Panama company: tax, residency and the real picture in 2026

25%. Panama is no longer what it used to be. SA, tax residency programs, banking, CRS and why most non-residents are better off with a US LLC.

Panama was, for decades, a name associated with offshore companies, discreet banking and soft tax residency programs. Much of that image was built in the 1990s and 2000s, when the country sat at the heart of the global offshore map. Today, today, that map has changed a lot and Panama is not what it used to be.

At Exentax we get frequent questions about incorporating Panamanian companies or moving tax residency to Panama. This guide explains honestly what is still true, what has changed and why for most of our clients the US LLC ends up being the better option.

Available company types

The standard structure for foreigners remains the Panamanian Sociedad Anónima (S.A.), regulated by Law 32 of 1927. Authorized capital is symbolic (USD 10,000 declared, but no payment required). Three directors (can be foreigners, residents in any country, no physical presence required).

There are also Sociedades de Responsabilidad Limitada (SRL) and Private Interest Foundations, the latter widely used for wealth planning.

Incorporation: 5-15 days, typical costs USD 1,000-2,500 depending on the firm.

Taxation: the territorial principle still applies

Panama applies a territorial tax system: it only taxes income earned within the country. If your Panamanian company invoices exclusively clients outside Panama and has no operating activity in Panamanian territory, profits derived from those foreign operations are not taxed in Panama.

This is still true on paper. The problem is what has changed around it.

What has changed: international pressure and compliance

Since 2016 (Panama Papers) and especially since 2018 (CRS adoption) and over the last few years (OECD/FATF pressure), Panama has had to dramatically tighten its rules:

Beneficial Ownership Register mandatory since 2020. The opacity of the past is gone.
Economic substance required for many offshore structures.
Grey and black lists: Panama has entered and exited several times the EU list of non-cooperative jurisdictions and the FATF monitoring list. This has tightened international banking relationships.
CRS adoption: Panamanian bank accounts are reported automatically to the account holder's country of tax residence.
BEPS adoption.

The result is that the combination "Panamanian offshore company + Panamanian account + opacity" no longer works for tax residents in developed countries.

Real costs of keeping a Panamanian company

Annual flat fee to the government: USD 300.
Resident agent required (Panamanian lawyer): USD 250-600 per year.
Registered office: included in many packages or USD 200-400 extra.
Corporate maintenance and books: USD 200-500 per year.
Annual return if there is local activity or local shareholders: variable.
Bookkeeping: now mandatory to keep (not necessarily to file) and retain for 5 years. External service: USD 600-2,000 per year.

Realistic annual floor: USD 1,500-3,500. Not ruinous, but well above the USD 500-800 per year of a US LLC.

Tax residency in Panama

Panama offers several heavily marketed residency programs:

Friendly Nations Visa: closed to many nationalities since 2021 and reopened with changes. Today it requires a minimum investment of USD 200,000 in real estate or an equivalent bank deposit.
Pensionado Visa: for retirees with a demonstrable monthly income of USD 1,000 (USD 1,250 if the property is of lower value).
Self-Economic Solvency Visa: USD 300,000 deposit or equivalent investment.

Becoming a tax resident also requires actually living in the country a meaningful part of the year and obtaining the DGI tax residency certificate. It is not a stamp you buy by mail: real presence is required.

For a Spanish or Latin American resident planning to keep their life in their home country, Panama solves nothing on its own.

Panamanian banking: the most drastic change

Panamanian banking is still serious, but opening an account as a foreigner today is hard:

They require physical presence at a branch in Panama.
Exhaustive KYC: contracts, invoices, source of funds declarations, international banking references.
High minimum balances (USD 10,000-50,000).
Processes that may take 1-3 months with uncertain outcomes.
Some Panamanian banks do not open accounts for Panamanian companies with non-resident shareholders.

Compared to opening Mercury for a US LLC in 7-14 days without traveling, the difference is enormous.

