in shipping, trading, and investment structures.

Typical uses of a Panamanian S.A.

• Holding real estate in Panama - especially apartments, commercial units, or land, to simplify sale and succession.
• Operating companies - services, trading, logistics, import-export, and Free Zone entities (with additional licenses).
• International asset holding - bank and brokerage accounts, investments, intellectual property (with careful tax planning in home countries).
• Ship and yacht ownership - often combined with Panama flag registration.

Key legal characteristics

• Separate legal entity: Liability is limited to the corporation's assets, unless guarantees or fraud are involved.
• No minimum paid-in capital: Common authorized capital is USD 10,000 to keep registration costs low.
• No nationality or residency requirement for owners: Shareholders and directors can be of any nationality and residency.
• Flexible share structure: Registered shares are standard; bearer shares are heavily restricted and must be held by authorized custodians.

How is a Panamanian Sociedad Anónima structured (directors, dignitaries, and shareholders)?

A Panamanian S.A. has three key layers: directors/dignitaries who manage the company, shareholders who own it, and sometimes a beneficial owner behind nominees. By law, you must have at least three directors and one shareholder, and a resident agent.

The Public Registry only publishes the names of the directors, dignitaries, and resident agent - not the shareholders. This is why many international clients focus on how to structure the director layer for privacy while keeping real control through share ownership and powers of attorney.

Directors and dignitaries (officers)

• Minimum: 3 directors, who are usually also appointed as dignitaries.
• Nationality/residency: Can be any nationality and do not need to live in Panama.
• Publicity: Their names and ID/passport details appear in the Public Registry and are publicly searchable.
• Dignitaries: By custom, each S.A. has at least:
  • President
  • Secretary
  • Treasurer
• Overlap: One person may hold more than one dignitary role, and directors are often the same people as the dignitaries.

Shareholders and beneficial owners

• Minimum: At least one shareholder (individual or company).
• Privacy: Shareholders do not appear in the Public Registry. Their details are kept by the company and, in practice, by the resident agent and banks.
• Control: Shareholders control:
  • Appointment and removal of directors.
  • Changes to the articles of incorporation.
  • Approval of major transactions (depending on bylaws).
• Beneficial owner registry: Under recent legislation (including Law 129 of 2020 and Law 52 of 2016), the resident agent must record the ultimate beneficial owner (UBO) in a secure, non-public registry accessible to regulators.

Typical capital structure

• Authorized capital: Usually USD 10,000 (e.g. 100 shares of USD 100 each) to minimize registration tax and flexibility.
• Types of shares:
  • Registered shares: Standard and recommended; issued in the shareholder's name.
  • Bearer shares: Legally allowed but must be immobilized with an authorized custodian under Law 47 of 2013 and its amendments; used far less after global transparency rules.
• Payment: Capital usually does not need to be fully paid in at incorporation, but you should align with bank and tax expectations.

How do nominee directors work in Panama (privacy vs control)?

Nominee directors in Panama are individuals provided (usually by law firms) to appear as directors and dignitaries of your S.A. in the Public Registry, while you or your holding company remain the real owner. They offer privacy on public records but do not change who legally owns or controls the company if the structure is drafted correctly.

Used well, nominees protect the beneficial owner's name from casual public searches, while banks and authorities still know who is behind the structure. Used poorly, they can create real control risks or regulatory red flags.

Why business owners use nominee directors

• Privacy on public record: Only nominees' names appear in the Registry, not the beneficial owner's.
• Standardization: Law firms have experienced directors who understand the documentation and can sign promptly.
• Operational convenience: For simple holding companies, nominees can handle formalities without burdening the client.

How control is actually maintained

• Share ownership: You or your holding company hold all (or controlling) shares.
• Private agreements and letters:
  • Undated or pre-signed resignation letters of the nominee directors.
  • Directors' undertakings to act only on your or your lawyer's instructions.
• Powers of attorney (POA):
  • General or special POAs granted by the board to you or your officers.
  • These allow you to manage bank accounts, sign contracts, and handle day-to-day operations.

