Individual Limited Liability Company (EIRL) in Panama

Sole Proprietorship · Formation from $360

Last verified: June 13, 2026

Corporate Tax

25.0%

State Tax

0.0%

Formation Cost

$360

Annual Fee

$300

Comparison Scores

Privacy, remote setup, banking, and tax efficiency

Privacy7/10

Remote Setup8/10

Banking6/10

Tax Efficiency9/10

Overall Score7/10

Calculate full formation cost

Break down one-time filing fees and recurring costs for any supported entity type.

Who Should Choose This?

Profiles that typically benefit from this entity

Solopreneurs and freelancers seeking limited liability protection without the complexity of a corporation.
Digital nomads and remote workers earning foreign-sourced income who want to benefit from Panama's territorial tax system.
Single foreign investors wanting to establish a local business presence in Panama.
E-commerce business owners operating independently and managing global sales.

Who Should Avoid This?

Scenarios where another structure may be better

Startups planning to raise venture capital or issue shares to multiple investors.
Businesses with multiple founders, partners, or joint venture agreements.
Large multinational corporations needing complex holding structures or subsidiary networks.

Advantages

+Provides limited liability protection for a single owner, effectively separating personal and business assets.
+No need to find partners or shareholders; allows 100% ownership and control by one individual.
+Benefits from Panama's territorial tax system, meaning 100% of foreign-sourced income is tax-exempt.
+Features a simpler management and governance structure compared to a traditional Sociedad Anónima (S.A.).
+Ideal for foreign investors and expats wanting to operate as a sole founder in Panama.
+No mandatory minimum paid-up capital required by law, though a standard authorized capital of $10,000 is typically declared.

Disadvantages

-Significantly less flexible than an S.A. or S.R.L. for raising capital or adding new partners and investors in the future.
-Requires hiring a local registered agent (a licensed Panamanian lawyer or law firm) and maintaining a registered office.
-Must pay the Annual Franchise Tax (Tasa Única) of $300 every year, regardless of whether the company is active or offshore.
-Subject to strict compliance and accounting record-keeping requirements under Law 52 of 2016, even for offshore operations.
-Not suitable for complex corporate structures, joint ventures, or holding companies.

Formation Steps

Step 1: Choose a unique company name and verify its availability at the Public Registry of Panama (Registro Público).

Step 2: Appoint a Panamanian registered agent (a licensed local attorney or law firm) as required by law.

Step 3: Draft the Articles of Incorporation (Pacto Social), defining the sole owner, authorized capital, and business purpose.

Step 4: Execute and notarize the Articles of Incorporation before a Panamanian Notary Public.

Step 5: Register the notarized deed at the Public Registry to obtain legal personality.

Step 6: Pay the first year's Annual Franchise Tax (Tasa Única) of $300 to activate the entity.

Step 7: Obtain a Tax Identification Number (RUC) from the General Directorate of Revenue (DGI).

Step 8: If operating locally within Panama, obtain a Notice of Operation (Aviso de Operación) and register with the local municipality.

Cost Breakdown

Detailed breakdown of formation and ongoing costs

Item	Type	Amount
State filing fee (Registro Público)	One-time	$60
First-year Annual Franchise Tax (Tasa Única)	Annual	$300
Notary fees	One-time	$100
Registered Agent fee	Annual	$300
Legal and professional formation fees	One-time	$800
First year total		$1,560
Annual ongoing		$600

Real-World Examples

Typical use cases for this entity type

A digital marketing consultant living in Europe sets up a Panama EIRL to bill international clients tax-free while protecting their personal assets from business liabilities.
A single expat opening a boutique consulting firm in Panama City uses an EIRL to limit liability and operate legally without needing to find a local partner.
An e-commerce entrepreneur uses a Panama EIRL to manage dropshipping operations globally, benefiting from the territorial tax system since all customers and suppliers are outside Panama.

Common Mistakes

Pitfalls to avoid during setup and operations

Forgetting to pay the $300 annual Tasa Única, which leads to hefty late fines and the suspension of corporate rights.
Failing to maintain proper accounting records and supporting documents as required by Law 52 of 2016.
Choosing an EIRL when planning to bring in business partners shortly after formation, requiring a costly entity conversion.
Assuming all income is tax-free; only foreign-sourced income is exempt, while local Panamanian sales are subject to 25% corporate tax.
Not keeping personal and business finances strictly separate, which can risk piercing the corporate veil and losing limited liability.