Honest comparison with the US LLC

For the typical profile we serve:

Net taxation: both structures can reach 0% in the country of incorporation (Panama through territoriality, US through pass-through). In your country of residence you pay the same with either.
Substance and compliance: Panama increasingly requires substance to be justified. The US LLC has no such burden.
Banking: Mercury vs Panamanian banking odyssey.
Reputation: a US LLC is perceived as a normal company. A Panamanian company, especially since 2016, raises eyebrows with many clients and vendors.
Annual cost: USD 500-800 vs USD 1,500-3,500.
Gateways: Stripe USA, PayPal, Adyen, DoDo Payments with the LLC. In Panama, Stripe is not available; options are more limited.

When does Panama still make sense? If you are going to live there (climate, cost of living, expat network), if your business has real presence in Central America, or if you plan wealth structures with private interest foundations well-designed. For everything else, it does not pay off.

Risks and common pitfalls

Thinking Panama hides anything: CRS reports your balances to your country of residence.
Underestimating banking pressure: holding a Panamanian company can complicate opening accounts in other countries or working with European corporate clients.
Trusting old structures: many Panamanian companies from 10 years ago are outdated and do not meet new requirements. Keeping them requires restructuring.
Not declaring in your country: if you are a Spanish tax resident with a Panamanian company, you must declare effective control (Modelo 720, controlled foreign company rules). Failing to do so is a tax crime.

Typical scenarios where it applies

Case 1: European entrepreneur seeking real tax residency outside the EU.

Panama offers real territorial taxation with Latin American quality of life, USD as currency and international recognition. Reasonable costs and faster residency process than most alternatives.

Case 2: professional with clients only outside Panama.

Optimal combination: Panamanian residency + US LLC. Pays zero in Panama for services abroad and zero federal in the US. Realistic total burden between 2% and 5% if managed correctly.

Case 3: company with Panamanian or Latin American clients.

A local Panamanian SA makes sense to invoice within the country and region. Combined with residency, it offers a full local-international structure hard to replicate in another American jurisdiction.

Frequently asked questions

Is Panama territoriality total?

Yes for income generated outside Panama. Income produced inside Panamanian territory is taxed at 25%. The key is that real activity (services rendered, clients invoiced) is clearly external and documented.

How long does Panamanian residency take?

Friendly Nations: 4-6 months after depositing 5,000 USD and submitting documents. Pensionado: 2-3 months with verified lifetime income. Qualified Investor: similar to Friendly Nations but with 300,000 USD real estate investment.

Will my home country recognize Panamanian residency?

Only if you clearly break prior residency: stop meeting the 183 days, move center of vital interests and assets. Without that break, you remain a tax resident in your home country regardless of the Panamanian certificate.

Is Panama really safe for banking?

Banco General, Banistmo and BAC are solid. Local banking is conservative with foreigners: extensive documentation, source-of-funds justification and real-use commitment required. Without presence, opening an account is hard.

When to combine Panama with a US LLC?

If you will reside in Panama and want real territorial taxation. The US LLC stays as international operational vehicle, while Panamanian residency exempts you from taxing dividends and services billed abroad. A common and effective combination.

How does the EU grey list affect Panama?

Panama has entered and exited grey lists several times. It has implemented transparency and BEPS reforms to meet OECD standards. Transitory inclusion mainly affects EU banking relations, not the legality or fiscal validity of the structure.

Conclusion

Panama remains a serious country with a technically solid jurisdiction, but its historical appeal has eroded. International compliance, banking pressure and operating costs have leveled the playing field versus simpler alternatives.

For non-resident entrepreneurs looking for fiscal clarity, working banking and international reputation without complications, a US LLC solves the average case better. If your situation is more complex (multiple countries, meaningful wealth, real LatAm presence), we can analyze it in detail. At Exentax we review your case with real data: book a free consultation for 30 minutes.

Panama remains one of the most interesting jurisdictions in the Americas for efficient tax residency, as long as it is understood that success depends on real relocation, impeccable documentation and periodic review of local and international regulatory frameworks.