Risks and limitations of nominee directors

• Bank compliance: Banks do not accept anonymity; they require full KYC on the beneficial owner despite nominees.
• Dependence on service provider: If a dispute arises with the law firm or fees are not paid, nominees can resign or stop signing, causing operational disruption.
• Regulatory risk: Poorly structured nominee arrangements can be seen as attempts to conceal illicit activity, attracting scrutiny from Panamanian and foreign regulators.
• Limited actual involvement: Nominees will not manage your business; they sign only what is clearly documented and consistent with local law and compliance.

Best practices when using nominee directors

• Use a reputable Panamanian law firm with robust compliance and clear engagement letters.
• Ensure you hold:
  • Original share certificates or custody confirmations.
  • Directors' resignation letters and undertakings where appropriate.
  • Copies of signed powers of attorney in your favor.
• Clarify who can give instructions to nominees and how they will verify them.
• Review nominee fees annually and budget for them as part of ongoing maintenance.

What are the main steps and timelines to incorporate a Sociedad Anónima in Panama?

Incorporating a Panamanian S.A. usually takes 3 to 7 business days once you provide KYC documents and instructions to your lawyer. The process runs through a Panamanian notary and the Public Registry, guided by your Resident Agent (lawyer or law firm).

Most of the work is handled locally by the law firm, while you provide identification, structure decisions, and initial payment. Opening a bank account, if required, is a separate and often longer process.

Step-by-step incorporation process

1. Define structure and purpose
   • Decide on the company name (with 2 or 3 alternatives).
   • Define shareholder(s) and director(s) or confirm if you will use nominees.
   • Describe the company's main activities and whether it will hold assets or operate a business.
2. Provide KYC documents to the Resident Agent
   • Passport copy and proof of address for each beneficial owner, shareholder, and director.
   • Corporate documents if a company will be a shareholder.
   • Source of funds / source of wealth information (increasingly detailed).
3. Draft the Articles of Incorporation (Pacto Social)
   • Prepared by the Panamanian lawyer in Spanish.
   • Includes name, duration (usually perpetual), capital, share classes, directors, and dignitaries.
4. Execute public deed and register
   • The Articles are turned into a public deed before a Panamanian notary.
   • The deed is filed at the Public Registry, which assigns a registration number and corporate ID.
5. Deliver corporate documents
   • Certified copy of the public deed or Public Registry certificate (certificado de inscripción).
   • Share certificates, share register, and minutes book.
   • Resolutions granting any powers of attorney.
6. Optional registrations and licenses
   • Taxpayer registration with the Dirección General de Ingresos (DGI) if operating in Panama.
   • Commercial license (Aviso de Operación) via the Ministry of Commerce and Industries (MICI).
   • Special regimes for Free Zones, City of Knowledge, Colon Free Zone, etc.

Typical timelines

• Document preparation and KYC: 1 - 3 business days (depends mostly on the client).
• Notarization and Public Registry registration: 2 - 5 business days after documents are ready.
• Delivery of final documents (scans and originals): Within 1 - 2 weeks, depending on courier times.

What are the ongoing annual costs of a Panamanian corporation (including Tasa Única)?

The core annual cost for a Panamanian S.A. is the Tasa Única of USD 300, payable regardless of whether the company is active or generates income. On top of that, you must budget for resident agent fees, nominee director fees (if any), and accounting/compliance costs.

For a simple holding company, a realistic minimum annual budget is usually in the range of USD 800 to 1,500. Active operating companies will typically incur higher costs due to accounting, tax filings, and local compliance.

Key annual cost components (approximate)

Statutory accounting and record-keeping

• Under Law 52 of 2016, S.A.s must keep:
  • Accounting records.
  • Supporting documents for transactions.
  • Records of assets held abroad, where relevant.
• Records can be kept in or outside Panama, but the Resident Agent must know where and be able to obtain them within a reasonable time.
• Failure to maintain accounting records can lead to fines and problems with banks or due diligence processes.

What is the Tasa Única in Panama and how is it paid?

The Tasa Única is a fixed annual franchise tax of USD 300 that every Panamanian S.A. must pay to remain in good standing, regardless of activity or profits. It is separate from corporate income tax and is due based on the company's incorporation date.

