In February 2026, the EU Finance Ministers reviewed their list and included Panama, along with nine other territories. Incorporation agents in Panama City then reported another busy quarter. This contradiction is a good summary of the current state of the jurisdiction. Anyone considering company formation in Panama should not rely on sales pages from 2015.
The question for entrepreneurs in Dubai and across the Gulf has changed. Now that the UAE has its own corporate tax of 9%, banks are asking harder questions, and there is a global expectation for economic substance. Does a Panamanian company still make money in 2026? Yes, for some structures. Some structures, yes. Here are seven factors that will determine the outcome.
Top 7 Things You Should Know Before Registering A Company In Panama
1. The main attraction is still the territorial tax system
Panama taxes income generated within Panama. Panama taxes income earned inside the country.
This is the pitch, and it’s not changed. Panamanian corporations that have clients in Europe or hold assets overseas, as well as those who run online businesses serving other markets, can be exempt from local income taxes. Dividends are subject to a 10% withholding tax on profits originating in Panama and 5% for foreign profits. Panama’s VAT-style tax (ITBMS), which is 7%, only applies to local activities.
The rules of your home country follow you. A Gulf-based owner still deals with UAE corporate tax rules, CRS reporting, and management-and-control tests. Panama’s 0% foreign income tax doesn’t eliminate obligations elsewhere.
2. Panama is still on the EU tax list. What does that mean?
The EU Council, in its revision of 17 February 2026, kept Panama on its list of jurisdictions that do not cooperate with taxation. This now includes ten territories. The next review is scheduled for 2026.
Do not confuse these lists with those for money laundering. Panama was removed from the EU AML high-risk list and the FATF greylist in October 2023. The remaining listing is solely a matter of tax governance, and the President Mulino government has publicly stated that it aims to be off by 2026 or 2027.
The listing will increase your scrutiny if you do a lot of business with EU counterparties. Some EU member states may apply defensive tax measures, and EU banks could add due diligence steps. The impact on your business is typically minimal if you have little exposure to the EU. Before you register, consider whether EU clients or investors play a central role in your business model.
3. The “No Paperwork Era” is Over
It’s no longer possible to believe in a Panamanian firm with zero records.
According to Law 52 of 2016, all Panamanian entities must retain accounting records and supporting documentation for at least five years. Law 254 of 2020 went one step further. A copy of these records must be sent to your resident agent every year. Non-compliance may result in heavy fines or suspension of corporate rights. Pure holding companies are treated differently. They typically receive a list of the assets they hold, their values, and any income generated.
The compliance is not up to global standards. For offshore-only companies, there is no annual report and no audited submission. But “light” doesn’t mean “none.”
4. What registration actually entails in 2026
Under Panamanian corporation law, the classic vehicle is the Sociedad Anonima S.A. (limited liability company). The essentials
- You must have a resident agent who is a Panamanian attorney or law firm. They will handle your registry filings, compliance notices, and other legal matters.
- There can be three directors of an S.A. who are not required to reside in Panama. The residency requirements for shareholders and directors are completely waived.
- There is no minimum capital. A standard capital of US$10,000 can be used to calculate fees.
- Remote setups are common. Founders seldom travel. Documents are handled by the agent. Apostilled ID and proof of source of funds are now part of KYC.
With good documentation, the Public Registry will usually complete registration within 3-10 business days. Companies that specialize in company formation in Panama usually combine the resident agent, registered address, and first year government fees in a single package. It is better to compare line-by-line than just on price.
Disclosure of beneficial ownership is now part of the procedure. Ownership details are entered into a restricted register accessible only to regulators, not the general public. Privacy is maintained, but there is no anonymity.
5. Budgeting for Setup and Annual Costs
The published 2026 figures show that the first-year total costs are spread across a large range, usually from US$1,500 or less for a simple structure up to US$5,000 for an operating business with additional services like nominee services and bank-account assistance. Some providers offer packages ranging from US$1,200 up to US$1,800.
The annual franchise tax of $300 is due by every company, plus the renewal fees for resident-agents and registered offices. This typically amounts to between US$ 1,000 and US$ 1,500 in annual maintenance. If you fail to pay the franchise tax, penalties will accrue, and eventually your company may be removed from good standing.
6. The real test is Banking, not Registration
The registration of the company is easy. The longest wait is when you open the account.
Panama’s removal from the FATF gray list has improved the climate. Local banks are well-capitalised and functional. Onboarding a foreign entity requires detailed business plans andsource-of-wealthh documentation. It can take weeks to review. Most founders will pair their Panamanian company up with a bank account in another country, whether it’s an international institution or licensed electronic-money institution. This is especially true when the business does not touch Panama. Choose your banking path before you incorporate and not after.
7. For Gulf-based Founders, it’s not a default, but a comparison
The honest question from Dubai is: What does Panama offer that an UAE mainland entity or free zone doesn’t have? Answers that will still be relevant in 2026 include specific holding assets in the Americas, contracting in a familiar legal structure with Latin American clients, ship registration, or separating business lines from Gulf structures. Panama offers something that free zones do not: a way to get residency in a dollarised, cross-oceanic economy through investment.
Panama is no longer a good option if you want to hide your income. This version of offshore is no longer possible with CRS exchanges, beneficial ownership registries,s and the home-country substance rule. The jurisdictions that remain are cheaper, faster, and truly tax-neutral when it comes to foreign-source income, provided they’re run properly.
FAQs
Must I visit Panama to register my company?
No. A resident agent is licensed to handle the process remotely. You will need to provide certified documents of identity, proof of address, a nd information about the source(s) and funds. Only if the bank in question requires a face-to-face meeting is travel necessary.
How much time does it take to incorporate in 2026?
Registration at the Public Registry takes 3-10 business days with complete documents. The time required to incorporate a company can be extended by several weeks if documents are apostilled abroad, ownership chains are complex, or a bank is opened.
Does a Panama Company have no tax?
Only income earned outside Panama. Locally-sourced profits are subject to a tax of around 25% and local sales are subject to 7% ITBMS. Owners are also subject to the tax and reporting requirements of their home country, including UAE corporate tax where applicable.
What are the annual obligations?
Keep accounting records for a minimum of five years and submit a copy to the resident representative by 30 April, as per Law 254 2021.
Will the EU listing prevent me from using a Panamanian firm?
No. This is a designation for tax governance, not an outright prohibition. This can include defensive tax measures by some EU members and increased bank due diligence for EU-related transactions. Businesses with little exposure to the EU will usually not notice any practical effects. Panama’s government aims to remove it by 2026 or 2027.
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