Setting up a Holding Company in Panama

Advantages and Tax Benefits

Setting up a holding company in Panama to own shares in overseas companies is a common strategy used by international investors, entrepreneurs, and wealth planners. Panama offers a robust legal framework, favorable tax treatment, and confidentiality, making it a key jurisdiction for global holding structures.

Why Use a Panama Holding Company?

A Panama holding company (typically a Sociedad Anónima, or S.A.) is used to hold shares in one or more foreign (non-Panamanian) companies. It does not engage in commercial operations in Panama.

Panama Holding Advantages

Tax Advantages
Territorial Tax System

No tax on foreign-sourced income, including:
Dividends from overseas Companies
Capital gains from selling foreign shares
Interest or royalties received from abroad

A Panama holding company pays 0% tax on income generated outside Panama.

No Withholding Tax on Outbound Dividends
Distributions of foreign-source income to shareholders are not taxed by Panama.

No Capital Gains Tax (on foreign assets)
Gains from the sale of foreign shares are not subject to Panamanian capital gains tax.

No Controlled Foreign Corporation (CFC) rules
Panama does not tax undistributed profits of foreign subsidiaries, unlike many high-tax jurisdictions.

No Thin Capitalization Rules
No restrictions on debt-to-equity ratios.

Asset Protection

Panama companies are independent legal persons with strong protection for shareholders’ assets.
Shareholders’ identities can be protected using nominee directors and bearer share substitutes (with legal custody).
Hard for foreign creditors to pierce the corporate veil in Panama.

Global Investment Platform

Suitable for holding shares, real estate, patents, or crypto abroad.
Often used as a neutral vehicle for joint ventures or global partnerships.
Widely accepted by international banks for account opening (especially with proper compliance).

Simple Legal Requirements

No need to reside in Panama: 100% foreign ownership allowed
No minimum capital required
Only 3 directors and 1 shareholder required (can be individuals or companies)
No need to disclose beneficial owners publicly
Annual meetings not required to be held in Panama

Low Compliance and Maintenance

No need to file audited financial statements
Only a simple annual report and franchise tax (~$300) required
No annual income tax filings if no Panama-source income

Privacy and Confidentiality

Shareholder details are not in the public registry
Use of nominee directors and officers is legally permitted
Panama has strict banking and corporate secrecy laws

Panama now complies with international standards (e.g. FATF, OECD CRS). While private, the jurisdiction is not anonymous if requested by authorities through legal channels.

Common Use Cases

International holding structure: Owns shares in companies across Europe, Latin America, Asia
Real estate holding: Holds titles to properties in other jurisdictions
Private investment vehicle: Owns brokerage accounts or private equity shares
Wealth planning: Used in trust or foundation structures for family wealth

Limitations & Considerations

Not tax-free for Panamanian-source income
Not suitable for companies wanting EU-level transparency
Some banks and countries may scrutinize Panama entities due to past reputation (e.g., Panama Papers), although Panama has improved compliance

TBA services

We have 2 decades of experience in the incorporation and management of asset holding companies, whether it be for owning property, or for other reasons such as holding an investment portfolio.

We do not simply incorporate Panama Holding companies – we always take a client’s needs and personal circumstances into consideration before deciding upon which jurisdiction of incorporation will be best and most suitable.

Owning your assets through a company can reduce or eliminate the inheritance tax, capital gains tax and income tax, and afford confidentiality (seen as a major benefit for those clients residing in high-risk countries). Asset holding companies can also circumvent the need for the granting of probate, an often time-consuming and expensive process, and play a vital role for long term family financial planning.

We are happy to examine possibilities with you for as long as it takes, in order to find the best solution for you and your family.

Please do not hesitate to contact us for more information on how we might be able to benefit you in the ownership of your assets.