Non-payment triggers late fees, interest, and eventually suspension and potential dissolution of the corporation by the Public Registry. You normally pay the Tasa Única through your Resident Agent, a local bank, or directly through government payment platforms.

Due dates and periods

Panamanian entities are classified into two groups based on the date of incorporation:

• Group A: Companies incorporated between 1 January and 30 June.
  • Annual Tasa Única due by 15 July each year.
• Group B: Companies incorporated between 1 July and 31 December.
  • Annual Tasa Única due by 15 January each year.

How payment works in practice

• Your Resident Agent usually:
  • Monitors deadlines and sends renewal notices.
  • Collects funds from you and pays the government.
  • Charges a service fee or includes it in the annual package.
• You can also pay using:
  • Authorized Panamanian banks.
  • Government online systems (for those with local access).

Tasa Única vs. other taxes

• The Tasa Única is a flat corporate maintenance tax, not based on income, assets, or sales.
• It does not replace:
  • Corporate income tax on Panama-source income.
  • ITBMS (VAT-type tax) on certain local sales.
  • Payroll and social security contributions.
• Even a dormant or asset-holding S.A. with no Panama-source income must pay the Tasa Única to avoid suspension.

What happens if you do not pay the Tasa Única in Panama?

If you do not pay the Tasa Única, your S.A. quickly accumulates late fees and interest, then loses its ability to register documents, and after prolonged non-payment, can be administratively dissolved by the Public Registry. Reactivation is possible in many cases but becomes more expensive and complex the longer you wait.

For any S.A. that holds valuable assets (real estate, ships, bank accounts) or participates in contracts, allowing non-payment is a serious risk to continuity and transactional certainty.

Immediate and short-term consequences

• Late surcharge and interest: Additional amounts are applied to the unpaid Tasa Única after the due date.
• Blocking of registrations: An S.A. that is not in good standing cannot:
  • Register new public deeds (e.g. share transfers, director changes).
  • Record mortgages or liens on property held by the S.A.
  • Update its corporate information at the Public Registry.

Medium to long-term consequences

• Suspension of corporate rights: After several unpaid periods (commonly 3 consecutive years), the Public Registry may classify the S.A. as suspended, seriously limiting its legal operation.
• Administrative dissolution: After a longer period of non-payment, the S.A. may be struck off and considered dissolved, without a judicial process.
• Asset and contract impact:
  • Sale or refinancing of real estate becomes legally complex or blocked.
  • Banks may freeze or restrict accounts or request immediate regularization.
  • Counterparties may refuse to deal with an entity not in good standing.

Reactivation and regularization

• To reactivate an S.A. you generally must:
  • Pay all outstanding Tasa Única amounts.
  • Pay late fees, interest, and reactivation charges.
  • Work through your Resident Agent or appoint a new one if the old one resigned.
• In some cases, when accumulated debt is excessive and the company has no assets, it is more efficient to:
  • Let the S.A. be dissolved, and
  • Incorporate a new S.A. rather than attempting reactivation.

Why do you need a Resident Agent in Panama and what do they do?

Every Panamanian S.A. is legally required to have a Resident Agent, who must be a licensed Panamanian lawyer or law firm. The Resident Agent's name and address appear in the Public Registry and they are the official local point of contact between your S.A. and the Panamanian authorities.

Beyond formalities, the Resident Agent plays a central role in compliance: they conduct KYC, maintain beneficial owner information, and file corporate changes with the Public Registry.

Legal basis and requirements

• The requirement for a Resident Agent is rooted in Law 32 of 1927 and later reforms on anti-money laundering and transparency.
• Only:
  • Individual Panamanian lawyers, or
  • Panamanian law firms (sociedades de abogados)
  can act as Resident Agents.
• If an S.A. loses its Resident Agent (e.g. resignation for non-payment or compliance reasons), it must appoint a new one via public deed to maintain good standing.

Core functions of the Resident Agent

• Formation and registration:
  • Drafting and executing the Articles of Incorporation.
  • Filing deeds for changes of directors, capital, bylaws, name, etc.
• Regulatory compliance:
  • Performing KYC on shareholders and beneficial owners.
  • Maintaining the UBO information in the confidential registry.
  • Knowing where accounting records are kept under Law 52 of 2016.
• Government liaison:
  • Receiving official communications and notices.
  • Assisting with Tasa Única payments.
  • Coordinating with tax and other authorities when needed.

