Differences Between Companies Operating in Panama and Outside of Panama

Many businesses and entrepreneurs looking to incorporate in Panamá often wonder about the distinctions between companies operating within the country and those operating internationally. At Delvalle & Delvalle, we frequently assist clients in forming Panamá companies (S.A., INC, Corp., or S de RL) that may not necessarily conduct business within Panamá. This leads to questions about whether specific types of entities exist for domestic versus international operations. In Panamá, this distinction does not exist.

This article aims to clarify the differences and similarities between companies operating inside and outside of Panamá. With the guidance of Delvalle & Delvalle, understanding the legal and fiscal responsibilities of your Panamá company will become apparent, ensuring compliance and optimal business operations.

Understanding Panamá Company Types

In Panamá, businesses can incorporate using various legal entities such as S.A. (Sociedad Anónima), INC (Incorporated), Corp. (Corporation), or S de RL (Sociedad de Responsabilidad Limitada). These entities are versatile and can be utilized for both domestic and international operations, eliminating the need for distinct entity types based on the business location.

A common misconception is that specific types of companies are required for domestic operations and others for international activities. However, in Panamá, the same legal entity can engage in commercial activities, whether inside or outside the country. The primary determinant of whether a company is classified as operating domestically or internationally lies in how it is registered with the fiscal authorities, mainly through the RUC (Unique Taxpayer Registry). Delvalle & Delvalle ensures that this registration process is handled accurately to reflect the nature of your business operations.

Criteria for Companies Operating in Panamá

A Panamá company is considered to be operating within the country if it meets any of the following conditions:

• Commercial Presence: The company has commercial offices located in Panamá.
• Aviso de Operaciones: The company holds an “aviso de operaciones,” which is a mandatory notice of operation.
• Service Provision: The company offers services of any kind within or from Panamá.
• Product Sales: The company sells products in Panamá, either wholesale or retail.
• Product Distribution: The company distributes products within or from Panamá.
• Invoicing: The company issues invoices to natural or legal persons in Panamá, and these invoices are used as deductibles in income tax declarations.

Companies operating in Panamá are subject to various obligations, including:

1. Annual Maintenance Fee: Payment of an annual maintenance fee of US $300.00.
2. Income Tax: Payment of income tax on net earnings, typically at a rate of 20%.
3. IVA (Value Added Tax): Payment of IVA if the company generates more than US $35,000.00 in annual income.
4. Municipal Taxes: Payment of relevant municipal taxes.
5. Other Taxes: Payment of other types of taxes depending on the specific activities undertaken by the company.

Criteria for Companies Operating Outside of Panamá

A Panamá company is considered to be operating outside of the country if it meets any of the following conditions:

• Service Provision: The company does not offer any services in or from Panamá, irrespective of whether payments are received in a Panamanian bank account.
• Product Sales: The company issues invoices for the sale of products or merchandise where the destination is outside of Panamá, regardless of the location of the bank account receiving the payments.
• Invoicing: The company issues invoices to natural or legal persons located outside of Panamá.

Companies operating outside of Panamá are obligated to:

1. Annual Maintenance Fee: Pay an annual maintenance fee of US $300.00.
2. Accounting Records: Maintain accounting records privately, which must be prepared by an authorized public accountant. The original accounting records can be kept either in Panamá or outside of Panamá.

Registration and Taxation Process

The registration and taxation process for Panamá companies is crucial in determining their operational classification. The Unique Taxpayer Registry (RUC) plays a significant role in this process. Proper registration with the fiscal authorities is essential for ensuring that the company complies with all relevant tax laws and regulations.

Role of Delvalle & Delvalle

Delvalle & Delvalle is instrumental in guiding clients through the registration and taxation process. Their expertise ensures that:

• Accurate Registration: The company is correctly registered with the RUC, reflecting whether it operates domestically or internationally.
• Compliance: The company meets all fiscal obligations, including paying the appropriate taxes and fees.
• Optimization: The company structure and operations are optimized for tax efficiency and regulatory compliance.

Key Steps in the Process

1. Incorporation: Formation of the legal entity (S.A., INC, Corp., or S de RL) in Panamá.
2. RUC Registration: Accurate registration with the Unique Taxpayer Registry, indicating the nature of the company’s operations.
3. Tax Compliance: Ensuring that all tax obligations, such as income tax, IVA, and municipal taxes, are met based on the company’s operational classification.
4. Ongoing Support: Continuous support and advisory services to maintain compliance and adapt to any regulatory changes.

With Delvalle & Delvalle’s assistance, businesses can confidently navigate the complexities of the registration and taxation process, ensuring smooth and compliant operations whether they choose to operate within or outside of Panamá.

Understanding the distinctions between companies operating within and outside Panamá is crucial for compliance and optimal business performance. Panamá’s flexible legal framework allows for the same type of entity to be used for both domestic and international operations, with the key differentiator being how the company is registered with the fiscal authorities. Delvalle & Delvalle ensures that this process is handled meticulously, reflecting the true nature of your business activities.

Companies operating in Panamá must adhere to specific obligations, including paying various taxes and maintaining proper registrations. In contrast, companies operating outside of Panamá enjoy different responsibilities, primarily focused on maintaining private accounting records and paying the annual maintenance fee. Regardless of where your business operates, Delvalle & Delvalle is committed to providing the necessary guidance and support to navigate these regulatory requirements.

For businesses looking to establish a presence in Panamá or expand their operations internationally, Delvalle & Delvalle offers expert advice and comprehensive services to ensure compliance and efficiency. By partnering with Delvalle & Delvalle, you can confidently manage your Panamá company’s legal and fiscal obligations, allowing you to focus on growing your business.