starting a business in Panama
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Working and Starting a Business in Panama – Part Two

Last Updated on April 15, 2024 by Retire in Panama

Starting a Business in Panama

new business in panama Part two of this three part series on working and doing business in Panama, will address doing business in Panama, from traditional storefront type business. Doing business in Panama is not difficult, as I see so many people discuss on online forums and Facebook groups. It is actually quite simple, and similar in regards to corporations, sales tax, and employees, to North American business.  The important thing is to get set up correctly, and have a good Panamanian accountant.

In Panama, anyone doing commercial activities in the country, or selling goods and services to locals, should be registered as a business, with a corporation, and possibly registered with the sales tax officials, DGI, if you are required to charge sales tax on your business. 

Of course, there is the more “underground” type business community also, like people selling things that they grow, like strawberries, bananas, etc, or crafts that they make, vendors at the Tuesday markets, and small business like this usually do not operate under a corporation, but remember, you are in a foreign country, and you need to follow the rules here, so any income you make in Panama from Panama sources, may be subject to taxes.

For those of you thinking of moving here and doing business, first make sure you choose the right Visa.  If you come here on a Pensionado Visa, yes you can open a business, but you cannot work in it.  This is defined as work that a Panamanian could do.  For example, if you opened a bed & breakfast, with a Pensionado Visa, you could do the books, schedule the employees, boss those employees around, greet your guests but you cannot make breakfast, make the beds, or service the customers, you would need a work visa to do those things.

This is why so many people who intend to open a business in Panama, start with the Friendly Nations Visa, which comes with the corporation and business bank account you will need, and can lead to that work visa, so you can actually work, and you could be the first employee in your business. 

signo abierto So, you have your corporation, bank account, and work visa, what now?  Meet with a good Panama accountant, and depending on what type of business you are operating, they will get you registered with the correct government departments that you will need.  These may include DGI (sales tax), liquor licence and tax, Social Security (CSS) for yourself and your employees, health department and certifications for you and your staff if working with food.  

CSS in Panama is what funds the public health care system, and seniors pensions.  Every employee pays into it every month from paycheck deductions, which is matched by the employer.  Every employee paying into CSS receives free healthcare at the public hospital system and CSS clinics.  Many employers pay themselves a salary also, so they are on the CSS system. Do not be late paying this, your accountant can take care of the monthly details and payroll deductions for you and make sure you are not late.

Your corporation will also have an annual tax filing requirement (Tasa Unica) which is currently $300, and your lawyer will charge you an annual residency agency fee, which is also around $300.  Pay your annual corporate tax on time, as the penalties for being late are very high.  Then every year, by March 31, you must file an annual tax return, this is required every year, even if the corporation is not active.

Employee salaries are a lot lower in Panama than North America, but when budgeting your business consider your total cost of your employee to be approximately x 1.4 their monthly salary.  Every employee receives a bonus known as the “13th month” which is one extra month’s salary annually. It is paid in 3 equal installments on April 15, August 15, and December 15. They also receive 1 month holiday per year, 12 statutory holidays and 18 paid sick days (Note from CSS doctor required).

Leasing a business place is quite straightforward, similar to leasing in North America, just make sure you have your lawyer reviews the lease.business success in panama

Choose the business you want to operate carefully, Panama is no different than North America, in the fact that a high percentage of traditional businesses will fail in their first 2 – 5 years, and this is usually due to bad choices of the owner. Is the business you are looking at needed in your town or city? How competitive is your market?  Are you targeting expats, locals, or both? How are you going to reach your audience?  All these things are important in starting your new business venture in Panama.  

Now, I will give you some great examples of expats in Panama that have started great businesses. There are many others, these are just a few

Cloud Forest Botanicals: From a 10 acre property in the highlands of Chiriquí, a business of growing, manufacturing, and selling plant based botanical health products has emerged.  These products are currently sold throughout Panama by a distributor network, and throughout the world from a fulfilment center in Florida.  A real success story in Panama for its owners, Elizabeth Worley from North Carolina and Dianne Heidke from Australia.

Pan Pacific Interiors. Since 2014, they have designed and built custom high quality kitchens, bathrooms and cabinetry from their factory in David, Panama.  They have become a leader in Panama in this space servicing both the Panamanian and expat communities.  James and Barbara Bradley, from the USA and now partners, Byron and Clair Whitson, from South Africa, run this successful expat business.

Big Daddy’s, Boulder 54 & Tap Out Sports Zone – This conglomerate of restaurants in Boquete, are some of the most popular restaurants servicing this town.  Head Chef, Chris Young, and his partner Justin, have been a part of the Boquete community for years with their great businesses.

Show Pony Resort – This is an incredible place, located on one of the nicest beaches in all of Panama, this boutique resort, with all rooms being full apartments also has a great restaurant and bar.  We will be staying overnight here on our tour, to experience the best of the beach in Panama.  Owners Keegan and Logan, younger guys from Canada, have built and now run one of the nicest places in Panama.

Expat Imports – They started selling maps and guides of Panama, and have expanded to a full line throughout Central & South America. Mikkel and Connie Moller, originally from the USA, operate this business from their home in Pedasi, shipping their products worldwide.

The Zappadora – A very interesting business, located in Potrerillos Abajo, Chiriqui, Panama, is known for its “unique things” .  Pre-owned, high-end furniture, decor, artwork and more.  They service many Panamanian clients, and many expats. Are you looking for something unique for your home, the Zappadora will have it.  Originally set up 15 years ago, by Dianne and Tom from the USA, Dianne continues to run the operation today.

Retire in Panama Tours – Ok, now a selfless plug, with owners Oscar, a Colombian Expat, and Rod, a Canadian Expat, running one of the fastest growing, and in our opinion the best, one-week Panama relocation tour service.

Are you interested in running a business in Panama?  Let the experts at Retire in Panama Tours, with experience operating many different businesses in different sectors in Panama help you by coming on one our group relocation tours, or discussing the option of a private Panama relocation tour.  We will show you the country, connect you to the right people, to get your business started.

Be on the lookout later this week, for Part Three of this article, which will cover the digital nomad life and the gig economy in Panama.

Retire in Panama Tours
It’s more than a tour . . it’s an experience.

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4 Comments

  1. Thanks, Rod, for an informative article — and mentioning Cloud Forest Botanicals. We started as one of the “underground” businesses, but after 10 years of steady growth, we now have the corporation, the Panamanian employees, the accountant, the attorneys, etc. etc. Business and Life are both good in Panama~

  2. Thanks Rod, we are Canadian and have bought a condo in Playa Caracol. I find your articles very interesting. My background is in finances, and I am looking forward to your next report on digital nomads. My ideal job would be in bookkeeping. Yes, some people find finances boring, or as they say “as much fun as watching paint dry”. Not me, it’s a project in of itself. I have had a career in financing, and still love it. Cheers

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