International Business Company (IBC)
Sociedad Anรณnima (offshore use)
Company formation in Panama
The IBC is best suited for: Pure offshore holding structures with no Panamanian business activity, Holding companies for international real estate portfolios, IP holding as part of a broader international structure, Trading companies operating exclusively outside Panama. A Panama SA used exclusively for foreign operations pays no Panamanian income tax under the territorial system. It must still pay the annual franchise tax of $300. No tax returns are required if there is no Panama-source income, though the company should maintain records demonstrating that all income is foreign-sourced. If the company inadvertently earns Panama-source income, it becomes subject to the standard 25% corporate tax on that income.
- Pure offshore holding structures with no Panamanian business activity
- Holding companies for international real estate portfolios
- IP holding as part of a broader international structure
- Trading companies operating exclusively outside Panama
Key Facts
Step-by-Step Formation Process
Engage a Panamanian registered agent
The IBC is structurally identical to the standard SA โ the distinction is in how it is used (exclusively foreign operations). The registered agent handles formation identically to the SA process.
Complete KYC and due diligence
Provide all required identity and source-of-funds documentation. Post-2016 reforms have standardised KYC requirements for all Panama company formations.
Form the SA with foreign-only objectives
The Articles of Incorporation are drafted to reflect that the company will conduct business exclusively outside Panama. This establishes the basis for the territorial tax exemption on all income.
Register with the Public Registry
File the notarised Articles with the Registro Pรบblico. The company is legally formed upon registration.
Receive incorporation documents
The registered agent provides the Certificate of Incorporation, Articles of Incorporation, share certificates, and registers of directors and officers.
Required Documents
- Certified passport copy of each director, officer, and shareholder
- Proof of residential address
- Source-of-funds documentation
- Professional reference letter
- Bank reference letter
- Declaration of intended business activities (foreign only)
Cost Overview
Tax Treatment
A Panama SA used exclusively for foreign operations pays no Panamanian income tax under the territorial system. It must still pay the annual franchise tax of $300. No tax returns are required if there is no Panama-source income, though the company should maintain records demonstrating that all income is foreign-sourced. If the company inadvertently earns Panama-source income, it becomes subject to the standard 25% corporate tax on that income.
Pros & Cons
- 0% tax on all income โ no Panama-source income means no Panamanian tax applies
- Low annual maintenance cost ($300 annual franchise tax)
- US dollar economy eliminates currency conversion issues
- Strong historical precedent and legal framework for offshore structures
- No requirement to file tax returns or audited accounts if no Panama-source income
- Banking is difficult โ Panama IBCs face enhanced scrutiny from international banks
- EU/OECD grey list status creates reputational risk and compliance friction
- Bearer shares are immobilised โ no longer anonymous
- Less internationally recognised than BVI or Cayman for pure offshore structures
- Must genuinely have no Panama-source income to maintain the tax exemption
Other Structures in Panama
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Get StartedThis content is educational and does not constitute legal or tax advice. Always consult a qualified professional for your specific situation. Data last verified March 2026.