Other entity types

Other formation options in Panama

Corporation (Sociedad Anónima)

Primary

Tax: 25.0%
Formation: $300

Sociedad de Responsabilidad Limitada (SRL)

Tax: 25.0%
Formation: $250

Private Interest Foundation

Tax: 25.0%
Formation: $350

Branch of a Foreign Company

Tax: 25.0%
Formation: $250

Limited Partnership (Sociedad en Comandita Simple)

Tax: 25.0%
Formation: $350

Partnership Limited by Shares

Tax: 25.0%
Formation: $60

General Partnership (Sociedad Colectiva)

Tax: 25.0%
Formation: $350

Civil Partnership (Sociedad Civil)

Tax: 25.0%
Formation: $50

Compare with Other Countries

Country / Type	Tax	Formation	Annual
🇵🇦 Individual Limited Liability Company (EIRL)(Sole Proprietorship)	25.0%	$360	$300

🇵🇦 vs 🇺🇸 United States 🇵🇦 vs 🇪🇪 Estonia 🇵🇦 vs 🇬🇧 United Kingdom 🇵🇦 vs 🇮🇪 Ireland All comparisons →

FAQ

What is an EIRL in Panama?

An Empresa Individual de Responsabilidad Limitada (EIRL) is an Individual Limited Liability Company designed for a single owner, offering limited liability protection without the need for partners or shareholders.

Do I need to live in Panama to form an EIRL?

No, foreign non-residents can form and own an EIRL in Panama without needing to live in the country or hold a residency visa.

Does a Panama EIRL pay taxes on foreign income?

No. Panama uses a territorial tax system. Any income generated strictly outside of Panamanian territory is 100% exempt from local corporate income tax.

What is the Tasa Única?

The Tasa Única is an annual corporate franchise tax of $300 that every registered entity in Panama must pay to remain in good standing, regardless of its business activity.

Can an EIRL have multiple owners?

No, an EIRL is strictly for a single individual. If you plan to have multiple owners or investors, you must form a Sociedad de Responsabilidad Limitada (S.R.L.) or a Sociedad Anónima (S.A.).

Do I need a registered agent?

Yes, Panamanian law mandates that all corporate entities must have a resident agent who is a licensed local lawyer or law firm.

What is the minimum capital requirement?

There is no mandatory minimum paid-up capital required to form an EIRL, though a standard authorized capital of $10,000 is typically declared in the incorporation documents.

Can an EIRL be converted into an S.A. later?

Yes, an EIRL can be transformed into a Sociedad Anónima (S.A.) or another entity type later, but it requires a formal legal transformation process and registration through the Public Registry.

Detailed Tax Rates

Corporate Income Tax

From	To	Rate

Panama applies a territorial tax system, meaning only income generated within Panama is taxed. The standard corporate rate is 25%, but companies with taxable income over $1.5 million may be subject to an alternative calculation (CAIR) of 4.67% on gross taxable income if it results in a higher tax.

Personal Income Tax (Top rate: 25.0%)

From	To	Rate
$0	$11,000	0.0%
$11,000	$50,000	15.0%
$50,000	No limit	25.0%

Panama taxes individuals on a territorial basis. Foreign-sourced income is fully exempt, while local-source income is taxed at progressive rates up to 25%.

Capital Gains Tax

10.0%

Capital gains on the sale of securities and real estate located in Panama are generally taxed at a flat rate of 10%. Real estate transfers also require a 2% transfer tax and a 3% advance income tax payment.

VAT / GST

7.0%

Registration Threshold: USD36,000

Non-resident B2C providers of digital services are generally exempt from ITBMS registration, while B2B sales may be subject to a reverse charge mechanism.

Withholding Tax

Dividends10.0%

Royalties12.5%

Interest12.5%

Panama has a network of double taxation treaties that can reduce withholding tax rates. A new economic substance law (effective 2027) requires entities receiving foreign passive income to demonstrate local substance to maintain exemptions.

Payroll & Social Security

Employer14.8%

Employee11.0%

Employers contribute 13.25% for social security and 1.5% for educational tax, while employees contribute 9.75% and 1.25% respectively. Employer social security contributions are scheduled to increase to 14.25% in March 2027.

