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How are Panama companies faring these days?

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ampash

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Jan 10, 2025
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#1
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Hi all, long-term traveler here but new member to the group. US citizen now based in Paraguay, looking to incorporate somewhere simply and relatively cheaply to pay myself a salary (FEIE US tax rules) and have 1 or 2 other employees. Am thinking a Panama company with a US or Panamanian bank account and it will own a US LLC with a US bank account or EMI (so no reporting too many foreign accounts to the US) to use merchant accounts and take payments for ecommerce. A fairly typical setup for US expats I suppose. Of course the Panama company would have to be 50/50 owned with a non-US partner to eliminate even more reporting. Everything above board, just keeping the paperwork as simple as possible. Turnover under 100k to start with, probably global clients although some in the US and a few larger existing clients from the EU.

Would a Panama parent company with the US LLC still work in this case for client invoicing and banking? Better than sketchy Belize? I had a PA company a few years ago for the permanent residency but closed it due to unuse as I was only freelancing at the time. Have considered a Romanian company perhaps with 1% tax but it has monthly reporting.

Thanks in advance for your thoughts.
 
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#3
ampash said:
Hi all, long-term traveler here but new member to the group. US citizen now based in Paraguay, looking to incorporate somewhere simply and relatively cheaply to pay myself a salary (FEIE US tax rules) and have 1 or 2 other employees. Am thinking a Panama company with a US or Panamanian bank account and it will own a US LLC with a US bank account or EMI (so no reporting too many foreign accounts to the US) to use merchant accounts and take payments for ecommerce. A fairly typical setup for US expats I suppose. Of course the Panama company would have to be 50/50 owned with a non-US partner to eliminate even more reporting. Everything above board, just keeping the paperwork as simple as possible. Turnover under 100k to start with, probably global clients although some in the US and a few larger existing clients from the EU.

Would a Panama parent company with the US LLC still work in this case for client invoicing and banking? Better than sketchy Belize? I had a PA company a few years ago for the permanent residency but closed it due to unuse as I was only freelancing at the time. Have considered a Romanian company perhaps with 1% tax but it has monthly reporting.

Thanks in advance for your thoughts.
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I have one for many years and operating the company itself is good and causes not many problems even during the communist witchhunt, my impression is it got less since the communist have found a new darling (Dubai) to blame and shame, so Panama has less of a spotlight.

That being said, if you need banking, it can be very very challenging but it can be made work if you have good connections and business case with decent turnover. Id not advise it for startups if you lack somewhat serious funding.
 
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#6
Has US invaded Panama yet...lol?

You may really want to hold off on anything Panama related in case of any sort of [Trump initiated] economic coercion/blacklisting etc on the country.

Take a wait and see approach perhaps.
 
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#10
Sols said:
While it's getting better, Panama is still reeling from the Panama Papers.

Costa Rica might be a better choice if you want something local. Uruguay is also an option, with relatively straight-forward path to banking in many cases if you appoint a local director/representative.
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All good options will definitely look into. I guess I thought if the offshore company owned the US LLC banking wouldn't be much of an issue, but haven't tried it yet. Thanks for your input!
 
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#11
ampash said:
Wouldn't that incur a lot higher taxes? And I thought the FEIE was only for foreign employers... To be honest I would be nervous not being more diversified. Although the bottom line would come down to costs and paperwork. Thanks for your response!
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Feie is not only for foreign employers.
If you own a foreign company you have to report it to the IRS and pay taxes depending on the types of income, subpart F or GILTI. You need to contact a US tax professional to investigate this.
 
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#12
Xshore said:
Feie is not only for foreign employers.
If you own a foreign company you have to report it to the IRS and pay taxes depending on the types of income, subpart F or GILTI. You need to contact a US tax professional to investigate this.
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Yep, will do. Was aiming for 50/50 ownership to avoid the reporting/GILTI etc. and then exempt my salary. Got an appointment with a CPA... unfortunately don't have a second passport yet!
 
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#13
ampash said:
Hi all, long-term traveler here but new member to the group. US citizen now based in Paraguay, looking to incorporate somewhere simply and relatively cheaply to pay myself a salary (FEIE US tax rules) and have 1 or 2 other employees. Am thinking a Panama company with a US or Panamanian bank account and it will own a US LLC with a US bank account or EMI (so no reporting too many foreign accounts to the US) to use merchant accounts and take payments for ecommerce. A fairly typical setup for US expats I suppose. Of course the Panama company would have to be 50/50 owned with a non-US partner to eliminate even more reporting. Everything above board, just keeping the paperwork as simple as possible. Turnover under 100k to start with, probably global clients although some in the US and a few larger existing clients from the EU.

Would a Panama parent company with the US LLC still work in this case for client invoicing and banking? Better than sketchy Belize? I had a PA company a few years ago for the permanent residency but closed it due to unuse as I was only freelancing at the time. Have considered a Romanian company perhaps with 1% tax but it has monthly reporting.

Thanks in advance for your thoughts.
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Regarding romanian companies .... Keep in mind that you pay 1% for micro-companies with revenues that do not exceed EUR 60k and 3% for micro-companies with revenues of more than EUR 60k that do not exceed EUR250k and you must have a romanian employee .

So it's not suitable for you
 
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#14
ampash said:
Am thinking a Panama company with a US or Panamanian bank account and it will own a US LLC with a US bank account or EMI (so no reporting too many foreign accounts to the US) to use merchant accounts and take payments for ecommerce. A fairly typical setup for US expats I suppose.
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Will you have ECI? There is no treaty. You will be paying 30% branch profit tax in the US on any ECI (after paying CIT) that flows to the Panamanian company.
 
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#15
JustAnotherNomad said:
Will you have ECI? There is no treaty. You will be paying 30% branch profit tax in the US on any ECI (after paying CIT) that flows to the Panamanian company.
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No ECI, no substance in the US, just global clients.

Batantantan, no problem getting a PA bank account for the PA company, but connecting with payment processors can be problematic because a lot of banks have blacklisted PA. Hence the US LLC for billing.
 
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#16
ampash said:
No ECI, no substance in the US, just global clients.
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Ok.

ampash said:
Batantantan, no problem getting a PA bank account for the PA company, but connecting with payment processors can be problematic because a lot of banks have blacklisted PA. Hence the US LLC for billing.
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Will it really be so simple to circumvent? Hard to believe the payment processor wouldn't care about the ownership.
Also keep in mind Panama is blacklisted by some countries, so invoices from the US LLC may not be deductible for the client (if you do B2B).
 
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#18
JustAnotherNomad said:
Also keep in mind Panama is blacklisted by some countries, so invoices from the US LLC may not be deductible for the client (if you do B2B).
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You mean if the client asks about ownership structure of the LLC and discover the panamian owner? Is that common to happen? Hard to believe it's common for us companies to tell customers etc who its owners are.
 
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#20
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