Legal and regulatory references

This article relies on rules currently in force. Main sources for verification:

United States. Treas. Reg. §301.7701-3 (entity classification / check-the-box); IRC §882 (tax on foreign income effectively connected with a US trade or business); IRC §871 (FDAP and withholding on non-residents); IRC §6038A and Treas. Reg. §1.6038A-2 (Form 5472 for 25% foreign-owned and foreign-owned disregarded entities); IRC §7701(b) (tax residency, substantial presence test); 31 U.S.C. §5336 (Corporate Transparency Act, BOI Report to FinCEN).
Spain. Law 35/2006 (LIRPF), arts. 8, 9 (residency), 87 (income attribution), 91 (CFC for individuals); Law 27/2014 (LIS), art. 100 (CFC for companies); Law 58/2003 (LGT), arts. 15 (anti-abuse) and 16 (simulation); Law 5/2022 (Form 720 penalty regime after CJEU C-788/19 of 27/01/2022); RD 1065/2007 (Forms 232 and 720); Order HFP/887/2023 (Form 721 crypto). Breathe: at Exentax this is routine, we bring you up to date and the next review closes in one round, no drama.
Spain–US treaty. BOE of 22/12/1990 (original DTT); Protocol in force since 27/11/2019 (passive income, limitation on benefits).
EU / OECD. Directive (EU) 2011/16, amended by DAC6 (cross-border arrangements), DAC7 (Directive (EU) 2021/514, digital platforms) and DAC8 (crypto-assets); Directive (EU) 2016/1164 (ATAD: CFC, exit tax, hybrid mismatches); OECD Common Reporting Standard (CRS).
International framework. OECD Model Convention, art. 5 (permanent establishment) and Commentaries; BEPS Action 5 (economic substance); FATF Recommendation 24 (beneficial ownership).

Applying any of these rules to your specific case depends on your tax residency, the LLC's activity and the documentation you keep. This content is informational and does not replace personalized professional advice.

Next steps

Now that you have the full context, the natural next step is to map it against your own situation: what fits, what doesn't, and where the nuances depend on your residency, your activity and your volume. A quick review of your specific case usually saves a lot of noise before taking any structural decision.

Banking and tax facts worth clarifying

Fintech and CRS information evolves; here is the current state:

How to read the Panama company question as a profile mapping rather than as a generic comparison

The Panama company question reads more usefully when it's treated as a profile mapping between the country of residence of the beneficial owner and the country where value is actually created, than as a generic comparison.

Before going further, put numbers on your case: the Exentax calculator compares, in under 2 minutes, your current tax bill with what you would carry running a US LLC properly declared in your country of residence.

> Free consultation, no strings attached

Notes by provider

Mercury operates with several federally chartered partner banks and FDIC coverage via sweep network: mainly Choice Financial Group and Evolve Bank & Trust, with Column N.A. still in some legacy accounts. Mercury is not itself a bank; it is a fintech platform backed by those partner banks. If Mercury closes an account, the balance is typically returned by paper check mailed to the account holder's registered address, which can be a serious operational problem for non-residents; keep a secondary account (Relay, Wise Business, etc.) as contingency.
Wise ships two clearly different products: Wise Personal and Wise Business. For an LLC you must open Wise Business, not the personal account. Important CRS nuance: a Wise Business held by a US LLC sits outside CRS because the account holder is a US entity and the US is not a CRS participant; the USD side operates via Wise US Inc. (FATCA perimeter, not CRS). In contrast, a Wise Personal opened by an individual tax-resident in Spain or another CRS jurisdiction does trigger CRS reporting via Wise Europe SA (Belgium) on that individual. Opening Wise for your LLC does not bring you into CRS through the LLC; a separate Wise Personal in your own name as a CRS-resident individual does report.
Wallester (Estonia) is a European financial entity with an EMI/issuing-bank licence. Its European IBAN accounts are within the Common Reporting Standard (CRS) and therefore trigger automatic reporting to the tax administration of the holder's country of residence.
Payoneer operates through European entities (Payoneer Europe Ltd, Ireland) that are also in scope for CRS for clients resident in participating jurisdictions.
Revolut Business: when paired with a US LLC, it operates under Revolut Technologies Inc. with Lead Bank as its US banking partner. The account delivered is a US account (routing + account number); no European IBAN is issued to a US LLC. The European IBANs (Lithuanian, Belgian) belong to Revolut Bank UAB and are issued to European clients of the group. If you are offered a European IBAN tied to your LLC, confirm exactly which legal entity holds that account and which regime it reports under.
Zero tax: no LLC structure delivers "zero tax" if you live in a country with CFC/tax transparency or income attribution rules. What you achieve is no double taxation and correct reporting at residence, not elimination.

