General Partnership (Sociedad Colectiva) in Panama

General Partnership · Formation from $350

Last verified: June 13, 2026

Corporate Tax

25.0%

State Tax

0.0%

Formation Cost

$350

Annual Fee

$300

Comparison Scores

Privacy, remote setup, banking, and tax efficiency

Privacy3/10

Remote Setup7/10

Banking6/10

Tax Efficiency8/10

Overall Score5/10

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

Professional service providers (lawyers, accountants, consultants) forming a joint practice.
Small family-owned businesses operating locally in Panama.
Partners who want a simple, flexible management structure without strict corporate formalities.
Entrepreneurs conducting business entirely outside of Panama to benefit from 0% tax on foreign income.

Who Should Avoid This?

Scenarios where another structure may be better

High-risk businesses where protection of personal assets is crucial.
Startups looking to raise venture capital or issue shares to external investors.
Founders seeking strict privacy and anonymity, as partners are publicly registered.
E-commerce or international trading companies that require limited liability protection.

Advantages

+Simple and fast to establish with minimal bureaucratic hurdles.
+No statutory minimum share capital requirement.
+Pass-through taxation means profits are taxed only at the partner level, avoiding double taxation.
+Benefits from Panama's territorial tax system (foreign-sourced income is 100% tax-exempt).
+High flexibility in management structure and internal decision-making.
+No residency or nationality requirements for partners.

Disadvantages

-Unlimited, joint, and several liability for all partners (personal assets are at risk for company debts).
-Not suitable for raising external capital, angel investment, or venture capital.
-Less privacy compared to a Corporation (S.A.), as all partners must be registered at the Public Registry.
-Transferring partnership interests usually requires the unanimous consent of all other partners.
-Still subject to the annual franchise tax (Tasa Única) of $300 despite being a partnership structure.

Formation Steps

Step 1: Choose and verify a unique partnership name with the Panama Public Registry.

Step 2: Draft the Partnership Agreement (Pacto Social) outlining management, profit-sharing, and capital contributions.

Step 3: Notarize the Partnership Agreement before a Panamanian Notary Public.

Step 4: Register the notarized deed at the Public Registry of Panama (Registro Público).

Step 5: Obtain a Tax Identification Number (RUC) from the Directorate General of Revenue (DGI).

Step 6: Pay the initial Annual Franchise Tax (Tasa Única) of $300.

Step 7: Apply for a Notice of Operations (Aviso de Operación) if conducting business locally within Panama.

Step 8: Open a corporate bank account in Panama or internationally.

Cost Breakdown

Detailed breakdown of formation and ongoing costs

Item	Type	Amount
State filing fee (Public Registry)	One-time	$50
Notary fees	One-time	$75
Registered Agent fee	Annual	$250
Annual Franchise Tax (Tasa Única)	Annual	$300
Initial legal/professional formation fees	One-time	$350
First year total		$1,025
Annual ongoing		$550

Real-World Examples

Typical use cases for this entity type

A boutique law firm in Panama City established by three local attorneys sharing profits and liabilities.
A family-owned retail shop operating in a local Panamanian market.
A consulting agency formed by two expatriates providing services to clients in Europe, enjoying tax-exempt foreign income.

Common Mistakes

Pitfalls to avoid during setup and operations

Underestimating the risk of unlimited, joint, and several liability for the actions of other partners.
Failing to draft a comprehensive partnership agreement detailing dispute resolution and exit strategies.
Forgetting to pay the $300 annual Tasa Única, leading to penalties and suspension at the Public Registry.
Assuming the partnership itself pays corporate tax rather than understanding pass-through taxation.
Not clearly defining the management roles, leading to operational deadlocks.

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

Individual Limited Liability Company (EIRL)

Tax: 25.0%
Formation: $360

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

Civil Partnership (Sociedad Civil)

Tax: 25.0%
Formation: $50

Compare with Other Countries

Country / Type	Tax	Formation	Annual
🇵🇦 General Partnership (Sociedad Colectiva)(General Partnership)	25.0%	$350	$300

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

FAQ

What is a Sociedad Colectiva in Panama?

It is a general partnership where two or more partners manage the business and share unlimited, joint, and several liability for the company's debts.

Are foreign partners allowed in a Sociedad Colectiva?

Yes, there are no nationality or residency restrictions for partners in a Panamanian General Partnership.

How is a Sociedad Colectiva taxed in Panama?

It is treated as a pass-through entity. Partners pay income tax on their share of profits. Because Panama uses a territorial tax system, foreign-sourced income is completely tax-exempt.

Is there a minimum capital requirement?

No, there is no statutory minimum capital required to form a General Partnership in Panama.

Do I need to pay the Tasa Única (Annual Franchise Tax)?

Yes, like all registered legal entities in Panama, a Sociedad Colectiva must pay the $300 annual franchise tax to remain in good standing.

Can a Sociedad Colectiva be formed remotely?

Yes, it can be formed remotely by granting a Power of Attorney to a local Panamanian lawyer or registered agent to handle the notarization and registration.

What is the main disadvantage of this structure?

The main disadvantage is unlimited liability; partners' personal assets can be seized to settle the partnership's debts or legal obligations.

Who typically uses a Sociedad Colectiva?

It is most commonly used by small family businesses or professional associations (like law or accounting firms) where partners are actively involved in day-to-day management.

Detailed Tax Rates

Corporate Income Tax

From	To	Rate

Panama operates a territorial tax system. General Partnerships (Sociedades Colectivas) are typically treated as pass-through entities, meaning profits are taxed at the partner level. Corporate partners are subject to a 25% tax rate on Panama-sourced income, while foreign-sourced income is entirely tax-exempt.

