Foreign companies can open a representative office in Panama as a first step toward entering the market. The purposes of this office are limited, nonetheless, the information obtained from running such an office can be valuable for future company expansion.
Our team can help you set up a company in Panama or decide if the most suitable step for your activity is to start with setting up a representative office. Please read below to find out more about this type of establishment and other general information about Panama offshore company formation.
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What is a representative office in Panama?
The representative office (sometimes abbreviated RO) is the simplest business form that can be established across many different jurisdictions.
The office does not have legal capacity, nor can it engage in commercial activities. The most common uses are the following:
- engage in market research and exploration;
- perform liaison with local business partners and potential clients, engage in networking activities;
- promote the company’s products or services, without selling them as would be the case if the foreign entity would open a company in Panama;
- engage in other relevant marketing activities.
Companies that open a representative office in Panama may use this as a springboard to prepare their next step for entering the market.
Investors should be well aware of the limitations when they open a liaison office in Panama:
- it is not a separate legal entity; this means that the foreign company that will open a representative office in Panama will be fully liable for this office’s activities;
- it does not have legal capacity;
- it cannot be used to derive income from Panama.
What are the requirements to open a representative office in Panama?
A representative office can be used across many different business sectors.
For example, a foreign financial institution may set up a representative office in Panama to act as a liaison. In this case, a bank’s representative office does not need a special banking activity from the Superintendency of Banks, as it will not be able to engage in banking-related commercial activities.
Because when they open a liaison office in Panama investors will not be deriving income, there are no complex requirements and the general steps for Panama company formation will not apply in this case as the office will not have constitutive documents.
Companies that open a representative office in Panama will, however, need to establish a working point for this office. This can be a rented office space or it can be a virtual office space that offers access on demand to various spaces and solutions.
What are the alternatives to the Panama representative office?
The branch is the common alternative for investors who are not advantaged by the decision to open a liaison office in Panama because it can engage in the same commercial activities as the parent foreign company. Unlike the representative office, the branch can derive income from Panama, however, like the RO, it is not a separate business form from the parent company.
Our team can help investors open a branch if they are prepared to expand their activities to the country. Alternatively, we can also assist with Panama incorporation for a locally registered company, such as a limited liability company or a corporation.
Why invest in Panama?
Panama offers an attractive investment climate and important advantages, especially to US investors. The following advantages are summarized by our team:
- The country’s GDP grew by almost 11% in 2022 and by 7.3% in 2023;
- Trade and construction were the industries that had the largest GDP contribution in 2023, with 20% and 15%, respectively;
- The logistics sector was the third largest one according to GDP percentage in 2023, with 11.5% of the total value;
- The World Bank’s projections for growth for 2024 were estimated between 2 and 3%.
Do you want to do business in Panama? Or are you interested in immigration to Panama or obtaining a residence permit in Panama? Our team can help you.
Contact us for more information about how to open a representative office in Panama and other options for investors.