Panama company or Private Interest Foundation: an overview for Indian businesses and families
Panama offers territorial taxation and the Private Interest Foundation, but new substance rules from 2027, its EU listing and Indian FEMA rules all need weighing first.
Panama has a corporate law dating from 1927 and a territorial tax system. It is most relevant to businesses trading with Latin America and to some family structures. Before choosing it, Indian residents should weigh three things: Panama's international standing, its new substance rules, and India's own overseas investment rules.
The two vehicles
| Sociedad Anónima (SA) | A corporation under Law 32 of 1927, with at least three directors of any nationality, resident or not |
| Private Interest Foundation | A foundation under Law 25 of 1995, often used for holding family assets and succession planning |
| Resident agent | Both must appoint a Panamanian lawyer or law firm as resident agent |
| Annual franchise tax | USD 300 for an SA and USD 400 for a foundation; companies that fail to pay for three years are suspended |
How tax works
Panama taxes income produced within its territory (Fiscal Code Article 694); income from sources outside Panama is not taxed there. From fiscal year 2027, Law 526 of 2026 adds an economic substance test for Panamanian entities that belong to multinational groups and earn foreign-source passive income such as dividends, interest and royalties; an entity that does not meet the test pays a final 15% tax on that income.
Records and transparency
- Every SA and foundation keeps accounting records and provides them (or copies) to its resident agent each year, including companies that only hold assets.
- Beneficial owners are recorded by the resident agent in Panama's private beneficial ownership registry (SIRCUBF), available to the authorities.
International standing
Panama was removed from the FATF grey list in October 2023. As at 8 October 2026 it is on Annex I of the EU list of non-cooperative jurisdictions for tax purposes (revision of 17 February 2026); the Council's next revision is due in October 2026 and may change this, so please check the current list before relying on it. While listed, this can affect banking relationships and how counterparties in Europe treat payments. India and Panama have no bilateral double taxation agreement or tax information exchange agreement, although both are parties to the multilateral Convention on Mutual Administrative Assistance in Tax Matters.
The Indian side
- Companies. A resident individual may invest only in an operating foreign entity that meets the ODI conditions; a pure holding SA is generally not available, and real estate activity (buying and selling real estate or trading in transferable development rights) is a prohibited ODI sector.
- Foundations. A foundation has no share capital, so a remittance to it does not fit the usual ODI route. Its treatment under LRS and FEMA must be confirmed before any funds are sent.
- Tax and disclosure. Resident and ordinarily resident individuals report interests in foreign entities and foreign assets in Schedule FA, and the Black Money Act applies to non-disclosure.
See our ODI checklist for the general steps.
Alternatives worth comparing
For trading with the Gulf, Africa or Europe, a UAE free zone company is often simpler to bank; for asset protection questions in the UAE, see ProBiz Setup's asset protection services, with UAE tax compliance through pbz.ae. See our Panama page or ask us.
Sources: Law 32 of 1927 on corporations; Law 25 of 1995 on Private Interest Foundations; Fiscal Code Article 694; Law 526 of 28 May 2026 (Gaceta Oficial No. 30534-B); DGI guidance on the annual franchise tax (tasa única); Law 52 of 2016 and Law 254 of 2021 on accounting records; Law 129 of 2020 on the beneficial owners registry; FATF, Jurisdictions under increased monitoring (27 October 2023); Council of the EU, list of non-cooperative jurisdictions (revision of 17 February 2026); Foreign Exchange Management (Overseas Investment) Rules, 2022.