Choosing and managing your Resident Agent relationship

• Assess the firm on:
  • Reputation and years of practice in corporate work.
  • Responsiveness and clarity on fees.
  • Compliance standards (to avoid future regulatory issues).
• Review and keep:
  • The engagement letter or services contract.
  • Fee schedules for annual services and extraordinary work.
• If you want to change Resident Agent:
  • A new lawyer must accept appointment.
  • A public deed is executed changing the Resident Agent.
  • Any outstanding fees with the previous Agent should be resolved.

When should you hire a Panamanian business lawyer or corporate expert?

You should work with a Panamanian business lawyer or corporate services firm from the moment you decide to incorporate an S.A. or acquire one that already exists. Their involvement is not only practical but legally necessary, since the Resident Agent must be a Panamanian lawyer.

Beyond the legal minimum, professional advice is critical whenever you structure multi-jurisdictional ownership, open bank accounts, hold significant assets, or face compliance reviews.

Situations where expert help is essential

• Setting up your first S.A. in Panama
  • Choosing the right structure (single S.A. vs. group structure, shareholder jurisdiction, etc.).
  • Designing the director and nominee setup to balance privacy and control.
• Buying real estate or a vessel through an S.A.
  • Due diligence on the existing S.A. (debts, pending Tasa Única, hidden liabilities).
  • Structuring collateral, leases, and sale conditions.
• Opening bank or brokerage accounts
  • Preparing corporate documents and resolutions in the format banks expect.
  • Aligning beneficial owner disclosures with global compliance standards.
• Tax planning across jurisdictions
  • Coordinating Panama rules with your home country's tax and CFC regimes.
  • Evaluating whether profits will be seen as Panama-source or foreign-source.
• Regularizing an S.A. with problems
  • Unpaid Tasa Única or suspended/dissolved status.
  • Loss of contact with the previous Resident Agent or service provider.

What to ask your Panamanian advisor

• Exact annual costs, including:
  • Tasa Única.
  • Resident Agent fee.
  • Nominee director fees.
  • Expected accounting and tax compliance fees.
• How they will document:
  • Beneficial owner information and privacy safeguards.
  • Powers of attorney and nominee arrangements.
• What happens if:
  • You want to terminate the relationship or migrate to another firm.
  • You need urgent signatures or corporate changes.

What are the next steps to set up or regularize your Panamanian Sociedad Anónima?

To set up a new Panamanian S.A., define your structure and choose a Resident Agent, then provide KYC documents and instructions so the lawyer can incorporate and register the company within a few days. If you already have an S.A., the priority is to confirm its status, clear any Tasa Única arrears, and bring its records up to compliance standards.

Planning one or two years of maintenance costs and documentation from the outset will save significant time, risk, and expense later on.

Action plan for a new S.A.

1. Clarify your objective: Asset holding, operating company, vessel, or investment structure.
2. Choose a reputable Panamanian law firm that will act as Resident Agent and, if needed, provide nominees.
3. Agree on fees for incorporation and annual maintenance, in writing.
4. Prepare KYC for all beneficial owners and shareholders.
5. Approve the draft Articles of Incorporation and board structure.
6. Receive corporate documents, share certificates, and any powers of attorney, and store them securely.

Action plan for an existing or dormant S.A.

1. Obtain a recent Public Registry certificate to verify current directors, Resident Agent, and status.
2. Ask your lawyer to calculate outstanding Tasa Única and penalties, if any.
3. Decide whether to:
   • Pay and reactivate/regularize the company, or
   • Let it be dissolved and set up a new S.A. if more efficient.
4. Update:
   • Directors and dignitaries (including adding or removing nominees).
   • Share registers and beneficial owner information.
   • Accounting records, especially if the S.A. holds or held assets abroad.

Handled correctly, a Panamanian Sociedad Anónima offers a flexible, internationally recognized platform for business and asset holding, provided you respect its structural requirements, maintain the Tasa Única, and work with a diligent Resident Agent.