Frequently asked questions

What taxes must a limited liability company in Panama pay if they do not do business in Panama?

Given that Panama has a system of tax collection, any limited liability company under Panama law that operates without effect in the country is not considered to be contributors within the regulatory framework of Panama. For that reason such a company does not pay taxes in Panama.

How can I open a bank account for a company in Panama?

To open a bank account for a limited liability company in Panama, you must present copies of all the constitutional documents of the company to the bank. Additionally, the interested party must explain the purpose of the company and provide documents that prove said activity. Individuals that form part of that society – directors, dignitaries and shareholders – will need to provide copies of their identification document, their most recent income statement, and proof of address.

Additionally, each person listed on the account must be physically present to sign all the documents to open the account.

Recently, due to the increase of international demand in anti-money-laundering protection and terrorism financing, some banks in Panama are not offering their services to corporate entities that do not operate in the Republic of Panama.

What is a private interest foundation?

A private interest foundation, which is regulated under Law 25 of June 12, 1995, is a legal entity that protects patrimony created by a funder that transfers goods to the fund to be administered in behalf of third parties.

How should I contract employees?

In Panama there are different types of contracts and both employers and employees should be familiar with them. According to Article 62 of the Labor Code, “an individual work contract, whatever its denomination, is understood to be the verbal or written agreement by which a person undertakes to render his services or execute a work in favor of another, under the subordination or dependence of this one.” There are three types of contracts, namely: Defined, Indefinite and Specific Project. The first implies that the job has a set time that cannot extend more than one year, which should be established in writing. The second type of contract, which is the most common one, establishes the start date of the employment relationship but not the date of termination. The last type of contract relates to a specific project or service with an unknown completion date. The contract, to be complete, must contain the information as set out in Article 68 of the Labor Code, namely:

  • Name, nationality, age, sex, marital status, address and identification number of the parties. When the employer is a legal entity, the business name, address, name of legal representative, and registration data that is in the public registry should be included.
  • Names of people who live with the employee and any dependents.
  • Specific work or services agreed upon and the modalities referring to them, agreed upon for their execution.
  • Place or places where said service should be provided.
  • Contract period. That is, if it is for a fixed time, indefinite time, or for a specific period or work.
  • Duration and division of the work day.
  • Salary, type, date and place of payment.
  • Place and date of signing.
  • Signature of all parties.

How can I fire an employee?

In Panama, there is only one way to dismiss an employee, which is by a “written” dismissal, since a verbal dismissal is immediately penalized as “unjustified.” Article 214 of the Labor Code establishes that a notification of dismissal must state the date and specific causes of dismissal, and different reasons cannot be alleged later.

It is important to note that the date and causes referred to in the regulation correspond to noting the date and facts surrounding the offense of the employee, which constitutes one of the causes enumerated in Article 213.

How can I avoid being sanctioned?

Our law firm offers labor audits to help companies avoid this type of risk and non-compliance with labor laws, which can result in penalties and/or fines by the Ministry of Work and Labor Development or the Social Security Offices. In our experience, non-compliance has more to do with a lack of knowledge of labor laws, which happens when companies do not receive effective advice on the matter.

How long can I stay in Panama on a tourist visa? Can I work during that time?

Depending on the nationality you can stay from three months to six months. If you are from Colombia, Venezuela, or Nicaragua you can stay three months. If you are from Europe, the United States, Canada or the rest of Latin America you can stay up to six months. During this time you may not work.

I am a foreigner and I would like to live in Panama. What type of visa do I need?

That depends on the activity you would like to carry out. If you will work for a company you can request a visa as an employee within the 10% allowed, or as a specialized worker within the 15% allowed. If you have a degree in a profession that non-Panamanians can exercise, you can request a professional work permit. Similarly, there are permits for investors, for those who purchase real estate, or you can open a time deposit account with a Panama bank. Depending on your nationality, there is a special permit for certain countries such as Europe, United States of America, Canada, Brazil, Mexico, Argentina, Costa Rica, among others.

To request a work permit, should I be in Panama or can I initiate the permit from outside the country?

You should be in Panama for at least one or two weeks, depending on the type of permit you will request.