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%

Individual partners are taxed on their share of Panama-sourced profits at progressive rates up to 25%. The first $11,000 of income is tax-exempt. Foreign-sourced income is completely exempt from Panamanian income tax.

Capital Gains Tax

10.0%

Capital gains from the sale of Panamanian assets are generally taxed at a flat rate of 10%. A withholding tax of 5% applies to the transfer of securities, and 3% applies to real estate transfers as an advance payment.

VAT / GST

7.0%

Registration Threshold: USD36,000

Panama's ITBMS (VAT) applies to digital services provided by non-residents to local consumers if the service is consumed within Panama. Non-resident providers may be required to register or local banks may apply withholding.

Withholding Tax

Dividends10.0%

Royalties12.5%

Interest12.5%

Panama has a growing network of double taxation treaties that can reduce withholding tax rates on dividends, interest, and royalties for qualifying non-residents.

Payroll & Social Security

Employer14.8%

Employee11.0%

Employers contribute 13.25% to social security (increasing to 14.25% in March 2027) and 1.5% for educational tax. Employees contribute 9.75% to social security and 1.25% for educational tax.

Other Taxes

Annual Franchise Tax (Tasa Única)

All registered legal entities in Panama must pay an annual franchise tax of $300 to maintain their good standing.

Notice of Operations Tax (Aviso de Operación)

An annual tax of 2% on the company's net worth, with a minimum of $100 and a maximum of $60,000, applicable to businesses operating locally in Panama.

Incentives & Support

Territorial Tax System (Foreign Income Exemption)

Panama applies a strict territorial tax system where only income generated within the territory of Panama is subject to taxation.

100% exemption from corporate income tax, dividend tax, and VAT on all foreign-sourced income.

Eligibility: Any Panamanian entity, including a General Partnership, that conducts its business and generates income exclusively outside of Panama.

Formation Requirements

Minimum Capital

No requirement

There is no statutory minimum capital requirement for a General Partnership (Sociedad Colectiva) in Panama.

Local Director

Not Required

Partners can be of any nationality and reside anywhere. No local resident partner or director is required.

Registered Office

Required

Virtual office allowed. $250-$400 per year (usually included in the Registered Agent fee)

Notarization Required

Yes

Power of Attorney (Remote)

Required

A notarized and apostilled Power of Attorney is required for the local Panamanian lawyer to register the partnership deed (Pacto Social) without the partners being physically present.

Timeline

Standard: 3-5 business days days

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

Required Documents

1Notarized and apostilled passport copy of each partnerApostille needed
2Second form of ID (e.g., driver's license or national ID)
3Proof of residential address (utility bill or bank statement, not older than 3 months)
4Bank reference letter
5Professional reference letter (from a lawyer or accountant)

Compliance & Reporting

Annual Filings

Annual Franchise Tax (Tasa Única)

Penalty: $50 late fee. A second missed payment incurs an additional $300 penalty and loss of good standing.

July 15 (if incorporated Jan-Jun) or January 15 (if incorporated Jul-Dec)

Annual Income Tax Return (Declaración Jurada de Rentas)

Penalty: Fines ranging from $100 to $1,000, plus interest on unpaid taxes and loss of the 'Paz y Salvo' certificate.

March 31

Audit Requirement

Not Required

Not required for offshore operations. Domestic companies with capital over $100,000 or annual sales over $50,000 must have their tax returns signed by a Panamanian CPA.

Accounting Standard

IFRS or Panamanian GAAP

Tax Return Deadline

March 31 for legal entities (can be extended by 1 month upon request).

VAT Filing Frequency

Monthly (by the 15th of the following month). Professional service providers may file quarterly.

Data Protection

Regulated by Law 81 of 2019 and Executive Decree 285 of 2021, which establish strict principles for the protection of personal data, requiring explicit consent for data processing and granting ARCO rights to data subjects.

Banking & Payments

Banco General

The largest bank in Panama, offering comprehensive corporate banking services. However, it requires an in-person visit and extensive documentation to open an account.

Towerbank

A traditional Panamanian bank known for being crypto-friendly, allowing businesses to link crypto accounts to fiat banking.

Payoneer

Remote-friendly

A popular global fintech alternative for Panamanian entities to receive international B2B payments in multiple currencies remotely.

Wise

Remote-friendly

Excellent for multi-currency accounts and international transfers, though availability may depend on the partners' personal residency.

Payment Gateways

PagueloFacil, PayPal, 2Checkout, PayU, Zota

Currency

USD

Multi-Currency: Supported

Account Opening

Opening a traditional corporate bank account in Panama is notoriously strict and time-consuming. It typically requires an in-person interview, extensive KYC documentation, and financial reference letters. For remote founders, leveraging international fintech platforms like Payoneer or Wise is highly recommended to bypass local banking bureaucracy.

Practical Information

Timezone

UTC-5

Business Language

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

Legal System

Civil law

Ease of Doing Business

#86

IP Protection

Panama offers robust intellectual property protection through the Directorate General of Industrial Property (DIGERPI). Trademarks, patents, and copyrights are protected under Law 35 of 1996, and Panama is a signatory to major WIPO treaties, ensuring international standards.

Double Tax Treaties

17 countries

Notable treaties: United Kingdom, Netherlands, Spain, Mexico, France, Ireland

Visa & Residency Options

Qualified Investor Visa

Grants permanent residency in about 30 days for a minimum investment of $300,000 in real estate, $500,000 in securities, or a $750,000 bank deposit. Leads to citizenship after 5 years.

Friendly Nations Visa

Available to citizens of over 50 designated countries. Requires a $200,000 real estate investment, a $200,000 fixed-term deposit, or formal employment by a Panamanian company to obtain residency.