Other Taxes

Notice of Operations Tax

An annual tax of 2% on the company's net worth (capital), with a minimum of $100 and a maximum of $60,000, required for businesses operating locally.

Annual Franchise Tax (Tasa Única)

A flat annual corporate franchise tax of $300 is required to maintain the entity in good standing, regardless of whether it operates locally or offshore.

Incentives & Support

AMPYME Microenterprise Incentive

Tax exemption program for micro and small businesses registered with the Micro, Small and Medium Enterprise Authority (AMPYME).

Full exemption from corporate income tax for the first two fiscal years of operation.

Eligibility: Must be a registered microenterprise with annual gross income under $150,000.

Free Trade Zones (e.g., Colon Free Zone, Panama Pacifico)

Special economic zones offering tax and operational benefits for businesses engaged in logistics, manufacturing, and export.

Exemption from import duties, corporate income tax on re-exports, and local VAT (ITBMS).

Eligibility: Must establish physical operations within the designated free zone and engage in permitted activities (e.g., re-export, manufacturing).

Formation Requirements

Minimum Capital

No requirement

No mandatory minimum paid-up capital, but a standard authorized capital of $10,000 is typically declared.

Local Director

Not Required

Foreign directors are permitted. However, a local registered agent (Panamanian lawyer or law firm) is mandatory.

Registered Office

Required

Virtual office allowed. $150-500/year

Notarization Required

Yes

Power of Attorney (Remote)

Required

Required if the founder is not physically present in Panama to sign the incorporation deed before the notary.

Timeline

Standard: 3-5 business days days

Expedited: 1-2 business days days ($150)

Required Documents

1Passport copyApostille needed
2Proof of address (utility bill)
3Bank or professional reference letter
4Articles of Incorporation (Pacto Social)Apostille needed
5Power of Attorney (if formed remotely)Apostille needed

Compliance & Reporting

Annual Filings

Annual Franchise Tax (Tasa Única)

Penalty: $50 late fee plus 20% surcharge, and suspension of corporate rights.

June 30 or December 31 (depending on incorporation date)

Annual Income Tax Return (Declaración Jurada de Rentas)

Penalty: Fines ranging from $100 to $500, plus interest on unpaid taxes.

March 31

Audit Requirement

Not Required

Only required if capital exceeds $100,000 or annual sales exceed $50,000.

Accounting Standard

IFRS or Panamanian GAAP

Tax Return Deadline

March 31 for legal entities (can request a 1-month extension).

VAT Filing Frequency

Monthly

Data Protection

Regulated by Law 81 of 2019 (effective March 2021), which requires consent for data processing and grants data subjects rights to access, rectify, and cancel their personal data.

Banking & Payments

Towerbank

Remote-friendly

Known for being crypto-friendly and open to modern digital businesses and offshore entities.

Credicorp Bank

A mid-sized onshore bank that is highly experienced with e-commerce and international trading companies.

Banco General

One of the largest and most stable banks in Panama, ideal for local operations and traditional businesses.

Payoneer

Remote-friendly

A global fintech platform that supports Panamanian entities for receiving USD and EUR payments internationally.

Payment Gateways

PagueloFacil, PayPal, 2Checkout, PayU, Zota

Currency

USD

Multi-Currency: Supported

Account Opening

Opening a corporate bank account in Panama can be rigorous due to strict KYC and AML regulations. While some banks allow remote opening, many traditional banks require an in-person visit or a local legal representative.

Practical Information

Timezone

UTC-5

Business Language

Spanish (official), English (widely used in business)

Legal System

Civil law

Ease of Doing Business

#86

IP Protection

Panama offers standard intellectual property protection, including trademarks, patents, and copyrights, regulated by DIGERPI. Registration processes are relatively straightforward but can take several months.

Double Tax Treaties

17 countries

Notable treaties: Spain, United Kingdom, France, Italy, Netherlands, Mexico, Singapore

Visa & Residency Options

Friendly Nations Visa

Offers residency to citizens of 50+ friendly nations who establish professional or economic ties with Panama, such as forming a company or investing.

Qualified Investor Visa

Grants permanent residency for a minimum investment of $300,000 in real estate or $500,000 in securities.