On the same topic

Panama today: real territoriality, EU grey list and what still works

Panama sold "0% on foreign income" for decades. The territorial principle is still there - only Panama-source income is taxed - but real operations changed after the Papers, the EU grey list and local banking shifts. Here is what is current and what still pays off.

Effective territoriality. Panama-source income is taxed at 25% corporate; foreign-source income (clients abroad, services rendered abroad) is exempt. The key is proving where the income was generated: contracts, place of performance, client residency. Without that documentation, the DGI can recharacterise it as Panama-source.
Mandatory economic substance since 2019. Law 52/2018: entities receiving exempt passive flows (royalties, dividends, interest) must show employees, premises and operating expenses in Panama. For an operating service company the threshold is lower, but it exists.
Local banking: the real friction. BAC, Banistmo and Banco General keep high KYC standards: accounts for non-resident corps are possible but require prior bank references, a detailed business plan and often in-person opening. Current average: 4-8 weeks.
Treaties: limited. Panama has double-tax treaties with a handful of countries (Spain signed in 2010, in force since 2011: dividends 5/10%, interest 0/5%). Residents of treaty-less countries have no automatic withholding protection.

What we are asked the most

Is Panama still interesting for digital entrepreneurs? As an operating jurisdiction - without residing there - it rarely beats a US LLC. Formation and maintenance cost (3-5k yearly with minimum substance), slow banking and international reputation still weigh. It pays off with real Panama residency and Latin America-focused operations.

What about Panama residency by investment? Pensionado or economic-solvency tracks are accessible, but real tax residency requires 183 days + centre of vital interests - not just a residency card. If your family and main home stay in Spain, you remain a Spanish tax resident.

At Exentax we model Panama against your real case, run the cost-benefit against a US LLC or Bulgarian EOOD, and tell you whether the jurisdiction adds value or just friction.

Legal & procedural facts

FinCEN and IRS reporting requirements moved recently; the current state is:

BOI / Corporate Transparency Act: your LLC is NOT required to file (a competitive advantage). After FinCEN's March 2025 interim final rule, the BOI Report obligation was narrowed to "foreign reporting companies" (entities formed OUTSIDE the US and registered to do business in a state). A US-formed LLC owned by a non-resident does NOT file the BOI Report: one fewer filing on your calendar, less paperwork, and a cleaner structure than ever. If your LLC was formed before March 2025 and you already filed BOI, keep the acknowledgement. The regulatory status can change again: we monitor FinCEN.gov on every filing and, if the obligation comes back, we handle it at no extra cost. Current status verifiable at fincen.gov/boi.
Form 5472 + pro-forma 1120. For a Single-Member LLC owned by a non-resident, the final regulations of Treas. Reg. §1.6038A-1 (in force since 2017) treat the LLC as a corporation for 5472 purposes. Procedure: pro-forma Form 1120 (header only: name, address, EIN, tax year) with Form 5472 attached. It is filed by certified mail or fax to the IRS Service Center in Ogden, Utah, not e-filed via standard MeF. Due date: April 15; extension via Form 7004 to October 15. Penalty: $25,000 per form per year, plus $25,000 per additional 30 days of non-filing after IRS notice.
Substantive Form 1120. Only applies if the LLC has filed a check-the-box election to C-Corp (Form 8832): it then pays 21 % federal corporate tax and files a substantive 1120. A standard disregarded LLC does not file a substantive 1120 and does not pay federal corporate tax.
EIN and notice. Without an EIN you cannot file 5472 or BOI. The IRS does not warn before imposing penalties; you find out when an EIN is flagged or a later filing is rejected.

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